Province's Proposed Land Needs Methodology Will Aggravate House Price Affordability in the GGH
Originally submitted to the Ministry of Municipal Affairs and Housing, Ontario Growth Secretariat on February 28, 2018
Re: Feedback on the Province's Proposed Methodology for Land Needs Assessment for the Greater Golden Horseshoe (GGH)
The Centre for Urban Research and Land Development (CUR) at Ryerson University welcomes this opportunity to provide a response to the Discussion Paper entitled Proposed Methodology for Land Needs Assessment for the Greater Golden Horseshoe (the Proposed Methodology).
CUR is an expert-led research centre, dedicated to formulating policies and solutions to address the concerns confronting urban growth and change within the Greater Golden Horseshoe, as well as to educating students to take leadership roles in these pursuits. Its orientation is founded on uniting economics and market analysis within the context and understanding of social and environmental considerations.
CUR researchers have extensive research experience and knowledge about the importance of maintaining a sufficient supply of serviced land for a range of housing types and locations to accommodate anticipated and unanticipated demands in the marketplace to help ensure housing affordability. We also have conducted numerous urban policy analyses examining the efficacy of policies to achieve their stated objectives without generating an array of unintended consequences.
Higher housing prices are a well-known and documented unintended consequence of supply shortages of serviced sites for new housing. To minimize these negative effects it is important that "shovel-ready" sites be available to meet the needs of a growing and changing population.
CUR hosted a workshop on February 26, 2018 aimed at assessing the Proposed Methodology and recommending changes to enhance its outcomes and moderate undesirable negative housing market and economic consequences.
The workshop covered four topics:
- Ways to build a comprehensive land use methodology: looking at best practices;
- Assessing how the provisions in the Province's proposed methodology relate to best practices;
- Discussing the macroeconomic consequences of inadequate land needs assessment; and
- Making the Proposed Methodology more cognizance of economic and market realities, minimize undesirable negative impacts and still achieve Growth Plan objectives.
CUR research staff gave presentations dealing with these four topics. These presentations are attached in Appendix A. The workshop proceedings were also videotaped. The video can be accessed via this link: https://ryecast.ryerson.ca/86/Watch/12314.aspx
Three Key Recommendations for Modifications to the Proposed Methodology
The presentations included a number of observations on the limitations of the Proposed Methodology and recommendations for dealing with them which we hope will be reviewed by your team. There are three especially important recommendations that warrant very close consideration:
1) The residential land needs analysis should incorporate housing types
The 2017 Growth Plan is very clear - housing types matter. This point has been underscored by the experience in the GTHA since 2006. Market trends demonstrate that high-rise apartments are not regarded as close substitutes for single-detached houses by a substantial proportion of homebuyers. The marketplace has responded to the planning-induced reduction in the building of new houses and the planning-induced explosion in the high-rise apartment construction through escalating prices for houses which spread to semi-detached and townhouses as well.
To counter undesirable price increases for single-detached houses, the supply of closer substitutes for single-detached houses - townhouses, stacked townhouses and low-rise apartments - have to be increased considerably. This has not happened over the past decade and is unlikely to happen unless a shovel-ready supply of serviced sites is available to accommodate a surge in construction.
At a minimum, the Proposed Methodology should be modified to encompass land needs for the following housing types:
- Lower-density: single-detached and semi-detached houses;
- Mid-density: townhouses, stacked townhouses and apartment buildings less than 5 storeys; and
- Higher-density: apartment buildings of 5+ storeys.
There is nothing amiss about a well-supported public policy targeted at shifting the mix of new housing built to higher densities that market trends would produce as long as the documented societal benefits of this policy exceeds the documented societal costs. But the current shift from single-detached and semi-detached houses and townhouses to largely high-rise apartments imposes excessive costs because of a lack of substitutability. For the policy to be effective and moderate undesirable price pressures on single-detached houses, a significant shift from high-rise apartment construction to mid-density housing forms is essential.
2) The differing housing roles of built-up and greenfield areas should be recognized
The economics of urban redevelopment in a dynamic and growing region like the GGH largely results in higher-density housing redevelopment and infill development in built-up areas - mainly apartments with a component of townhouses. In contrast, greenfield areas with their lower land costs typically accommodate lower density developments - mainly singles and townhouses with some apartments.
An examination of the anticipated breakdown of new housing built by type of unit is a requisite for the allocation of the new housing between built-up and greenfield areas. Ignoring housing types greatly increases the odds of a mismatch between the land supply available and the land supply needed.
3) Monitoring the supply of residential land by planning status and by servicing status in the short- and medium-term should be an integral part of the land needs analysis
While there is a need to ensure there are ample lands designed to meet housing demands over the long-term, as the Proposed Methodology recognizes, there is an even more important imperative to ensure there is an ample supply of serviced sites ready to go (shovel ready) or near the end of the planning process with infrastructure available to accommodate the demand (as per Policy 1.4.1 of the 2014 Provincial Policy Statement- otherwise undesirable upward price pressures will occur).
Each housing type of course has different densities (i.e. 100 apartments require less land than 100 townhouses) which means a consideration of housing types is required to determine land supply needs accurately.
Superimposing the timing of the availability of infrastructure onto the land supply inventory by approval status should be a requirement for all upper-tier and single-tier municipalities in the GTA and this information should be updated annually.
The land needs analysis should, at a minimum, evaluate the available land supply against the policies in the Provincial Policy Statement regarding minimum land inventories of at least 3 and 10 years of expected demand by unit types and recommend corrective actions to counter any predicted shortfall.
Impact of Recommendations
These recommended modifications to the Proposed Methodology will still generate the Growth Plan's desired shift away from lower density new housing but result in a more sizable component of mid-density new housing at the expense of the higher-density housing that has dominated new housing production over the past decade. By focusing on the need for enough shovel-ready sites to always be available to accommodate the anticipated demand by unit density at the time it emerges.
Without these changes the GGH will be characterized by high and volatile housing and land prices, excessive household debt, undesirable wealth transfers, a stunting of the filtering down process, and ultimately a more uncompetitive economy compared to metropolitan regions like Chicago. In this regard it is important to monitor the housing market and economic impacts, identify emerging unintended consequences, and take steps to counter them with corrective actions.