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Through the Roof: The High Cost of Barriers to Building New Housing in Canadian Municipalities

Blog by Matt Cavelti | May 16th, 2018

In May of 2018, the C.D. Howe Institute (an independent not-for- profit research institute) released an Article written by Benjamin Dachis and Vincent Thivierge (both researchers at C.D. Howe, and Thivierge a PhD student at the University of California) about the high housing prices in Canada and more specifically, Vancouver. “Through the Roof: The High Cost of Barriers to Building New Housing in Canadian Municipalities” is an important commentary that explores the causation of high-priced real estate. This article immediately caught my eye as it explains what I have been telling clients, friends and family for the past several months - which is quite simply, that the regulatory process for the provincial and municipal governments is accelerating the rise in Vancouver real estate prices. Our government is driving up housing prices by employing restrictions and extra costs in the form of zoning regulations, development charges and limits on development in undeveloped land neighboring urban areas, as well as in developed urban areas.

This excessive government regulation has been calculated by C.D. Howe institute to cost potential home-buyers in Vancouver over $600,000.00 (per new single-detached house) more in 2016 compared to 2007. They key message from this article is one I very much agree with: municipal and provincial governments should review land-use policies and reduce development charges because, unfortunately, these extra costs end up being passed down to the consumers like you and me.

Major take-aways from this commentary:

  1. Provincial and Municipal red tape is adding an additional $322 per square foot to construction cost in comparison to Toronto where the study found it only accounted for an additional $78 per square foot, that means Vancouver builders are paying 4.1 times what their counter parts are paying in Toronto;
  2. Vancouver is only building one third the units Toronto is building annually. On average, only 3500 detached homes are being built a year – which is far too few when you consider the demand and the time it takes to get building permits;
  3. in Vancouver an incredible 50% of the sale price is associated to red tape vs. the 22% of sale prices in Toronto associated with red tape;
  4. there was an astounding $644,000 increase in home prices in Vancouver between 2007 and 2016 due to the previously-discussed factors which are directly correlated to government regulation;
  5. these massive extra costs then get passed on to the consumer - causing a major problem with affordability in Vancouver’s real estate market;
  6. once homeowners purchase a home, it is common to have an incentive to prevent new homes or developments in that neighbourhood - this would create competition when existing homeowners put their houses up for sale. Competition lowers the rate of return on the investment and as a result, existing homeowners often support local government policies such as zoning regulations that restrict new development. N.I.M.B.Y! not in my back yard;


It is clear that restrictions and extra costs in the form of zoning regulations, delays on permit approvals, development charges, and limits on greenfield housing development are increasing the price of housing in Vancouver in a very dramatic way. The first step in fixing the Vancouver real estate crisis is to look at the regulating body that governs the building of new homes; municipal governments and provinces should enable and allow for more development by easing restrictions on land usage, simplifying and updating zoning bylaws, and reducing development charges. Vancouver needs the development of low density structures, such as duplexes and quadplexes in single-family neighbourhoods and Vancouver needs these developments and new homes to be built with less government cost bearing on the shoulders of the consumer.

Matt Cavelti | (604) 802 3390 | mattcavelti@royallepage.ca | mattcavelti.com