Ratepayers, homeowners and renters aren’t ATM machines
BY GEORGE BARNHART, BOARD MEMBER, GRUMPY TAXPAYER$ OF GREATER VICTORIA
Who doesn’t want their rent or mortgage payment reduced by a third?
Finding affordable housing in Greater Victoria, which is defined by CMHC as less than 30% of a household’s income before taxes, is very difficult. So, it’s not surprising that elected civic officials and candidates are constantly talking about affordable housing.
The truth is – it is within the power of government(s) to address four issues to help solve what is a critical issue for the entire community.
First, consider that the C.D. Howe Institute estimates government fees, regulations, direct taxes, secondary taxes that add up to 27 per cent of building costs or approximately $230,000 to the average single detached home in Greater Victoria – a cost that is escalating rapidly.
The Victoria Residential Builders Association (VRBA) has written numerous articles on the issue. In May VRBA newsletter, they highlight the myth that builders pay for these government fees and regulations. In fact, it is the homeowners and renters that bear the cost.
Second, inefficiency and ineffectiveness of local governments.
The District of Saanich acknowledges the issue. In 2015, to great fanfare, Saanich launched a review to reduce the red tape. Then, in Feb. 2018, a similar review was announced. Again, no results. In Nov. 2020, a Request for Proposal was issued to seek outside help for a ‘development process review.’
The Canadian Home Builders Association report on how municipal process, approvals negatively affect housing affordability and cost homeowner’s money.
A developer sums up the frustration, “It is not just the taxation and red tape, it is not knowing what rule will change even after approvals. Community benefit seems to be a negotiation with no guidance as to what can be asked for by cities. It seems in some municipalities; developers are simply a mark to take as much funds they can from. We end up spending countless hours of delay negotiating with staff who seem to have no negotiation skill or inclination. If we could get approvals faster, we could help with the housing crisis.”
A question was asked, will the developers pass along the savings? The answer is – very likely if government allows the market forces to work. What is guaranteed, is that the developers are not paying the cost of government inefficiency and self-indulgence – ratepayers, homeowners and renters are.
Third, supply is limited.
A fundamental law of economics is supply and demand – insufficient supply and/or high demand causes prices to increase. Demand is relatively constant in Greater Victoria, and why not, who would not want to live here. But limited supply is a more complex problem. According to CMHC dwelling starts for the year 2020 are down by 19% across BC and by 8% in Greater Victoria. Yet, across Canada dwelling starts were up 3% for the year.
There are numerous exciting new developments planned for Greater Victoria, but it is a difficult investment climate. The provincial government acknowledged the restrictions to supply and need for affordable housing, in large part, by exercising its authority to circumvent costly municipal fees, regulations and taxes. If the provincial government can save money and speed up the process, why do homeowners and renters still have to pay?
In fairness, the provincial government has introduced a $15M Local Government Development Approvals Program to encourage 162 municipalities to reduce development costs and ultimately improve supply. A drop in the bucket that will likely meet stiff opposition from the administrative staff of the municipalities who benefit from the current system.
Lastly, take a look at zoning and land use controls.
According to research done by the National Bureau for Economic Research, Harvard University and Wharton School, the price of housing is close to the marginal, physical costs of new construction. Instead zoning and other land use controls play the dominant role in making housing expensive.
In 2016, the Fraser Institute published a report on the Impact of Land Use Regulation on Housing Supply and supported by Margaret Wente, Globe and Mail “Governments have strangled supply through overly strict zoning rules and land-use regulations.“ The C.D. Howe study says municipal governments and provinces should take steps such as “easing restrictions on developing agricultural land, simplifying and updating zoning bylaws and reducing development charges.” Even modest fixes could shave house prices by tens of thousands of dollars.
The June 2021 final report from Canada and BC’s expert panel on ‘Housing supply and affordability’ echo this question. The panel states “We believe, and indeed expect many of our recommendations to generate robust discussion or be met with resistance. However, the sooner these issues and trade-offs are understood, and actions are taken, the sooner British Columbia can meaningfully change its course on housing affordability”
It is time for all levels of government to stop treating ratepayers, homeowners and renters as ATM machines and implement some meaningful improvements.
Our elected officials need to step up to their promise to make housing more affordable for all. It’s within their power to do so.
READ MORE
Municipal inspections generate big surpluses despite new housing decline,Victoria Residential Builders Association, 2021.
Housing reports two big recommendations likely dead on arrival, Times Colonist, June 19, 2021.
BC Expert Panel on Housing Affordability,https://engage.gov.bc.ca/app/