By Kenneth P. Green
and Josef Filipowicz
The Fraser Institute
A recent Wall Street Journal article featured a number of cities that stand out, giving well-deserved praise to Vancouver’s walkable urban landscape. But while Vancouver continues to become even more pedestrian friendly, a much bigger problem is going unsolved. Growing housing costs are consistently outstripping income increases in the city.
There is no single, easy to spot cause of Vancouver’s growing housing costs. Low interest rates, population growth, and the region’s liveability can encourage demand from purchasers the world over. But constraints on the housing supply are overlooked too often. Vancouver’s geography, and a substantial amount of protected agricultural land, stop the city from growing out, while red tape at city hall makes growing up difficult as well.
In Vancouver, it takes an average of 15 months to get a residential development approved – nearly five months longer than in neighbouring Burnaby. The costs of complying with regulations and development fees add up to an average of more than $37,000 per new home in Vancouver, while in Burnaby this cost averages $17,500. Opposition to new housing from local council and community group also deter homebuilders, raising questions about city hall’s priorities as housing affordability is a growing concern.
Vancouver is not the only city wrestling with barriers to new housing. From London to San Francisco, cities face similar constraints on the supply of new homes, and have the growing prices and rents to match.
But it doesn’t have to be that way. Houston, one of the fastest growing cities in the United States, is a place where newcomers do not face the compromise of high growth and high housing costs. More building permits were issued in Houston between 2010 and 2014 than any other metro area in America, and the region remained affordable to middle-class families through its oil-fuelled growth spurt.
Houston’s loose land-use policies and absence of traditional zoning allow the city to grow rapidly as its economy evolves. Houston developers can add density to inner-city neighbourhoods without facing a long and costly rezoning process. Meanwhile, more than two thirds of new housing in Vancouver requires rezoning, which adds an average of 6.5 months to the approval process. Doing without this layer of regulation creates a capacity for growth that helps maintain Houston’s affordability, and offers lessons for any city expecting to grow.
Houston’s example is buttressed by the recommendation of Andrés Duany – considered by some to be the father of the dense, walkable model of urban development encouraged in Vancouver – who has a new proposal for forward looking cities: leaner regulations. The idea is that finding ways around increasingly complex municipal regulations can reduce compliance costs, making more room for small developers and innovative projects. Detroit’s harsh economic reality has pushed the city to put these ideas into action. This new hands-off approach to enforcing development regulations has allowed a flurry of activity, contributing to the Detroit’s cultural and entrepreneurial renaissance, even leading some to call it the new Brooklyn.
Vancouver is internationally known for two things: world-class quality of life and unaffordable housing. Municipal policies play a role in maintaining both of these titles. Vancouver can learn from its peers on the world stage which benefit from reduced red tape, which allows innovative solutions to housing for growing populations and ultimately lowers housing costs.
Kenneth P. Green, Ian Herzog and Josef Filipowicz are analysts at the Fraser Institute.