Expert panel highlights construction shortages, supply mismatches as root causes of escalating prices
Rather than focusing on curbing demand through higher transfer taxes and penalties as a way to contain runaway housing prices in B.C., a government-appointed expert panel is calling for the removal of regulatory impediments that has created a long-standing shortage in housing supply.
Earlier this month, a six-member expert panel jointly commissioned by the federal and B.C. governments released a report addressed to Canada’s finance minister Chrystia Freeland, which highlighted the fact that housing construction in the province has not kept pace with its growing population.
As explained by Murtaza Haider, professor of Real Estate Management at Ryerson University and real estate industry veteran Stephen Moranis in the Financial Post, construction has remained between 10,000 to 25,000 units per year over the past three decades in Metro Vancouver, an area known for extreme escalations in housing prices. That state of play has remained even in the face of the region’s continuing increase in population.
“The bulk of recent construction comprises condominiums, which does not address the shortage of low-rise (e.g., detached, semi-detached) housing,” Haider and Moranis said. “The result is a sustained and fast escalation of low-rise housing prices in the Vancouver area.”
The report offered twenty-three recommendations, bucketed under five calls to action, to address the problem of housing prices.
Under one call to action, the panel called on provincial and federal governments to encourage construction of community and affordable housing. Noting that the federal government’s recent investment in community housing has been much lower than pre-1990s levels, it said tax incentives are needed to support the development of social housing.
They also called on all levels of government to coordinate better, particularly as increasing the housing supply would involve sorting out land use, controlled by municipal governments, and incentives and means to fund the construction of affordable housing, which are in the hands of higher tiers of government.
Another call to action asks for the removal of preferential tax treatment for homeowners. Decades of government policies aimed at encouraging homeownership have resulted in unfair treatment of renters, the panel said. A balanced tax system should feature to equitable treatment of renters and owners, they said, further recommending that B.C.’s Homeowner Grant be eliminated.
“Many housing advocates argue that Canada has sufficient housing or that Canadians might even be over housed,” said Haider and Moranis. “Such reasoning conflicts with the reality that among the G7 countries, Canada has the fewest dwellings per 1,000 population, as noted by a recent report by the Bank of Nova Scotia.”
The bank estimated that to keep the dwelling-to-population ratio at 2016 levels, there should have been 100,000 additional units constructed between 2016 and 2020. And by its approximation, reaching the G7 average – 471 dwellings per 1,000 residents – would require Canada to have an additional 1.8 million dwellings.
