How an NDP-Green government can free up B.C.’s housing supply

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Appeared in the Vancouver Sun, June 12, 2017

In the wake of last month’s election, the NDP and Green Party appear poised to form the next government in Victoria. And yet, in their 10-page agreement, (which has sweeping implications for the future of governance in British Columbia) they make only brief mention of one of this province’s hottest issues—housing affordability—by promising to increase the supply of “affordable housing” and tackle “speculation and fraud” in the housing market.

It’s difficult to discern what specific policies these promises will inspire. A few things come to mind, however.

Obviously it’s important to distinguish between “affordable housing,” often used to define government-owned or subsidized housing for vulnerable groups such as disabled people or families in poverty, and housing affordability—basically the ability for average workers and their families to live comfortably in a house, condo or apartment. Housing in a city or province is affordable, broadly speaking, if the vast majority of citizens can adequately house themselves without any assistance. While helping vulnerable groups is important, ensuring broad housing affordability is key to any region’s quality of life.

Nevertheless, with an NDP government backed by the Green Party, increased spending on affordable housing in B.C. seems likely, but broader efforts to address housing affordability for the general populace remain unclear. In any case, if B.C.’s next government wants to improve affordability for average citizens, it should recognize the housing market fundamentals of supply and demand.

In a market economy, homebuilders and property developers respond to increased demand for housing by building and marketing new homes and communities. If growth in demand outpaces their ability to add supply, prices go up. After all, a growing pool of potential buyers and renters bidding on a dwindling number of listings can only make housing more expensive. If housing affordability for average British Columbians is the goal of politicians, local and provincial governments should reduce barriers to housing development.

Unfortunately, recent research by the Fraser Institute suggests this isn’t happening in the most desirable areas of the Lower Mainland. Researchers surveyed developers and homebuilders about their experiences obtaining building permits at city halls across the region. It turns out, there are huge disparities between municipalities when it comes to red tape.

Let’s start with how long it takes to obtain a building permit. It takes 21 months, on average, for Vancouver City Hall to approve housing projects. Just across Boundary Road in Burnaby, it only takes seven months. South of the Fraser River, it takes just under 15 months in Langley Township, and 11 in Delta.

Vancouver also has the thickest red tape in the region. Typical homebuilding projects cost almost $80,000 per new dwelling unit to comply with city regulations—almost $30,000 more than Surrey, the next most expensive city for homebuilders.

Clearly, there’s room for improvement.

Beyond measuring the scope of the problem, these numbers also highlight potential solutions to a lagging housing supply. Because the disparities are so large between Lower Mainland cities, there’s a great opportunity to share best practices. After all, municipalities and the province already collaborate to provide services such as transit and policing—why not also talk about processing building permit applications in a timely, cost-effective manner?

Whatever housing policies B.C.’s new government adopts, it should not lose sight of underlying market dynamics. Improving the ability of homebuilders to respond to growing demand is an important first step towards affordability. It also comes at little cost. Otherwise, red tape and costly permitting will continue the supply strangulation that’s pricing many British Columbians out of the housing market.

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