Governments should care what Ontario homebuilders think about regulation

Housing headlines are everywhere. Federal Finance Minister Bill Morneau recently announced a raft of housing reforms. Ontario Premier Kathleen Wynne and Toronto Mayor John Tory recently rang alarms bells on housing. And according to a report released yesterday by the Toronto Real Estate Board, Toronto house prices jumped more than 20 per cent in September.

Indeed, affordability in Toronto has eroded to an all-time low, with prices jumping by more than 50 per cent in the past five years, and rental vacancies sitting at 1.6 per cent. 

It’s clear more housing is needed, for owners and renters alike, in Canada’s largest city and its surrounding areas, before a place to live becomes too scarce a commodity. 

But consider this. Behind the provision of new homes are industry professionals, from homebuilders, to engineering firms, to property developers. To provide new homes, they must navigate the various building permit approval processes at city halls across the Greater Golden Horseshoe (GGH). In its latest study on land-use regulation, the Fraser Institute surveyed such professionals about permitting processes in the GGH.

Long and uncertain timelines for building permit approval by city staff can slow or ultimately reduce the supply of new homes. According to survey respondents, these timelines average more than 18 months across the GGH, with a high of more than two years in Georgina (York Region) and low of less than 15 months in Burlington.

Rezoning can add almost a year to approval timelines in some cities, or less than a month in others. This process can be especially costly to homebuilding in cities where most new builds require rezoning, such as Toronto and Pickering. In fact, the typical cost of navigating the approval process in Toronto (more than $46,000 per housing unit) dwarfs the cost in Hamilton (less than $21,000 per unit).

Moreover, local councils and community groups, which can prevent the building of new homes, represent the strongest deterrent to new homebuilding in King Township, Toronto and Oakville. And unfortunately, council and community opposition tends to be strongest in cities where home values are highest, begging questions about the motivation of local homeowners to maintain or increase property values by deterring new housing construction.

When all measures of residential land-use regulation are combined, the neighbouring cities of Burlington and Hamilton rank as the GGH’s least regulated cities. Conversely, King Township and Ajax rank as the most regulated. Toronto is the fourth most heavily regulated jurisdiction in the GGH, sitting at 20th out of 23 cities studied.

These rankings are not trivial. Reducing or slowing the number of new homes built in Canada’s most important economic region can have negative consequences for newcomers or young families. A reduced pool of housing in a growing region can push prices beyond their reach, or eat into the higher wages they earn relative to smaller communities.

On the plus side, the wide range of results across the cities included in the study show that municipalities can learn from each other. For shorter building permit approval timelines, look to Burlington. For reducing compliance costs and fees, look to Hamilton. It is locally that best practices can be incubated and shared, not provincially or federally.

As the housing debate continues to make noise in Ottawa, Queen’s Park and city halls across Ontario, it’s important to remember the fundamentals of the housing market. World class, growing regions such as the GGH can only remain successful if their most important asset—people—can find appropriate housing. Reducing barriers to the construction of new homes can help ensure that Canada’s largest urban area will keep attracting and retaining the best and brightest, as it always has.