Anshu Arora LLM, MSc, PMP

In recent years, the "progressive YIMBY” (Yes, in my backyard) movement has embraced the idea that a surge in market-housing supply will magically lead to affordability. However, all housing supply is not created equal. Despite a construction boom building thousands of new market units of multi-family supply, affordable housing remains elusive for over a third of British Columbians. The economic theory is not producing the promised housing affordability.

As the modelling and analysis that Housing Minister Ravi Kahlon used to justify the BC NDP’s mass upzoning of single-family, middle-class neighbourhoods showsit will produce less than half the supply needed to meet the demand. The Canada Mortgage and Housing Corporation estimates for B.C. to get housing affordability back to what we experienced in the early 2000s, we need to build 610,000 units more than would have been constructed. Tom Davidoff, one of the report’s authors, is cautious in his predictions of both the affordability achieved by the upzoning and the immediacy of the changes. The BC NDP’s approach is not an urgent solution to a housing affordability crisis but rather a short-term communication exercise, increasing the wealth of homeowners and hopes of renters leading into a provincial election.

We have an urgent housing affordability crisis and this is evidence of how inefficient it is to wait for the private sector to deliver housing affordability. The housing crisis is more localized for those experiencing core housing need. The core housing needs are the people in our communities whose housing is insecure, inadequate or unaffordable. In B.C., nearly 15 per cent of the population is paying more than 30 to 50 per cent of their annual income on housing. This is the most critical intervention point for the provincial government.

A 2021 Statistics Canada report shows the core housing need in Canada is 10.1 per cent, ranging from Quebec at six per cent to Nunavut at 32.9 per cent. B.C. is second worst at 13.4 per cent, followed closely by Northwest Territories (13.2 per cent) and Yukon (13.1 per cent). The next closest province is Ontario, at 12.1 per cent.

A Statistics Canada report published on Nov. 20, 2023, shows unsurprisingly the dramatic intergenerational advantage the adult children of homeowners born in the 1990s have over their peers whose parents weren’t homeowners. Additionally concerning is the findings that “adult children of multiple property owners were nearly three times more likely to be homeowners in 2021 than those whose parents were non-homeowners,” and B.C. has the lowest rate of homeownership of people born in the 1990s in the country.

New rules protecting workers from asbestos exposure — the leading cause of workplace-related deaths — come into effect for B.C. on New Year's Day. The WorkSafeBC rules, which are the first of their kind in Canada, require workers to go through special training before doing asbestos abatement related to buildings, including identifying, cleaning up or containing asbestos. They also require building owners to hire specially licensed companies if they need asbestos removed.

"Exposure to asbestos and the fatalities that result from those exposures continues to be the leading cause of fatalities for workers in British Columbia, accounting for about a third of all occupational deaths," said Mary Lovelace, director of credentialling at WorkSafeBC. Asbestos, commonly found in roofing materials, insulation, tiles and other building materials, is carcinogenic. When the fibrous material is disturbed, it releases fine particles into the air, which can lead to a variety of cancers when inhaled.

It was formally bannedin almost all products Canada in 2018; however, according to WorkSafeBC it was phased out of commonly used building materials in the 1990s. While many of the most serious asbestos exposures happened years or even decades ago, Lovelace says the new regulations ensure that work happening today won't lead to deaths and illnesses in the future.

Under the new requirement, employers in the field must be licensed by WorkSafeBC, and the workers they hire must be certified. Certification requires training that sometimes includes a practical exam. Licensed companies are now publicly listed on the WorkSafeBC website. Through the training courses, workers learn how to protect themselves and others from inhaling asbestos while working closely with the material.

It's a move that asbestos removal companies say will protect their workers and make competition more fair, but it comes with a price tag. Saeed Dana, owner and director of B.C. Green Demolition, said he's paid $2,000 each for 12 employees to do the training. Despite the cost, Dana says it will make competition more fair. "There are lots of companies, they don't follow the [safety] procedures," he said. In requiring all companies to follow a standard set of precautions, Saeed said that those who previously cut corners to provide a cheaper service are no longer able to undercut companies that operate safely.

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The province’s housing-density legislation unlocks zoning to create tens of thousands of new homes across Metro Vancouver, but that alone might not spur developers to build houses, at least not quickly. Bill 44, which allows for multi-unit construction on previously single-family lots, and Bill 47, which sets minimum standards for increased zoning around transit hubs, have been heralded in many circles as revolutionary changes in the face of B.C.’s housing crisis.

Zoning, however, is still just one element that developers need to consider before building new homes in an environment of high interest rates and soaring costs. “I think the central assumption in all this legislation is that municipalities and zoning are the (main) reasons for inaction” on building more housing, according to Andy Yan, urban planner and director of the City Program at Simon Fraser University. “And I think it’s problematic. It’s the housing system we’re talking about, not just one part of it.”

Yan said the objectives raise questions about whether B.C. will have the construction workforce needed to build the number of units desired and whether the goals are financially sustainable, considering prevailing inflation-fighting interest rates. A modelling exercise commissioned by the province to support its legislation assumes still extremely high prices would be required to entice the levels of development it wants, particularly in high-priced centres such as Vancouver, Burnaby and Richmond.

An adequate supply of rental housing is essential to restoring affordability in Canada. According to one of our recent studies, it would require an investment of at least $1 trillion to achieve this. In this context, the private sector plays a crucial role.

Research conducted earlier this year showed that most of the recent purpose-built rental housing stock in Canada is owned and developed by the private sector. In order to launch the construction of new rental development projects, return expectations by investors need to be met. As a result, larger-scale developers with the deepest pools of capital and a greater ability to source upfront equity have been playing a significant role in the development of new rental housing.

Purpose-built rental developers in Canada are facing an increasing number of market challenges. Under these circumstances, developers have adjusted in several ways; by either reducing the potential future supply of rental housing or adapting their strategies to move along new construction projects. For most rental projects planned in 2022, the limited return premiums have motivated the decisions to pause or cancel projects. Other developers who decided to move along projects saw the need to raise rents to offset increasing borrowing, construction and development costs. It is worth mentioning that developing a multi-family housing project requires several years and the timeline may vary across different cities, with some taking longer than others.

Research suggests that important financial adjustments needed to be made to ensure financial viability. These include, increasing rent prices, using lower quality materials and/or reducing the square footage of units. In this context, economic and financial conditions are contributing to the deterioration of future rental affordability.

Larger-scale developers (1,000+ units) should be responsible for more than 3 out of 4 new rental units among survey respondents in the coming years. They also represent 9 out of 10 respondents who are leveraging public sector funding, such as CMHC programs, hence incorporating a greater share of affordable housing units into their portfolios. That said, market rent was mentioned as the most common product strategy.

Partnerships between larger institutional investors, such as pension funds and public companies (that is, REITs), and private developers can allow for reduced upfront cost and greater access to alternative financing. These partnerships were mentioned to be increasingly leveraged to build new rental housing. Larger scale developers are seemingly putting more focus into creating affordable housing opportunities. Collaboration and partnerships between different development typologies and investors will be foundational in the future rental housing development ecosystem.

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American economist Thomas Sowell once said that “there are no solutions, only trade-offs.” That is, dealing with a problem entails making a choice, and doing so entails forgoing the alternatives.

For example, damming a river to protect a town from seasonal flooding means accepting that a reservoir will form on other side of the dam. The reservoir – and all it may entail for its natural surroundings – is deemed preferable to the potential damage that yearly flooding would do to the town.

The good news is there are policy options that can be brought to bear on a painful housing crisis that is leaving Canadians exasperated, and rightly so. The bad news: we haven’t decided which options we’re willing to accept. At its heart, the crisis stems from a growing gap between housing demand and supply; many homes are needed, but too few are built. The Canadian Mortgage and Housing Corporation has estimated that we need to build 5.8 million homes nationwide by 2030 to restore some semblance of affordability; we are on track to build less than half of that. Closing this gap will require significant increases in investment, labour, materials or productivity – but more importantly, it will require political will.

We have three broad choices, each with their own trade-offs.

First, we can build our cities outward, accelerating the creation of new neighbourhoods at the edges of our communities. This has been Canada’s way for most of its history, but especially after the Second World War and the mass adoption of personal automobiles. Canada has also traditionally used its enormous land mass to build entirely new cities, including railroad and resource boom towns from Calgary to Dawson City. The trade-off: More land for homes means less land for everything else. Canadians who currently oppose the redesignation of farmland or other rural areas surrounding cities would need to accept more home building in these areas. In more remote regions targeted for development, the thorny issue of divvying up Crown land – which comprises the majority of Canada’s land mass – would inevitably emerge.

Second, we can grow upward and become denser by shoehorning additional homes into existing neighbourhoods. To an extent, we’re already doing this: more than half of home building between 2016 and 2021 occurred within existing urban areas, and recent government reforms (e.g. allowing the conversion of single-family homes to triplexes) signal an appetite for more, though Canada’s cities would need to at least triple the current densification rates to close the gap through this option alone.The trade-off: most neighbourhoods would change – perhaps drastically. Canadians in urban areas, for instance, would need to mentally divorce themselves from the notion of owning single-family detached homes with garages and yards, and accept that neighbourhoods can’t stay frozen in time. As famed urbanist and former Torontonian Jane Jacobs put it, “a city cannot be a work of art.”

Third, we can grow our population more slowly. Faced with an enormous gap between the number of homes Canada needs and the number built, we could simply shrink the need. Governments (thankfully) don’t control how many children Canadians have, but they do determine immigration policy and the number of permanent and non-permanent residents. Anyone broadly opposed to historic increases in home building at the urban fringes or within existing neighbourhoods, but who still wishes for affordability, also wants to reduce population growth, whether they know it or not. The trade-offs here are more complex. If the federal government reduces immigration levels, Canadians must accept new demographic realities and policy solutions aimed at significantly improving productivity to offset a slower-growing or perhaps even shrinking work force, which may change how and when Canadians retire, among other considerations. In short, this would require additional trade-offs in other avenues.

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