Fewer, smaller government fees for development would also help
Bob Ransford
Sun
Don’t expect local government to suddenly come to the rescue of those who can’t afford to own a home, but want to.
Do, however, expect local government across the province to make knee-jerk decisions to intervene in the marketplace. Politicians can’t resist jumping on a bandwagon, especially when that wagon is decorated with banners that talk of “crisis” and “hardship.” After all, they can spend your tax dollars, feeling good responding to the top news story of the month.
Unfortunately, this kind of political response focuses not on the long-term supply of housing — the only factor that promises to have any significant impact on the large group of middle-income people in search of a home.
Instead, short-term interventions, like local government subsidies for non-market housing or mandatory requirements for developers to build subsidized housing, may in fact exacerbate the affordability challenge.
Why do policy-makers and politicians make decisions that promise no real rewards?
These kinds of decisions are usually made because the decision-makers have little understanding of the marketplace. Most politicians have always operated in the public environment where supply and demand have little relevance.
Governments have always responded with taxpayer resources to provide subsidized housing for those who have no other means of providing shelter. Even in periods where there is considerable housing supply and prices are tempered, demand for housing by those in the lowest income groups can not be effectively met. People with the lowest of incomes don’t experience a housing affordability challenge. They experience, instead, an income challenge.
Governments have been effective responding to this need. But when decision-makers hear the words “housing affordability crisis” and it applies to the masses instead of a small group of those most in need, the response has to be different.
The challenge of providing more affordable living for those earning average incomes is a different one. Different responses are needed–market-based responses that address supply and demand.
Government doesn’t need to intervene. In fact, it needs to back off.
Backing off means removing some of the restrictions that inhibit supply. Often these are zoning restrictions that favour low density housing and encourage sprawl.
When government does intervene, it risks disrupting the marketplace and adding to the problem.
Take for example, taxing the developer to pay for subsidized housing. The City of Vancouver charges $2 per square foot for all new multi-family development to raise funds for subsidized housing. The City of Richmond recently implemented a similar but lower fee.
The consultant Richmond hired to formulate its affordable housing strategy recommended the levy but warned City officials:
“…it is important to recognize that, in some ways, the different fees and levies that are associated with the development of new housing construction can potentially contribute to a higher cost profile for new housing supply –a result which can affect the general level of affordability. Consequently there is a limit to how much the development process can fund affordability initiatives.”
In other words, governments can push the price of housing even further by adding new taxes on development. Government-imposed costs can also make land less economical to develop. For example, if a tract of land is more valuable for a use other than housing simply because the returns from developing housing are eaten away with government charges, that housing won’t get built and less supply will be on the market.
It is all too easy to provide that supply by allowing growth to sprawl at low densities, far from jobs, services and amenities. It is also easy to throw government subsidies at housing, hoping that we will address affordability, when we are barely making a dent and only partially assisting those most in need.
Housing affordability should not be an end in itself. A more sensible goal is more affordable living. To achieve more affordable living, we need a supply of housing sufficient to meet demand. That housing needs to be built in compact neighbourhoods, where densities are sufficient to make it possible to provide jobs, services and amenities close by, keeping total household expenditures in control, making living more affordable.
Bob Ransford is a public affairs consultant with COUNTERPOINT Communications Inc. He is a former real estate developer who specializes in urban land use issues. Email: [email protected]
© The Vancouver Sun 2006