Inadequate safeguards for property rights affecting housing affordability
Housing is a big issue for Canadians. Even though house prices fell slightly after the pandemic, it’s still tough for young families to find and afford a home.
A poll from Ipsos in the spring showed that about 63 out of every 100 Canadians who don’t own a house have given up on ever getting one. Almost seven out of 10 said that only rich people can afford to own homes.
However, many Canadians may not understand how property rights – or, in many cases, the lack thereof – play a part in the housing shortage, and how robust property rights can help alleviate the problem.
The recently released Canadian Property Rights Index from the Frontier Centre for Public Policy identified how local laws that control how people can use their land are a major cause for concern across Canada. These laws, known as ‘regulatory takings’, can be very limiting. Regulatory or ‘constructive’ takings refer to local land use or zoning laws that limit how individuals may use their land.
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Many jurisdictions, provinces and municipalities in Canada have such laws, with the most restrictive coming from the provinces. As a result, this land can’t be used for building houses.
Excluding land from development and urban growth puts upward pressure on housing prices. There is a clear connection between urban containment policies and housing affordability. ‘Urban containment’ is a name for policies that limit the spread of cities and clearly separate city and country land.
Wendell Cox – author of the Demographia International Housing Affordability Survey – has documented how these policies affect housing affordability in all cities around the world. It’s basic supply and demand: policies that limit or ban the development of unused land push up the cost of land and housing.
This is certainly not confined to Canada. In 2015, New Zealand’s Productivity Commission stated that: “When the release of land for development is restricted (in and around cities), it creates scarcity, limits housing choices, and drives up housing prices. People with less money are hit hardest.”
Sadly, the image of ‘greedy’ land developers often hides the fact that housing accessibility and affordability mainly affect the less well-off. Critics of ‘McMansions’ in residential development often overlook the typical homes found on the outskirts of major cities. It’s not the wealthy but ordinary Canadian families who occupy these homes. Rather than being criticized, home builders deserve recognition for their contributions.
Policymakers and politicians need to find ways to balance legitimate societal needs with the need for land for housing and other development.
British Columbia and Ontario offer two case studies.
Since the 1970s, B.C. has maintained an Agricultural Land Reserve (ALR) as a land use exclusion zone. Designed to protect valuable agricultural land and protect the public from food insecurity, the exclusion zone has created problems for municipalities seeking to grow to accommodate growing populations. The reserve is administered by the Agricultural Land Commission, an administrative tribunal, and is very restrictive in allowing exclusions from the zone. The problem is people forget about the human need for housing and portray the issue as a victory for pristine farmland over greedy land speculators. Prejudice against the suburbs and an unrealistic faith in high-density housing also contribute to the problem.
Even though the ALR only covers about five percent of B.C.’s total land, its rules have blocked the housing and development needs of communities.
In the case of Ontario’s ‘Greenbelt,’ cynical critics are more often focused on who wants to develop the land than the fact that municipalities are being squeezed and feel that certain lands need to be excluded from the Greenbelt if they are to meet the housing and development needs of their communities.
Experience with urban containment policies in the United States might serve as an inspiration. Facing housing affordability issues, many states have seen pushback against such policies. States such as Colorado, with more robust democratic systems that allow for referenda and citizen initiatives, rejected overly restrictive urban containment policies and favoured the property rights of land users.
Canadians across all provinces and territories should also push back, stop demonizing land developers and begin to recognize their property rights so we can solve our housing problems.
Joseph Quesnel is a senior research associate with the Frontier Centre for Public Policy. He is the author of the newly revised Canadian Property Rights Index.
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