Not enough new housing is being built for sale or rent and this results in higher prices, higher rents and long waits lists.
by Dave Wilkes
The other day I was listening to pundits on talk radio debating the issue of housing affordability — and what can be done to address the high cost of putting a roof over your head.
It sounded like the experts were talking right past each other, apparently discussing completely different issues. I realized it was because their definitions of housing affordability were different.
It seems to me, though, that some of the solutions can be the same. Housing affordability is a complex subject. At the risk of oversimplifying, there are really three different definitions. The first is housing — houses and condos — that the average family can afford to buy. The second definition is housing that the average person can afford to rent. And the third is not-for-profit rental housing, where collective ownership (co-op) or a degree of social assistance (subsidized housing) helps ensure that the cost of housing can be borne within the income of the resident.
All of these definitions of housing affordability are valid and all come with specific issues to address if affordability is to be tackled as an issue. Unfortunately, as is often the case with highly political topics, it is the differences that get debated — winners and losers get picked and opportunities get missed.
What is common to all three definitions is lack of supply. Not enough new housing is being built for sale or rent, and there is not enough not-for-profit rental housing to meet the need. This results in higher prices, higher rents and long wait lists. A number of factors affect the supply of all three forms of housing. All are subject to the same lengthy bureaucratic approvals process prior to being built. All three require land that is adequately serviced with existing infrastructure that can accommodate the increased usage (for infill projects) or new infrastructure if it is an entirely new development. Lastly, all three forms of housing are subject to layers of regulation, reliance on community acceptance and the political will that exerts influence on building projects around the GTA.
Any one of these factors can add cost, impact the number of new units that come to market, delay new housing from being built or halt construction entirely.
On the cost side, newly built homes that fall under the first two definitions are also subject to government fees and charges that increase purchase price or impact rental costs. BILD recently published a study on the government fees, taxes and charges applied to new homes in the GTA. It demonstrated that the layers of tax-on-top-of-tax added almost 25 per cent, or $186,500, to the price of an average single-family home in the GTA.
In the lead-up to this year’s municipal election, we need our governments not to pick winners and losers, but to focus on housing policies and reforms that can have broad benefits and increase housing supply.