Should Growth Pay for Growth?
Striking a balance between housing supply and city amenities is more important than it's ever been.
The government has been diligently looking for ways to increase housing supply in Ontario. In May, the Hon. Steve Clark, Minister of Municipal Affairs and Housing rolled out a new plan to tackle the crisis entitled More Homes, More Choice: Ontario’s Housing Supply Action Plan. The development industry was generally optimistic that the plan would reduce the time required to secure planning approvals, but the City of Toronto planning department concluded that the plan would not increase housing supply.
Neither developers nor planners have accepted any blame for the skyrocketing house prices in Ontario’s capital, with developers ignoring their aggressive land purchasing strategies, and planners patting themselves on the back for the approvals they’ve already granted, despite the record low vacancy rates and daily bidding wars a glaring reminder of the massive under-supply.
However, increasing housing supply can have negative consequences including unwanted shadows; increased traffic; congested subways; crowded sidewalks; disruptions due to construction; the loss of lower priced housing; or the demolition of a favourite place. Municipalities have financial tools to help offset some of these outcomes, like development charges and parkland dedication fees that are used to improve, refresh, renew, and build public spaces and transit. As they say, growth is intended to pay for growth, but almost all of the increases in these growth-related fees get transferred to new home buyers, driving up housing costs and reducing affordability. Developers don’t automatically eat those fees and accept a lower return, they try to either buy land for less or reduce other costs, but the typical result is higher prices or a shuttered project.
According to public space advocate Jake Tobin Garrett on ParkPeople.ca, the new Supply Action Plan “combines parkland dedication (Section 42) and density bonusing (Section 37) into one tool called a Community Benefit Charge. It severely curtails the ability of cities to require developers to provide parkland onsite.” Garrett mentions that Sections 42 and 37 “compel developers to pay for a portion of things like water and sewer infrastructure, transit, daycares, public art, etc. All things that are important for quality places to live.” The question ultimately becomes: where is the trade-off? How do you maintain housing affordability, create enough housing supply to meet demand, while still requiring new home buyers (and tenants) to fund parks, public art, and transit?
A survey conducted as part of the government’s consultation prior to releasing the Action Plan, they asked people what their priority was when looking for a home: 52 per cent said the price or rent of the residence was most important, while 23 per cent chose nearby services, and 14 per cent chose the type/size of the real estate. Cities can fund all the parks and public art they desire, but if only the most affluent people can afford to live near these amenities, they have failed.
In a recent trip to Dallas, where I used to live, I was struck by the increase in downtown density and urbanism in this major Texas city. The DFW metroplex area is synonymous with sprawl and car-centric amenities, but that is slowly changing. People are moving to the area from all over the country, desperate to escape bad weather and high house prices. My college roommate moved back to Dallas from Washington, D.C. and bought a condominium for $225 per-square-foot, a third of the cost of a comparable unit in D.C., and a quarter of the cost in Toronto.
I’m not advocating for a massive increase in greenfield development like Dallas has, but they do make it easy for businesses to flourish, they don’t have restrictive planning policies, they deliver a lot of rental and ownership product, and house prices have been relatively stable. Some people don’t like the idea of making life easier for developers, but keeping the cost of living stable and predictable is an admirable policy goal.
Many anti-supply and anti-development advocates like to respond to new housing proposals with “You’re building for whom?” implying that new housing isn’t desirable, or a benefit to the community because it is expensive. You could ask the same thing about new parks, why are new home buyers in tiny condos fitting the bill for a public space that equity-rich single-family homeowner will share?
There are no easy answers to these questions, but striking a balance between housing supply and city amenities is more important than it’s ever been. It is commendable that the government is trying to address the housing crisis, and the best long-term solution to that problem is more homes.
Ben Myers is president of Bullpen Research & Consulting, a boutique real estate advisory firm that works with land owners, developers, and lenders to better inform them of the current and future macroeconomic and site-specific housing market conditions that can impact their active or proposed development projects.