To support affordable housing, look at Toronto’s land-use planning regime

Theglobeandmail.com
June 22, 2016
By Frank Clayton

The land-use planning regime applied in the region around Toronto doesn’t pay enough attention to economic and ground-related housing affordability issues. Since the mid-2000s, the Ontario government has elevated environmental issues to the top of the land-use planning-goals hierarchy, advancing them through edicts such as the Greenbelt Plan and the Growth Plan for the Greater Golden Horseshoe.

Protecting the environment is laudable, but so too are the goals of fostering job growth, economic productivity and affordable housing. It’s time to step back and undertake an economic review of the existing land-use planning regime in the Toronto region to ensure that it fosters, not inhibits, the attainment of these important economic and housing goals.

Last December, a panel headed by former Toronto mayor David Crombie issued a report that found significant environmental progress has been made over the past decade, which it expected to continue under the current planning regime. It noted that the mid-2000s policies have begun to reduce urban sprawl through reduced land consumption rates and a shift in the new housing mix away from ground-related housing types to apartments.

Despite this, the Crombie panel recommended, and the province has embraced, the idea that the regional land-use planning framework be toughened further toward promoting a vision and goals that already are skewed in favour of the environment.

The Crombie panel did not examine the existing land-use planning regime’s impacts on regional job growth and economic prosperity (the inclusion of “prosperity” in the report title is misleading). It did not even consider the Toronto Region Board of Trade’s annual Scorecard on Prosperity reports, which emphasize that “improving the [Toronto] region’s performance is imperative because productivity growth is essential to maintaining and raising living standards.”

Other things being equal, reducing costs imposed on businesses by the land-use planning regime will lead to enhanced economic productivity and a higher standard of living. But significant direct and indirect economic costs result from a complex, multilayered and restrictive land-use planning regime such as the one Toronto has.

Examples of direct costs include private-sector compliance costs, governmental planning administration costs and foregone incomes and employment from building small apartments rather than larger ground-related homes. Examples of indirect costs are the higher cost of real estate and suboptimal location options for businesses and households.

To the Crombie panel and the provincial government, economic benefits apparently flow magically from an environment-first planning regime. Economic costs are either assumed to be unimportant or irrelevant, a view that conflicts with that expressed by economists in a recent in-depth analysis of the land-use planning system in the region around London:

“It is perfectly possible to argue that the [economic] costs we identify are worth paying to achieve other policy objectives. However, it is not helpful to pretend these costs do not exist.”

Similarly, at a time when prices of ground-related homes, (e.g., single-detached houses and townhouses) are exploding in the Toronto region, the Crombie panel report did not even mention the decreasing affordability of ground-related homes as a concern, let alone including recommendations to improve affordability. The latter would require a sizable increase in the available supply of greenfield-serviced sites for new ground-related housing in the suburban 905 area-code regions and on obsolete industrial areas within the city proper. Without a huge increase in the supply of serviced sites, prices of ground-related homes will continue to rise and these homes will increasingly become the preserve of the affluent at the expense of middle-income millennials and immigrants. To many home buyers, apartments are not a close substitute for ground-related homes.

There hasn’t been a lot of research into the economic impacts of the existing land-use planning regime in the Toronto region, but the research from England (on which Ontario’s planning regime was modelled) supports the position that the role of economics should be elevated in Toronto regional planning:

“To summarize, there is evidence that planning or zoning systems that restrict the supply of land or space have significant economic costs, which need to be balanced against any environmental or social benefits,” the study concluded.

Ontario’s government should initiate a comprehensive review of the land-use planning regime in the Toronto region before enacting its proposed changes to ensure that the planning regime is pro-active in targeting important economic and housing goals and is not imposing unnecessary economic costs on the regional economy.

Questions the review could usefully address include: What are the impacts of the current land-planning system on economic growth and productivity and the prices of ground-related homes in the Greater Golden Horseshoe? Should planning goals be rebalanced to give greater weight to economic and housing market aspirations? Are there more efficient ways to achieve planning objectives than through the present complex regime of government directives, e.g., more use of incentives or price signals?

It is imperative for the economic well-being of GTA residents that proposed urban land-use policies be examined within a benefit-cost framework which explicitly recognizes economic as well as environmental costs and benefits before being finalized.