GTHA housing affordability - The great debate

NRU
Sept. 21, 2016
By Geordie Gordon

Greenbelt and Growth Plan policies are impacting housing affordability in the GTHA, but the scope and scale of that impact is a topic for debate. Some experts say that the policies, by decreasing supply, are significantly reducing affordability, while others maintain they are only one among a host of factors-such as national housing policy, location and low interest rates-driving up the cost of housing.

The economic impact of the Greenbelt and the Growth Plan was the topic of discussion at a recent debate hosted by the Urban Land Institute as part of its Electric Cities initiative. While the presenters agreed that housing affordability is being impacted, there was no consensus about the extent of that impact.

Ryerson University professor David Amborski told participants that while the provincial plans are important planning tools, the resulting economic impacts have been underplayed. He suggested Greenbelt and Growth Plan policies be viewed using an urban containment lens, and their effect on housing affordability be measured using principles of supply and demand.

“When you do put constraints in place, like the Greenbelt, you constrain the total land supply. That in itself isn’t a problem in the short run... it may be in the long run, in the broad market” he said.

The issue with land restrictions is that smaller municipalities, or “sub-markets” with less available land feel the effects of the restriction more keenly.

“If there is [a] municipality with a lot of employment [land] and a large percentage of [that] land [is] in the Greenbelt, it could have impacts on [land] supply in that sub-market,” Amborski said.

As demand for housing increases, it effects the supply and thus the cost of land, which is a large determinant in the cost of housing. In determining land supply, Amborski said it is important to consider the amount of designated, serviced land, not just the total supply.

Hemson partner Russell Mathew agrees. He noted that the Greenbelt won’t be a factor in the supply of land until perhaps 2050. Rather, the issue with land supply is the amount of serviced land, which is indirectly related to the Growth Plan because of the time it takes for new land to come on stream, as well as the capacity of municipalities to service new sites with the necessary infrastructure. He said that current demand it clearly outstripping supply, which is causing price increases.

“The Growth Plan, however, over the longer term, is very deliberately limiting the supply of ground-related housing in hopes of more people living in apartment-type housing in an intensified environment. All of which is fi ne, but it does, of necessity, use the price mechanism to get there, because you’re restricting the supply of the product compared to what people would want,” Mathew said.

There are some legislative tools to address supply issues, Amborski said, noting that the Provincial Policy Statement requires municipalities to have a three-year supply of serviced lots, and report on it annually. However, citing research done by the Ryerson Centre for Urban Research, he said, none of the 905 municipalities, apart from Oshawa and Whitby, or regional governments are doing this.

“We have one of the strongest [land use] regulatory structures in North America, and now, with what might be called Growth Plan 2.0, it almost doubling down on some of the regulations. Before we enter into that, we should look at the economic impacts, what’s it going to do?” Amborski cautioned in reference to the proposed amendments to the Growth Plan.

Mathew echoed Amborski’s call for caution saying that the effects of the proposed amendments are not yet well understood. He suggestions work is needed to determine what the impact on housing affordability will be, among other effects.

“This is a big deal, and a big deal deserves some careful analysis and work... and I haven’t really seen that,” he said.

But other factors also need to be taken into account, according to University of Waterloo associate professor Markus Moos. While it’s clear from research that land restrictions such as the Greenbelt are associated with higher housing costs, the question of whether or not the restrictions is causing the lack of affordability is not definitive.

“I’m not going to disagree that the Greenbelt land restrictions have an impact on price, the question is what’s the degree relative to all the other factors that are impacting the price of housing and land [in the GTHA],” he said.

Moos says that another important factor influencing price is geography. This means that land prices peak in downtown Toronto, with secondary peaks in GTHA nodes.

“In the GTA, the highest concentration of jobs is still downtown and around the airport, and that [means] that when you’re looking at what’s causing... the increases in land values, it’s people’s decision in trading off housing and community costs. It’s about accessibility, accessibility determines the value
of land,” he said.

As more sectors of the economy seek to locate in the city, it attracts more people and drives up land prices in the core with a proportional increase throughout the region.

“You can have increases in the price of single-family homes just because the region is growing and because there’s actually demand for the higher-density [housing] sector, not because there’s a higher demand necessarily for single-family homes,” Moos said.

Moos also pointed to government’s withdrawal from the housing sector, starting in the 1980s and 1990s, saying it has had a negative impact on housing affordability. He said the country used to have a well-regulated housing market with a national housing policy. This has been lost. In the 1980s, the government built 15-20,000 units of affordable housing per year, which by the 2000s had dropped to 1,000 units per year, resulting in a higher demand for market housing.

Metropole Consultants principal Pamela Blais agrees. She said it’s important to keep a broad perspective when considering the increase in housing prices that has been evident in the last five years. There are supply and demand factors, as well as local and global factors that need to be
assessed. Blais highlighted the influence of mobile global capital as something that has changed recently, and is on the increase.

“There’s a lot of global capital out there looking for somewhere to land profitably. Toronto is very, very attractive... to globally mobile capital,” she said. “This is something that’s relatively new and could have impacts in terms of price pressures locally.”

Blais says the sustained, hyper-low interest rates have pushed up the demand for housing, particularly since the 2008 recession. This has had an impact on affordability, one which has coincided with the implementation of the Growth Plan.

The event, moderated by First Gulf Corporation development vice president Derek Goring, took place September 15 at the Toronto Reference Library.