Regulation driving up Vancouver home prices: report

VANCOUVER (NEWS 1130) – Metro Vancouver housing prices are notoriously high and a new report blames excessive regulation for choking the supply of new real estate in the region.

The CD Howe Institute suggests red tape directly influences the cost of both new and existing housing.

“You look at what the price of housing is and you compare it to what it actually costs to build a house. When there are great big gaps between what it costs and what people end up paying, that tells me there is some pretty serious market dysfunction,” says Benjamin Dachis, an associate research director with the think tank.

“That dysfunction is a result of lack of access to land. When there is a free and open market, developers will keep on increasing supply up until the point which the price for housing just equals what it costs,” he tells NEWS 1130.

However, in most major Canadian metropolitan areas, the report finds there is a persistent gap between the cost of building new housing and its market price with the extra costs on new housing ranging from an average $229,000 in the eight most restrictive cities to $600,000 in Vancouver.

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Dachis says barriers to housing supply account for 50 per cent of the cost of housing in our region.

“That’s by far the worst in Canada and comparable to some of the costs around the world in places like Manhattan and Europe.”

He points a finger at regulations surrounding the Agricultural Land Reserve, strict zoning restrictions and development contribution charges.

“Recent policies – such as taxes on foreign buyers or new federal mortgage rules – have focused on curtailing the demand for housing, instead of taking meaningful steps to increase the supply,” says Dachis.

While the report admits land-use policies can generate important benefits, it claims that the cost of higher housing prices imposed by housing regulation typically outweighs those benefits.

“We have to remember, we can have all the demand — all the foreign buyers — you want but that’s only a problem driving up the price of housing if there is not a commensurate increase in supply. The key thing to remember is that what really drives up the long term price of housing is the ability for developers and other constructors to build the kind of housing that people demand,” he adds.

The report recommends spurring more construction by easing restrictions on building on farmland, simplifying zoning bylaws and reducing development charges.

The City of Vancouver says it’s has taken ‘significant action’

The City of Vancouver says it recognizes there are numerous contributing factors to the affordability crisis, like many othe cities that are stuck in a similar situation.

“Vancouver is highly desirable city to live in, attracting buyers who want to enjoy all the benefits of our beautiful city and it’s many amenities, and live close to where they work,” says the City in a statement to NEWS 1130.

“Additionally, Vancouver has been experiencing historic levels of development activity and economic growth, with development and building applications are at all-time highs – 7,675 applications were submitted in 2017.”

The City also cites a rising cost of land as a “critical barrier” in being able to develop affordable rental and social housing.

“The City has taken significant action to address both housing demand and supply, stabilize land values, and address speculation. The goal is to ensure existing homes are primarily for people who live and work in Vancouver, and to drastically expand the supply of housing across the spectrum of affordability. This includes a comprehensive review of City regulations with a focus on simplifying unnecessary complexity; accelerating development review processes; simplifying CAC policy for rezoning projects to allow market rental applications to be processed faster; and implementing new taxation to promote empty or underutilized properties coming back into the long-term rental market.”