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LYALL’S FILES: Why Housing Un-Affordability is Here to Stay
January 28th, 2015 11:50 am     A+ | a-

Richard Lyall / RESCON


Welcome to RESCON's new blog! Here you'll read about a range of issues related to residential construction, including six-storey wood-frame construction (more on the Feb. 11 Toronto Mid-rise Symposium at this link and coming to this space), quality of construction, accessibility, net zero housing, new voluntary certification programs, build green programs, WSIB rates, the Ontario College of Trades and more.

As the voice of the residential construction industry, RESCON – the Residential Construction Council of Ontario – has a responsibility to talk about the issues of the day faced by the residential construction industry and try to shed some light on how these issues affect builders and ultimately you, our homebuyers.

Our association is best known as a hands-on, technical, builders-only group, but have started a communications program as we feel that greater outreach is required to bridge the gap between builders and the public so that you have a better understanding of our industry.



RESCON is a hands-on, technical, builders-only association. Photo supplied by Brookfield.


AFFORDABILITY

So let’s start off by tackling the subject that has chins wagging around the GTA: affordability.

It is not going to be rectified anytime soon. The need for affordable housing is a supply problem arising from market dysfunction. Not enough housing is being built, especially for working families. Consequently prices have escalated beyond the reach of many people. The Jan. 19 TD Bank Economics Report on housing in the GTA spells out that issue.

Meanwhile, on Jan. 27, the Globe and Mail targeted “smart growth” in its analysis piece on housing affordability in the GTA.

And while our government is taking much of the blame for this situation, it has a crucial role to play in two ways: first, in the upkeep and investment of existing social housing or in specific projects in aid of those who have no resources to pay for housing; second, and more importantly for sheer economic impact, the conditions and rules governing the supply of housing in general.

In other words, the affordability of housing for working Canadians.

GOVERNMENT-IMPOSED BARRIERS

The problem is government rarely has been good at examining its role in the dysfunction that is our housing market. While governments have repeatedly announced their intentions of ensuring adequate housing supply, little is done to examine the government-imposed barriers to housing supply much less do anything meaningful about it. To begin, there are the various levels of government subject to different masters whose housing roles remain uncoordinated at best.


Then within the various levels of government, there are a plethora of ministries, agencies, boards and commissions whose actions affect housing supply and affordability. No one coordinates these various “silos” of government which have their own distinct agendas with no coordinating function or cost-benefit analytical capacity.

In other words, little consideration is given to the actual supply of housing. Little consideration is given to the associated economic, social and health consequences. Inadequate supply causes people to pay too much for housing, or live in substandard conditions with the associated health consequences. This affects the economy, investment, learning, employment and productivity.

Meanwhile, the massive increases in development charges in recent years simply adds gas to a fire. These charges have advanced well beyond any rational “growth pays for growth” argument. They are simply regressive and punitive on unwitting newer and future homebuyers. And ideas like inclusionary zoning, bounced around during Toronto’s municipal election campaign, is a ludicrous fail of an idea that would simply penalize other residents in the same projects.

The systemic response to housing issues have been limited and arguably grossly counterproductive. Announcements on social housing site specific projects create the illusion of broad-based action. Repeated announcements about “ensuring” a supply of affordable housing are fatuous at best.

While governments programs for rent supplements and social housing upkeep are absolutely necessary, they mean little with respect to the absolute size of the problem – which continues to grow.

MILLENNIALS

Worst of all, our young hard-working people are being chided as “failing to launch” when the truth is the decision makers have failed to give them a pad. Is it any wonder millennials are staying home longer and not having families? The sad thing is their predicament is the product of failed and half-baked government planning and development policies. Part of the problem was nothing was done to balance the provincial growth plan with measures that would speed development within existing building boundaries.

While there was great fanfare about the greenbelt, there was little appetite to explain to existing ratepayers and nimbyists that this would require higher densities within existing neighbourhoods. The result – no balance or market equilibrium of demand and supply. The economics 101 effect – price increase. Making it even worse, the province saw explosive growth on taxes on new development.

In response to the chilling TD Report, it makes sense to examine the staggering cost, waste and delays in the process of moving housing ideas from the concept stage to occupancy.

Here’s the fundamental issue: it is much harder and less positive work than announcing new spending programs (and it’s less newsworthy).

Governments are cash-strapped and the situation is deteriorating but action is required. In 2008, the building industry proposed that the government conduct a housing affordability impact audit to look at streamlining and cutting red tape. It should get rolling now.

Also, without some kind of review and coordinating authority looking at housing supply, this will remain unaddressed and continue to grow as it has for the past decade. We can’t afford to have more expensive housing than New York, as reported in the TD Bank study. It is simply unsustainable.

A new market-driven approach is the only solution.

Thanks for reading our debut blog. Please also follow our conversations on Twitter at @_RESCON, @RESCONprez, @RESCON_VP and @RESCONtech.

Feel free to email me at media@rescon.com.

Richard Lyall has represented the residential building industry in Ontario since 1991 in his capacity as the President of RESCON, the President of the Metropolitan Toronto Apartment Builders Association and as the Executive Director of the Toronto Residential Construction Labour Bureau. Lyall is also a frequent speaker and writer on issues related to the construction industry. 

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