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Andrew Evans: What America can teach Canada about getting things built

Commentary

An emerging yet persistent theme in diagnosing the economic challenges facing Canada is that we can’t seem to build things anymore. The basic critique extends across the economy from housing to major resource projects and virtually everything in between. There’s a growing consensus that if we want to grow economy, address climate change, and improve the quality of life for Canadians, we need to start building again. 

Yet while there’s shared understanding of the problem, there’s not yet a commonly-held solution. That can be explained by various factors including different political preferences, competing policy priorities, and the particularities of different parts of the economy. 

One issue though that extends across many of these impediments to building is the environmental assessment process. In Ontario, for instance, environmental assessments (EAs) have been rightly identified as a key barrier to getting major projects completed in general and expeditiously in particular. The Ontario government has recognized some of the challenges with EAs and enacted reforms in recent years. These policy changes eliminated EAs for some projects and truncated them for others—including smaller types of electric transmission, municipal infrastructure like stoplights and intersections, and rebuilds of existing roadways from unnecessary burden. The goal has been to place the focus on those projects which warrant greater attention. 

Yet as important as these steps are, they are necessary yet insufficient to fulfill the government’s ambitious plan to build things. Further measures are therefore needed to close this file out and unlock growth while maintaining necessary environmental protections.

The core issue for environmental assessments is that the timeline for their completion is consistently inconsistent. They are subject to myriads of different types of consultation, like consideration for impacts to species-at-risk, local community input, Indigenous tribal consultation, and intergovernmental discussions. 

As a prime example, the projects into developing the Ring of Fire have been stalled for over two decades due to a variety of issues and have yet to even advance into the formal EA stage in the latest iteration. It took three years to create an initial project analysis scope for the environmental assessments for each of the access roads that would lead to the Ring of Fire. With the next phase likely to take longer than three years and perhaps even double or triple that timeframe, the process is simply too long. It shouldn’t take more than twenty years to even begin construction. 

These delays aren’t limited to new projects either. Waasigan, an electricity transmission line Hydro One wants to build in Northwestern Ontario alongside largely existing transmission lines, has been in the EA process since April 2019, and final approval of an EA is not expected until the end of 2024. Ontario is not alone in facing such troubles with building major projects in Canada, as projects like the Trans-Mountain pipeline and the Atlantic Loop have faced similar issues. 

The question, of course, is what policymakers can do to accelerate these projects? The short answer is: we should look for inspiration in our southern neighbour. 

In the United States, the National Environmental Protection Act (NEPA) requires environmental assessments for federal projects. These can be those that occur on federal lands, are from a federal agency (like the Department of Transportation), or use federal funds. 

The difference between the U.S. and Ontario is that NEPA sets out legislated timelines embedded in a two-step process. The first phase is an environmental assessment that determines whether the project will have significant, or potentially significant, environmental impacts. This process can take up to one year as defined in legislation. During this process, community input is solicited and the impacts of the proposal and alternatives are considered, but there is no disqualification issued for the project in question. If the project does not have significant impacts, full project approval is issued within the year. 

When there are significant impacts found, the process moves to a second stage, called an Environmental Impact Statement. This statement is designed to be a decision document that analyses the environmental impacts of a project as well as considers alternatives to mitigate any impacts. There’s also further public engagement during this stage. 

The statement features a legislated time limit of two years, directives to “reduce paperwork and the accumulation of extraneous background data”, and even a maximum final report page limit of 300 pages! This report is then provided to decision makers for a final decision, after which it can be appealed in courts and litigated.

Lest anyone accuse the U.S. federal government of being hard-hearted with its approach, states like New York, Washington, and Montana have their own legislation that mimics NEPA methods. Even a progressive state like California has a stricter timeline than the federal government of only one year to prepare a state-level statement.

As the next step of permitting reform, Ontario should adopt the NEPA model in its own EA process. In order to maintain public support and environmental protections, the government may wish to launch public discussions on how to legislate time limits similar to the NEPA process. These discussions should involve diverse stakeholder representation to enable different and even competing views to be heard. This is key for securing ongoing legitimacy to such reforms. By bureaucratizing the process in a manner that seeks to concretely define core environmental objectives, while identifying the Ontario-specific details necessary, a publicly approved process can be created.

Designing a newly defined process will still inevitably result in legal challenges from special interest groups currently benefiting from today’s process. The government must be prepared to defend its actions in court. However, if the policy overhaul discussions are conducted in a transparent manner that involves a strong cross-section of society, it should prove a solid case for the government to win.

Winning is key. It will remove the barriers to development and the current legal grey zone that make environmental assessments so prolonged. Addressing these challenges is ultimately a crucial step to helping Canada and Ontario get back to building. 

The GTA badly needs homes, but most neighbourhoods are barely growing

Commentary

It’s no surprise to anyone that the Greater Toronto Area is short on housing. One need only ask renters or first-time homebuyers whether enough homes are available to rent or buy, and at prices they can afford.

Indeed, the GTA-wide rental vacancy rate (a measure of rental unit availability) was 1.7 percent for purpose-built rental units and 1.1 percent for rented condominiums in 2022, well below Canada’s three-decade average of 3.2 percent. Predictably, rents have risen sharply, hurting all renters but especially the most vulnerable.

Clear demand for housing in Canada’s largest urban region raises important questions about supply. How many homes are built in the GTA, and where?

In recently-published research, we answer these questions using data from the two most recent censuses, conducted in 2016 and 2021. In total, the number of homes across GTA communities grew by roughly 160,000 homes over this period—a seven percent increase. We further divided this growth across the GTA’s 1,227 census tracts (neighbourhood-sized urban geographies).

As it turns out, the GTA’s housing stock growth (the change in the number of homes region-wide) was far from evenly distributed. In fact, more than half of all housing stock growth occurred in Downtown Toronto or at the urban fringe of far-flung suburbs such as Vaughan, Markham, Brampton, Milton, and Pickering. Meanwhile, the bulk of census tracts located in between these two areas barely grew at all.

The geographic distribution of housing stock growth between 2016 and 2021 was highly concentrated within a three-kilometre radius of Union Station and on the urban fringe—34 kilometres from Union Station and beyond. The 270 census tracts located in these areas added 304 homes, on average, between 2016 and 2021, while the 957 census tracts located between 3 and 34 kilometres from Union Station added just 80 homes, on average, with many even losing more homes than they added. This “donut” pattern of growth has several policy implications as the region attempts to overcome a generational housing shortage.

First, slow-growing central neighbourhoods and communities can accommodate a lot more housing. In fact, well over one third (370 out of 957) census tracts located between three and 34 kilometres from Union Station exhibited a net loss of housing between the last two censuses. It’s one thing to argue that a neighbourhood is already “full,” and thus can’t add anymore housing, but it’s hard to see how allowing desirable neighbourhoods to lose homes is justified.

Second, the steep decline in housing stock growth immediately outside the regional core (Downtown Toronto) is a strong indication of policy barriers to homebuilding in otherwise highly desirable neighbourhoods, rather than implying weaker demand to live there. Our research shows that census tracts between two and three kilometres from Union Station added more than 12,000 homes between 2016 and 2021, while tracts between three and four kilometres from Union Station added fewer than 3,000 homes. For context, this includes neighbourhoods such as the Annex, Rosedale and Cabbagetown—among the most expensive in Canada.

Third, faster-growing pockets in more distant communities are partially reflective of deliberate efforts to develop additional nodes of transport and commerce beyond the regional core, but could also be the result of insufficient homebuilding in desirable central neighbourhoods. Intuitively, it is likely that some percentage of households residing in outlying areas do so as a result of insufficient or unaffordable housing options closer to the regional core, which concentrates a higher proportion of the GTA’s employment, educational, commercial and entertainment features.

Empirically, past research measuring the link between land-use regulation and housing supply found that many parts of Brampton and York Region would have grown more slowly between 2006 and 2011 had regulatory barriers such as lengthy, uncertain project approval timelines and local opposition been relaxed in neighbourhoods closer to the regional core.

To their credit, policymakers in Queen’s Park and at City Hall have taken notice. The province recently passed legislation aimed at making it easier to build more homes in existing neighbourhoods, most notably by allowing up to three housing units on most single-family lots. Toronto has gone one step further by allowing up to four units “as-of-right” (that is, without the need to rezone). These are important measures, but by no means perfect. Beyond the number of units allowed by local zoning bylaws, a raft of stipulations limit the size, style and shape of buildings, as well as the number of parking spaces required. In other words, there’s a whole lot more that could be done to “unlock” more housing in slow-growing neighbourhoods across the GTA and beyond.

Relatively fast housing stock growth Downtown and in select outlying districts plays an important role in closing the gap between demand and supply, but given the magnitude of unmet need for housing in Canada’s largest urban region and primary port of entry, all governments have a role to play in enabling the construction of more homes across more neighbourhoods and communities.