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Ginny Roth: We may have to empathize with NIMBYs to solve the housing shortage

Commentary

The good news is: We seem to be reaching a turning point on the housing issue – people know there is a problem and the chorus of voices calling for change is getting stronger.

The bad news is: We haven’t yet confronted the depth and nature of the political challenge. It’s so politically fraught that it sometimes feels intractable.

As the price of housing continues to rise not just in Canada’s big cities but in smaller cities and towns too, the urgency of the policy challenge is increasing. Fortunately, politicians, business leaders and policy thinkers are starting to take notice.

Even more optimistically, an increasing majority of these voices understand that tinkering on the demand side of the equation will not fix the problem. The cause of increasingly out-of-reach housing prices is not minor, therefore, the solutions will not be found by making minor policy tweaks.

Though some, including the federal government, still claim that taxing foreign buyers or investing in affordable housing here and there will solve the problem, consensus is building around the correct diagnosis of the problem. Canada does not have anywhere near enough housing supply for the number of interested buyers (and sometimes renters) and the single biggest reason for this is planning and land use restrictions that get in the way of development.

The reason these restrictions remain, both as a general matter of policy and in specific instances of application, is because existing homeowners do not want their streets, their neighbourhoods and their towns to change. They elect representatives who will uphold the status quo and punish politicians who threaten it. The common reaction to this challenge is for pro-growth voices to bemoan the selfishness of NIMBYism. We shake our heads and our fists and write snarky columns about their hypocrisy.

Some in Canada, to their credit, are making early forays into trying to counter NIMBYism with YIMBYism (Yes, please, in my backyard!). This pro-development enthusiasm at the policy level, though rare, is welcome and helps contribute to a public narrative which occasionally pushes back against the NIMBY majority. But it is not enough.

An approach that forces through unwanted new developments is politically dead on arrival.

Efforts to make housing more accessible and affordable must ultimately endeavour to bring Canadians onside at the grassroots level. A viable plan must not seek to slip through development approvals without the neighbourhood noticing, nor should it ram through major policy overhauls against the wishes of voters only to have them overturned when a new government gets elected on a promise to bring back local control.

An approach that forces through unwanted new developments (both big city towers and new suburban sprawl) is not only politically dead on arrival, it’s inconsistent with the values of a good society.

There are no doubt unethical manifestations of NIMBYism that we should dismiss. Arguments against new developments are often no more than thinly veiled racism, classism and selfishness. But we should not ignore other legitimate concerns. The desire of a community to preserve its heritage, culture and history is legitimate.

An attachment to parkland, greenspace, mature trees and sunlight is legitimate. And yes, a desire to keep one’s surroundings beautiful is legitimate. We need look no further than the recent outrage over plans to “modernize” the Chateau Laurier in Ottawa to understand that Canadians want to keep their traditional buildings attractive. It is not snobbish or immoral to want your neighbourhood to look and feel good.

More practically speaking, incumbent homeowners do not want to see the value of their homes erode. This challenge is harder to confront but confront it we must. The Liberal government has sought to indulge Canada’s baby boomer homeowners by denying the realities of the need for more housing supply. I can’t say I blame the government for worrying about messing with what is effectively the retirement savings of much of our population. But increasing housing supply must not necessarily erode home values across the board. While an increase in supply would certainly take some of the heat out of the market (after all, that’s the whole point), we know that at the local level, development can sometimes add value to incumbent properties, often many times over.

What is clear is that any approach that dismisses concerns about local neighbourhood character or eroding home values for current owners is both politically and morally unpalatable. So, is there a better way?

It is worth looking to the United Kingdom which, while different on the details for a number of reasons, is confronting a fundamentally similar housing supply and accessibility challenge. As part of an attempt to further solidify a new voting coalition of working-class Conservative voters, Prime Minister Boris Johnson and his government have been re-thinking planning rules to encourage more development.

They issued a white paper to explore options and are in the midst of grappling with political opposition from their own party’s benches. Foreseeing the challenge of this political opposition, British think tank Policy Exchange put out a paper called Strong Suburbs earlier this year to try to promote politically viable policy change.

The paper explores a very specific idea: empowering incumbent homeowners at the local street level to opt into their own gentle densification. This means that a majority of homeowners on an individual street in a suburban community in England could decide to welcome multi-family, multi-floor terrace homes (think beautiful brownstone walk-ups more common on the streets in Paris and London) instead of single-family bungalows, adding value to their properties and multiplying housing availability in their community.

Streets would be empowered to opt in with some constraints placed on height (in consideration of neighbouring streets) and homeowners would be encouraged to apply design and beauty stipulations for developers, avoiding styles that would ruin the look and feel of the community. The paper uses economic modelling to make the case that incumbents would see the values of their property increase, encouraging more and more streets to opt in, thus significantly increasing the overall supply of housing in the country.

There are no doubt challenges with this model and the devil may well be in the details. But it is well past time that Canada start exploring options like the one outlined in this paper.

Our housing discussion still naively assumes we must either ignore the problem and tinker at the margins or grit our teeth and gear up for a big fight to ram through new planning and zoning rules which would be stopped or reversed when voters inevitably put up a fight.

Canada’s nascent YIMBY movement is encouraging and as others have pointed out, the number of voters who cannot afford homeownership is growing. Now we must confront the political challenge, painting a picture for Canadians who own homes and for Canadians who do not, of what a better future with more plentiful, beautiful housing could look like and how we might get there.

Livio Di Matteo: The real victims of wealth inequality? It’s not the middle class

Commentary

Economic inequality is a dominant public policy issue given that along with its effects on economic welfare, it is also a factor in health outcomes such as COVID-19.

Research is showing that countries with higher income inequality experienced more COVID-19 cases and deaths. Inequality is even considered a factor in hampering the post pandemic economic recovery. Needless to say, it is important to understand exactly what inequality is.

Inequality is a multi-dimensional problem affecting not only income, but consumption, wealth and access to opportunity.

Nevertheless, much of the current policy debate focuses on the income shares of the top one percent of earners when wealth inequality is likely the bigger problem. Wealth provides greater long-term economic security and can be a better long-term indicator of social status and economic and political power.

Wealth inequality is complex and the outcome of economic change as well as institutional forces. It can be a transitory part of the economic life cycle, given that wealth and income rise with age.

It can also become ossified, persisting across generations and reinforced via cycles of poverty and discrimination. Wealth inequality can be pushed up by economic growth and industrialization but mitigating factors can pull it back down, such as during the 20th century which saw increased unionization rates, estate taxation, mass public education, social welfare interventions and the fostering of home ownership.

While housing prices are considered a factor in driving inequality at present, it was not always the case. One often unacknowledged past example towards more equitable wealth distribution was the United Kingdom’s Housing Act of 1980 which provided incentives to public housing or council house tenants helping them to buy their homes at a discount. As a result, the British home ownership rate increased 15 percentage points — from 55 percent in 1979 to over 70 percent by the early 2000s which certainly fostered more broad-based wealth holding.

While taxes on wealth are levied in 24 of the 36 OECD countries, they have played limited roles in tax revenues

At the same time, a reduction in union strength as well as the end of estate taxation and less progressive tax systems may also be factors raising overall economic inequality since the 1970s.

There have been calls for increased wealth taxes as a solution to growing wealth inequality as well as meeting the expenditure demands of the COVID-19 pandemic.

But a recent OECD review finds that while taxes on wealth — like inheritance, estate and gift taxes — are levied in 24 of the 36 OECD countries, they have played limited roles in tax revenues. In 2018, only 0.5 percent of total tax revenues were sourced from these taxes on average across the countries that levied them.

In the case of Canada, which abolished estate taxation in the 1970s, it has been suggested that wealth taxes add relatively little to the taxes on capital and capital income that are already in place and come with substantial administrative challenges.

Wealth inequality has been high and persistent, though some eras have seen lower wealth inequality than others. The industrial growth and development of the 19th century saw immense surges in wealth inequality. The evidence for Canada, the United States, and the United Kingdom shows reduced wealth inequality starting in the 20th century after the increases of industrialization.

The period since the 1970s has seen some rebound in wealth inequality in these three countries but it has been most striking in the United States. In the case of Canada, more recent estimates put the current wealth share of the top 1 percent at closer to 30 percent.

Wealth inequality everywhere is ultimately driven by complex interacting forces and not necessarily by simple inexorable laws relating rates of return and accumulation. Wealth inequality is an outcome of economic change. Economic change via war, globalization, technological change, and property booms creates winners and losers with the shifting balance driving changes in inequality. Economic change and disruption benefit those who are able to take advantage of new opportunities, resulting in more inequality. In a sense, some inequality is inevitable if one has robust economic growth.

Of course, these trends based on the top one percent obscure changes within the wealth distribution. For example, as the 20th century progressed, Canada saw a shift that saw the wealth share of the top 10 percent decline while that of the next 40 percent has increased. However, what is truly remarkable is how poorly the bottom 50 percent have done over time with their share remaining practically constant at under 10 percent. The chief beneficiaries in Canada of a more equitable 20th century wealth distribution have been the ‘‘middle’’ wealth holding classes as represented by the next 40 percent of the distribution after the top 10 percent.

This on its own represents a substantial historical achievement in terms of increasing economic security and creating broader wealth holding but it comes with issues.

The high inequality of the 19th century is attributed to the effects of raw capitalism without a social safety net, but the present is also disconcerting. After all, by the third quarter of the 20th century Canada had adopted a reasonably comprehensive redistributive state with income security programs, child support payments and credits, subsidized university education, public health care, and other assorted public goods and infrastructure.

One might expect that, over time, human capital would rise, earnings rise, and wealth flow down to those at the lower end of the wealth distribution. While everyone is richer in absolute terms because of rising real income and wealth, the relative shares of the bottom 50 percent have not improved. It appears that the poor are still with us.

The persistence of low asset holding among the bottom 50 percent of the wealth distribution is a serious issue that public discourse has largely neglected, preferring instead focusing on the relative shares of the top one percent and “middle class” hardship.

The 20th century expansion of the redistributive role of government was accompanied by an expansion of middle-class wealth holding but not increased wealth shares of the bottom half of the distribution. It is unclear what the factors driving this persistence of inequality are.

Intergenerational growth of inequality via intergenerational transmission of values and attitudes toward human capital, saving and wealth may be factors. And all of this is probably going to be compounded in coming years by the educational disruption of COVID-19 and its effects on human capital acquisition particularly in lower income and more marginalized communities.

Acknowledging these realities is a start in addressing what has been a long-standing and persistent problem in inequality.