Anshu Arora LLM, MSc, PMP

Political leaders, especially at the provincial level, have focussed their attention on two related factors that they can control through legislation. First, they argue that local planning processes and regulations slow down approvals and drive up the costs of housing. Second, they say, NIMBY (not in my backyard) attitudes from residents limit density and slow down approval processes.

Those who study the history of housing in Canada identify inadequate government commitment and coordinationover the last several decades as a key factor in the contemporary problem. With governments at all levels largely out of housing production, housing starts fell far short of demand (driving prices up). In many cities, the supply of affordable social housing units contracted as local authorities lacked the financial resources to repair them. Some affordable options — such as single-room occupancies for low-income individuals — decreased in numbers as governments dismissed them as not offering ‘the standard of housing we want to see.’

Today, land ownership around most cities is controlled (or optioned) by a small number of local firms, some of whom have the ear of government to obtain favourable treatment. Because land is a finite good, the firms that control it have little incentive to release it at a rate that would bring prices down. If they hold the land longer, they may convince governments to increase permitted densities and thus enhance returns. Hence, developers have not built tens of thousands of already permitted units, waiting instead for future opportunities.

Housing has long been seen as a vehicle for household wealth accumulation, but as interest rates fell in the wake of the financial crisis, it offered a secure investment opportunity for pension funds, insurers, and real estate investment trusts. Small-scale housing projects increasingly gave way to large-scale, high-rise towers. Companies often bought affordable apartment properties, evicted tenants for renovations, and then relet units at higher rents. During 2022 and 2023, investors bought a significant proportion of homes sold, contributing to escalating prices: in some cases, they turned single-unit homes into multiple-unit accommodations.

Despite the growing value of the real estate sector, housing starts failed to keep up with demand. In 1976, CMHC reported over 273,000 housing starts for a population of under 24 million; in 2022, only 240,600 housing starts served a population of nearly 40 million. In 2023, at a time of increasing demand, CMHC reported a decline in housing starts. Industry analysts blamed high interest rates and significant construction labour shortages for the decline. By some accounts, Canada is short 80,000 construction workers and faces more retirements in the next decade.

Housing is a perpetual front-burner issue in Vancouver, given elevated prices for homes and the most expensive rental prices in Canada. So it’s no surprise to see billions for housing in the latest provincial budget. But throwing money at the problem isn’t going to move the needle on housing affordability (and availability) unless governments cut the red tape that got us here in the first place. The fundamental problem is that there aren’t enough units of housing being built in British Columbia’s Lower Mainland to ease pressure on housing prices and vacancy levels. And the housing that’s being built is being built too slowly, in part due to long and uncertain permitting processes.

The spike in housing prices in Vancouver over the past decade has been well-publicized. The median detached house price in Vancouver is roughly 12 times the median income, which makes Vancouver among the most expensive places on Earth to buy a house. And while there was an uptick in housing starts in Vancouver over the past decade, it didn’t keep up with employment growth over that period, which attracted more people to the region. Despite the lagging supply of new housing in Vancouver, there appears to be a total lack of urgency. A 2017 study found that it took on average 18 months to secure housing permits in Vancouver. Moreover, Vancouver faces a dual squeeze on both upward and outward development. Most of Vancouver’s land mass is zoned for single-detached housing. This means that growth in the number of housing units within the city will have to mostly come from upwards development, which is for the most part prohibited. And even when dense developments are proposed, they are often met with opposition for aesthetic reasons. In short, the deck is stacked against building new housing units, and even when city hall approves new units, they endure a long and uncertain regulatory gauntlet.

While it’s unsurprising the B.C. government plans to throw money at housing, it won’t move the needle on housing affordability. Instead, provincial policymakers should encourage municipalities to cut the red tape that’s strangling housing construction.

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