Rising housing stock puts downward pressure on prices and supports economic growth

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Both federally and provincially, Canadians and their legislators often look down on American politics and politics, and sometimes with good reason: gun control and the abortion debate come to mind. But when it comes to tackling the housing crisis, Canadian politicians could learn a thing or two from what’s happening south of the border.

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Earlier this month, President Joe Biden announced that the federal government would seek to address the root cause of the housing crisis, which he sees as exclusionary zoning – local rules that prohibit construction of multi-family dwellings and rather favor single-family units. . In a White House statementthe administration said that “land-use exclusion and zoning policies limit land use, artificially inflate prices, perpetuate historical patterns of segregation, keep workers in low-productivity regions, and limit Economic Growth”.

All of this is true. The increase in the housing stock exerts downward pressure on prices and promotes economic growth. To research on zoning rules in the United States showed that by excluding workers from high-rent areas like New York and San Jose where their productivity would be higher, local zoning rules lowered US economic growth reached 36% between 1964 and 2009. There is no reason to assume that similar exclusionary zoning laws do not have the same negative impact in Canada. In Toronto, for example, almost 70% of its land is zoned exclusively for single-family homes, making it illegal to build anything with increased density.

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Elevating the conversation and targeting zoning reform are things Justin Trudeau and Chrystia Freeland could have done in their last budget. Right now, only two Conservative leadership candidates are talking about campaign zoning, Scott Aitchison and Pierre Poilievre.

But the lessons on zoning reform aren’t just helpful at the federal level. The United States offers many examples of state and municipal legislators carrying out dramatic zoning reforms. In Oregonfor example, any land previously zoned exclusively for single-family homes can now, as of right, build a duplex or even a quadruple if it is in a municipality of more than 25,000 inhabitants.

The same goes for Minneapolis, which abolished exclusionary zoning before the pandemic. The city now seems to be going against the trend of rising rents. Rents for one and two bedroom units are actually lower in 2022 than they were in 2019. Part of that can likely be attributed to having eased construction for increased density.

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  1. Housing costs have skyrocketed relative to household incomes wherever there is a strong policy of urban confinement.

    Wendell Cox: Political restrictions caused the housing crisis

  2. None

    Jack M. Mintz: Do-it-yourself won’t lower house prices — interest rate hikes

  3. A new home subdivision is under construction in East Gwillimbury, Ontario, Canada, January 30, 2018. The annual pace of housing starts slowed slightly in January, falling less than expected for the start of the year.  (Mark Blinch/Reuters)

    Randy Gladman: Ontario’s housing problem is a supply problem

  4. Residential homes are seen in this aerial photograph taken over Burnaby, British Columbia, Canada, Monday, June 3, 2019. The Canada Mortgage and Housing Corporation is expected to release housing starts numbers on June 10 .  Photographer: SeongJoon Cho/Bloomberg ORG XMIT: 775354098

    Opinion: Let a thousand fourplexes bloom: How private property rights can solve Canada’s housing crisis

Finally, the small town of Auburn, Maine, shows how local councilors can embrace ‘YIMBYism’ (meaning ‘Yes, in my backyard’, as opposed to ‘Not in my backyard’) to increase affordability. Auburn Mayor Jason Levesque, originally elected in 2017, ran on a pro-development platform that offered voters in his city of 24,000 three options: raise taxes dramatically, cut public services or do new residents come. Having chosen growth, Auburn plans to increase its housing stock by more than 25%, scrapping zoning rules and adopting an “all of the above” view on housing types.

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This kind of bold ambition is exactly what Canada’s big cities and the communities around them need if we are to tackle rather than just talk about the affordability crisis. At the national level, the average rents Pink nine percent in April from a year earlier. In Toronto and Vancouver, arguably the two Canadian cities most in need of increased density, rents have increased by 23 and 27 per cent, respectively. On the buy side, the national MLS benchmark the price for a home was $882,000 in April, a 27% year-over-year increase despite interest rate increases beginning to dampen demand.

Much of Canadian political culture is framed in opposition to what exists in the United States, but on zoning reform we should look south and learn. It’s time to build, but exclusion zoning gets in the way.

David Clement is Director of North American Affairs at the Consumer Choice Center.

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