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Chris Spoke: It’s no wonder housing is so expensive. We don’t build anything

Commentary

Canada has the fewest homes per capita of any G7 country, and Ontario is tied with Alberta for the fewest homes per capita of any Canadian province.“Canada has a structural housing shortage. This is by now very well established. Last year, we provided some insight into this shortage by comparing the number of dwellings per capita in Canada to that of other G7 countries. That analysis found a large gap between Canadian outcomes and those of our peers. While purely indicative, the analysis pointed to our collective failure in right-sizing the number of homes relative to our population. That work noted that we would need an additional 1.8 million dwellings in Canada for us to have the same number of homes per capita as other G7 countries.” https://www.scotiabank.com/ca/en/about/economics/economics-publications/post.other-publications.housing.housing-note.housing-note–january-12-2022-.html

For Ontario to catch up to just the average G7 country, we would need to see about 1,000,000 housing units completed overnight—and this is before accounting for any population growth.

Over the past ten years, we’ve seen about 70,000 completions per year.

It’s no wonder that housing is so expensive in this province, and in our major cities in particular.

Back in December, when we had six months to go until the provincial election, I floated a few policy proposals that would allow for much more housing to be built. I hoped that some of those might be picked up by the Province’s Housing Affordability Task Force.

Since then, in early February, the task force released a report that includes 55 bold ideas, starting with a proposal that the Province adopts a target of 1.5-million housing completions over the next ten years.Report of the Ontario Housing Affordability Task Force

In response, last week, on March 30th, the Province introduced the More Homes for Everyone Act, which includes a number of positive but fairly modest provisions.

None tackle the restrictive municipal land-use rules that make it effectively impossible for us to build the volume of housing we need.

Per the Province’s news release:

“We heard from municipalities that they aren’t ready to implement ambitious policies from the Task Force’s report right now.”

A full reading of the release does however suggest that the Province might have the appetite for bolder, perhaps less popular, action following the election when a second mandate has been secured. A key excerpt:

“The Task Force report is our long-term housing roadmap. Similar to Ontario’s approach with regular Red Tape Reduction bills, the province is committed to implementing the Task Force’s recommendations with a housing supply action plan every year over four years, starting in 2022-2023, with policies and tools that support multi-generational homes and missing middle housing.”

In anticipation of that bolder move, I’m updating the set of priority recommendations I made in December with a few more, pulling from a recent transition paper I wrote for Ontario 360.It’s Time To Build: Liberalizing Ontario’s Land Use Rules To Boost Market-Rate Housing Supply

Some of these repeat recommendations made by the Housing Affordability Task Force, and some are new. Taken as a whole, they’re disruptive enough to the status quo that they should be prioritized and implemented within the first 100 days following the election.

First, the Province should set standards requiring that all municipalities update their official plans and zoning bylaws to repeal or override all policies that prioritize the preservation of the physical character of their neighbourhoods.

This is to address the explicitly stated objectives in many municipal planning documents to preserve the stability and maintain the existing physical character of established neighbourhoods. In practice, this means that we see a lot of small old houses getting replaced with new big houses in many of our neighbourhoods, but no intensification and no additional units, despite strong demand.

Second, the Province should set standards requiring that all municipalities update their official plans and zoning bylaws to allow for a minimum of four residential units on all residential lots or six residential units on all residential lots within a population centre of 500,000 or more people.

Third, the Province should set standards requiring that municipalities update their official plans and zoning bylaws to not include any maximum heights lower than 12 meters. (That’s four storeys.)

Fourth, the Province should set standards requiring that municipalities update their official plans and zoning bylaws to end the practice of limiting permitted densities through a Floor Space Index (FSI) constraint.

The FSI is the ratio of the total permitted floor area of a building to the total lot area. So, for example, a 20 foot by 100 foot lot with an FSI of 0.6 would only allow for 2,000 sf * 0.6 = 1,200 sf of floor area in a new building—even if the form-based criteria (such as height and depth) would appear to allow for much more.

The FSI has got to go.

Two of these recommendations are repeated from my December piece. Taken all together, they would unlock the missing middle—housing types that are denser than a semi-detached house and less dense than a midrise building—and lead to a boom in small-scale development.

I’ve written another Hub piece here with my friend Brendan Whitsitt on why that’s a really good idea.“Why are these types of housing called ‘the missing middle?’ Because they fit into the ‘middle’ range of density, between detached houses on one end and midrise buildings on the other. At one time they were the predominant form of housing in many cities, but they’ve been ‘missing’ from new development since around the post-war era. At that time, increasingly restrictive zoning ordinances started setting aside large swathes of our cities for only detached houses. This has effectively reduced population in many of our most established city neighborhoods, even as overall urban populations have grown.” https://thehub.ca/2021-06-18/opinion-canada-can-build-millions-more-homes-by-unlocking-the-missing-middle/

They wouldn’t, however, do much to allow for efficient, higher-density buildings. They are necessary but not nearly sufficient.

We’re also going to need a lot more new midrise and highrise development.

I’m focusing on the missing middle here because these policy changes would distribute development more broadly beyond urban centres and transit notes, exhaust local NIMBY opposition through sheer volume, and, critically, draw from a broader and more accessible talent pool for development and construction.

They would help us chip away at our housing deficit and revive the dream of homeownership for young, middle-class, and immigrant families.

Derrick Hunter: Economic security depends on energy security. It’s time for our leaders to act like it

Commentary

We’re watching energy prices skyrocket as Russia invades Ukraine and sanctions are applied on Russian exports.

Downstream, this shows up directly in higher consumer costs at the gas station and in home heating bills. Indirectly, since energy costs are embedded in everything we consume, it manifests as widespread inflation in all the other consumables that we take for granted in modern society. For example, rising natural gas prices lead to shortages in fertilizer which in turn results in reduced crop yields and higher grain prices. Economic security depends on energy security.

Calm societies result from economic security achieved largely through stability in the price and quantity of the necessities of life. History has shown repeatedly how easily rampant inflation can bring down a government when the cost of living exceeds the ability of the citizenry to pay. The Arab Spring erupted in large part due to food price inflation“However, there was one factor unnoticed that had a global impact but affected the Middle East the most. Food Prices, more specifically the rising price of grain, says Lester Brown, president of the Earth Policy Institute.” https://medium.com/something-about-everything/food-riots-and-the-arab-spring-4886e4c3604#:~:text=Obvious%20reasons%20that%20ignited%20the,last%20and%20least%20authoritarian%20regimes. for example. “Nothing so weakens a government as inflation,” said John Kenneth Galbraith.

Modern politicians understand that periods of high inflation are toxic for political careers. Consequently, we are beginning to see surprising policy reactions to this recent round of energy inflation. California is sending cheques to car owners. Canadian premiers are debating the suspension of provincial gas taxes. Left-leaning politicians in both countries are demanding windfall profit taxes be applied to energy producers to be rebated to consumers.

But hang on a second; many of these same people who are now concerned about energy affordability are the same ones who have been putting up barriers to increasing supply and introducing carbon taxes, the whole point of which is to increase prices, thereby diminishing demand and leading us into a clean energy nirvana. It appears that for all the bloviating about the need for higher prices to curtail demand, there is an underlying concern that when the consumer must open his or her wallet a little wider to pay for something, higher prices might turn out to be a problem.“The latest Ipsos poll, conducted exclusively for Global News between Sept. 20 and 23, shows Canadians have vastly different views on what should be done to try to mitigate the impacts of climate change, and 46 per cent do not want to spend any additional money in the form of taxes or higher costs of goods.” https://globalnews.ca/news/5948758/canadians-climate-change-ipsos-poll/ That probably explains why the Canadian carbon tax has been promoted as having minimal net cost to the consumer.

The idea that energy security didn’t matter, and we could painlessly transition to renewables, or at least export our carbon footprint to parts of the world that were not pursuing net-zero was a comforting narrative when we thought we had reached the end of history.The End of History and the Last Man is a 1992 book of political philosophy by American political scientist Francis Fukuyama which argues that with the ascendancy of Western liberal democracy—which occurred after the Cold War (1945–1991) and the dissolution of the Soviet Union (1991)—humanity has reached ‘not just … the passing of a particular period of post-war history, but the end of history as such: That is, the end-point of mankind’s ideological evolution and the universalization of Western liberal democracy as the final form of human government.'” https://en.wikipedia.org/wiki/The_End_of_History_and_the_Last_Man Now though, the world is quickly waking up from a thirty-year stupor and re-discovering that there are bad actors out there who pose a threat to our way of life. This exposes all the bad decisions we made that increased our dependence on those it turns out we cannot trust. Perhaps it wasn’t such a great idea for Germany to rely exclusively on Russia to provide it with natural gas. Perhaps it wasn’t such a great idea for Canada to rely heavily on China for pharmaceuticals and PPE in the event of a pandemic. Perhaps it wasn’t such a great idea for Joe Biden to cancel the Keystone XL pipeline so that he’d have to go begging dictators in Venezuela, Saudi Arabia, and Iran for supplies after applying sanctions on Russia.

For that matter, perhaps if Canada had built pipelines to tidewater and LNG terminals, we’d be able to help Ukraine in a tangible way, rather than merely “convening” and “rooting for the underdog”.

We are getting a hard lesson in geopolitical reality; the world remains a dangerous place and many people are at risk of starving or freezing due to the reprehensible actions of an autocratic leader. Even a quick resolution to the Ukraine conflict wouldn’t change the fact that the Western world now knows that it cannot be dependent on despots in Moscow, Beijing, or Riyadh for critical inputs that drive modern life. It will take years to build alternative supplies and re-shore supply chains but that will be necessary if we wish to ensure our economic security.

In short, it seems likely that our three-decade experiment with globalization, if not dead, is certainly unwell. If the Russian central bank can be deleted from the world financial system as easily as a Canadian trucker, who could blame any nation that fears running afoul of the United States for adopting alternative forms of financial transacting that don’t require the cooperation of Western governments? We already see this occurring in things like India arranging to purchase Russian oil in rupees, in China’s replacement system for the SWIFT system (CIPS), and in Putin’s demand to be paid for natural gas in roubles. Our adversaries are building alternatives to the Western financial system; where is our alternative to the critical commodities we source from them?

Perhaps currency isn’t really what is being printed in enormous quantities by the Federal Reserve or the Bank of Canada. Perhaps we are discovering that actual currency is oil, natural gas, wheat, uranium, fertilizer, gold, etc.; real assets that we need that cannot be printed or otherwise wished into existence but that are gladly accepted in any country.

To that end, it never made any sense for green politicians and environmentalists to advocate destroying our fossil fuel supply chain without first building its replacement. Energy transitions always take decades. Electricity from renewables can make an important contribution but need to be backed up with natural gas, coal, or nuclear energy. The cost of upgrading the North American electrical grid will run into the trillions. The quantity of minerals required to convert the world’s automobile fleet to EVs away from internal combustion will be enormous and most of the known deposits are controlled by countries we can no longer rely on. Battery technology is nowhere near ready to meet our needs. Bad things happen when reality collides with platitudes.