You’ve cut your cable subscription, you’ve picked up overtime at work and you’ve quit your online shopping addiction. But no matter what you do, you can’t save $50,000 for a down payment. With only a minimal amount of discretionary income available after your recurring monthly expenses, it’ll be years before you’re able to save enough to afford a down payment on a home.
But it’s not your fault.
Research done by Wendell Cox, chair of the Housing Affordability and Municipal Policy program at the Frontier Centre for Public Policy in Calgary, indicates that restrictive land-use policies are to blame for what he calls the affordability crisis.
In a paper, “Canada’s Middle-Income Housing Affordability Crisis,” restrictive land-use policy is explained as including components such as urban containment policy, excessively large infrastructure fees, height limits, large lot zoning and building moratoria. This land, on the fringe of urban areas, is less expensive to build on, and Cox argues that easing the restrictions on these lands would result in housing there being less expensive as well as increasing supply.
“It’s frankly shocking, the extent to which urban planning has been permitted to destroy the housing market without paying any attention whatsoever to the consequences on people,” Cox says. “I’m not saying urban sprawl is great, that we ought not to do some things to control it, but we should be looking every year at housing affordability and if it’s getting worse, we need to be liberalizing the regulations.”
For the last three decades of the 20th century, average house prices and average household incomes in Canada rose at the same rate. Since 2000, however, Cox’s research found that house prices have increased at three times the rate of household incomes, and while Toronto and Vancouver lead the pack with home prices increasing at four times the rate of household incomes, cities such as Montreal and Edmonton have also felt the middle-income affordability pinch. Higher house prices appear to have been a principal factor in a trend toward smaller houses and condominiums across Canada, according to the report, and it’s most evident in Vancouver and Toronto, where housing markets have the most-restrictive land-use regulation.
While buyer-friendly mortgage products and historically low mortgage rates have added to the demand, the research says, it hasn’t been the reason for skyrocketing prices.
“The more-accessible mortgage loan products and low mortgage interest rates of recent years are likely to have increased the demand for owned housing. However, the influence of these factors would be similar in all markets across the nation and are unlikely to be the source of housing affordability differences between markets.” Instead, it’s likely that higher demand would be associated with higher prices where there are more restrictive land-use regulations, where in areas where these urban fringe areas are less restricted, high demand would lead to an increase in supply, having a comparatively small impact on house prices.
“I’m glad to see that the Prime Minister is interested in trying to address the housing affordability problem and I wish him every bit of luck in the world,” Cox says of the talk out of Ottawa about ways to slow the markets. “At the same time, it could be very difficult from a federal perspective to do that; land use decisions are really handled within the province.”
The affordability crisis also has the potential to reach far beyond middle-income households. According to the report, consequences are most impacting younger households, immigrants, and visible minorities, who tend to have lower incomes and less access to housing to begin with. Canadians are concerned about things like social justice and equality, Cox says, but “it’s like they completely forget their value set when it comes to [housing], and it’s a real problem... Unless there is regulatory reform, this will just continue going on. Housing affordability will just get worse.”

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