Trudeau in London Ontario September 13, 2023 Photo by CBC
By Mark Marissen
Principal, Burrard Strategy
Last week was a big week for housing in Canada.
It looks like the YIMBY’s are finally winning the narrative.
First, Justin Trudeau’s government made some significant announcements, then Conservative Leader Pierre Poilievre made sure to get in on the action, and we also heard from Vancouver Mayor Ken Sim.
Canada’s protracted housing shortage is causing an affordability crisis, and the federal government is finally making sure that Canadians know that they’re taking it seriously.
The feds are starting with incentives to curb exclusionary zoning in cities that forbid affordable housing on 75% of their residential land, as well as measures to spur on the construction of purpose-built rental apartments.
According to the Canadian Mortgage and Housing Corporation (CMHC), Canada needs an extra 3.5 million new homes by 2030 to get our country’s housing market anything close to affordable. This is on top of what’s already in the pipeline.
Addressing this shortage is a huge task, especially at a time when our housing starts are slowing down because of higher interest rates, labour shortages, rising costs of raw materials, as well as financing and development costs.
The federal government’s measures follow at least a year of Conservative Opposition Leader Leader Pierre Poilievre vaguely blaming “the gatekeepers” at City Halls across the country for standing in the way of building the housing Canadians need.
Exclusionary zoning, which essentially bans apartments, townhouses and multi-family housing on 75% of residential land in most cities, has become a huge issue across North America.
American President Joe Biden has been going after exclusionary zoning for a few years now.
Oregon was the first state to ban single family zoning in 2019. Lots of other states are scrambling to follow suit.
In the American Midwest, Minneapolis has built more housing than any other large city in the region for years, after abolishing exclusionary zoning.
Adjusted for local earnings, average rents in the city are down more than 20 per cent since 2017, while rising in the five other similarly large and growing cities.
In Canada, the biggest moves to date to tackle exclusionary zoning have been undertaken by British Columbia’s NDP government and Toronto City Hall. This is understandable, because Vancouver and Toronto have been suffering the most from the housing shortage.
But now, with rents and mortgages ballooning everywhere, almost everyone in Canada is experiencing the housing crisis.
The biggest shortage in housing is in purpose-built rental apartments, which need to be legalized throughout cities in Canada. The biggest barriers are zoning that prevents these apartments from being built, and a lack of government incentives to make it financially viable for home builders. This is what the federal government is now focusing on.
Federal Government uses spending power to end to municipal exclusionary zoning
Last Monday, the Prime Minister’s office said they were to make a “significant announcement” in London Ontario for the Housing Accelerator Fund, where Trudeau pledged $74 million to build thousands of homes in London, Ontario.
While there was no prior hint of Trudeau’s own declaration of war against the gatekeepers, buried deep within press release to follow, the PMO said, “Every agreement under the Housing Accelerator Fund will require municipalities to end exclusionary zoning and encourage apartment building around public transit in order to help seniors, students, and families.”
This is big news, and follows in the same spirit as what BC Premier David Eby and Pierre Poilievre have been saying.
Housing Minister Sean Fraser wrote to the Mayor of Calgary on the following day, saying that the city will not qualify for the $4 billion Housing Accelerator Fund monies unless she and her council end exclusionary zoning.
It’s great to see that the federal government is now using its spending power to force cities to stop caving into the NIMBYs.
Feds remove GST on purpose-built rental housing
The next day, the federal government made another big housing announcement, to remove the GST on rental apartment construction.
It’s something that Liberals promised in 2015, many observers have been calling for for years, and was a key recommendation from a panel of experts who advised the federal cabinet at their recent retreat.
The last time a lot of purpose-built rentals were built was in the 1970’s when there were lots of incentives and tax credits for rental construction. Once those tax credits were abolished, and condominiums and secondary suites in houses became the norm, very few rental apartments got built.
Removing the GST on new rental apartment construction won’t be a magic bullet, but it significantly reduces a lack of viability as a chokepoint reducing new housing construction.
These two announcements appeared to take some of the air out of Poilievre’s balloon.
While he had been talking passionately about housing for quite some time, he felt that he needed to formally get a full-fledged housing strategy out the door, including re-announcing some of his policies.
Pierre Poilievre released his housing plan in Vancouver on Thursday.
Poilievre in Vancouver September 14, 2023 Photo by CBC
The central feature of Poilievre’s plan is a policy that ties federal funding to housing starts.
He would require cities to increase the number of housing completions by 15% annually, and then 15% on top of the previous target every single year through compounding.
Poilievre’s plan would also withhold transit and infrastructure funding from cities that do not mandate the construction of high-density housing around transit stations.
Poilievre’s program is not unlike the government’s existing housing accelerator fund, except Ottawa isn’t proposing to withhold funds from municipalities that are slow to approve housing.
Like Trudeau, he is promising to remove GST on rental units, but with the caveat that rents for the finished units must be below market value.
He also vows to sell off 15% of the federal government’s 37,000 buildings to turn them into housing.
NIMBY snitch line
Poilievre loves gimmicks, and has re-introduced the Conservative idea of a “snitch line”, this time against NIMBYs. (The last time a “snitch line” was proposed by Conservatives, it didn’t go so well.)
Major penalties will be imposed on municipal governments that allow for “egregious cases of NIMBYism” by empowering Canadians to file complaints about NIMBYism with the federal infrastructure department.
Vancouver to build a few hundred more homes
Vancouver Mayor Ken Sim’s main housing promise for his ABC party during the 2022 election campaign was to triple housing construction. But housing starts in 2023 will be lower than in 2022, when he was elected.
Last week, City Council agreed to rezone much of the city for multiplex housing, and Sim says that this is just a first “piece of the puzzle” in his government’s efforts to deal with the housing crisis.
A motion passed unanimously on Thursday, to allow up to four units on standard city lots through much of the city, and as many as eight units on larger lots.
“We are taking bold action to address this housing crisis,” Ken Sim said. But critics of the plan argue the step is a drop in the bucket. Even worse, multiplexes aren’t even an ABC policy. It’s a legacy from the last mayor, Kennedy Stewart.
City planners have estimated that the new complex multiplex zoning policy will mean about 150 to 200 new homes, rather than the thousands needed to restore affordability.
Many people said it was only a tiny first step that must be followed with much more ambitious moves for over 70 per cent of land that was historically reserved for detached single homes in the city.
It’s well past the time to end the apartment ban altogether.
Andy Yan, director of Simon Fraser University’s City Program said the multiplex initiative doesn’t go far enough to seriously move the needle.
“It’s a small move. It’s basically a one-wheel tricycle with a flat tire,” he told Global News.
ABC City Councillor Sarah Kirby-Yung also acknowledged the plan was likely to deliver more strata housing than rental, saying “there’s more work to do on delivering on more rental across the city.”
Poilievre’s love-in with Sim
The strangest thing, however, was seeing Ken Sim and Pierre Poilievre endorse each other’s housing plans, right on the heels of Trudeau’s announcements.
Vancouver City Hall already controls all approvals for new housing in Vancouver, so it’s very odd that the Mayor has endorsed a plan to force him into building enough housing.
It also looked very much like Ken Sim was taking sides against the Liberal government which will be in power for at least two more years. Any chances of a Poilievre government will come almost at the end of Ken Sim’s mandate.