Front Burner - Could B.C.'s plan fix the housing crisis?

Episode Date: April 6, 2023

Vancouver is just one of many cities in Canada in the middle of a housing affordability crisis. This week, B.C. Premier David Eby floated a new plan that would mean some big changes. In Greater Vancouver, the benchmark price for a single family home is over $1.8 million, and rents have gone up too. An average 2-bedroom apartment rents for $2,000 a month – if you can find one, with vacancy rates around one per cent. Today, Mike Moffatt, an Assistant Professor at the Ivey Business School at Western University, takes us through B.C.’s new plan and whether the policy could provide a roadmap for the rest of the country. For transcripts of this series, please visit: https://www.cbc.ca/radio/frontburner/transcripts

In the Dragon's Den, a simple pitch can lead to a life-changing connection. Watch new episodes of Dragon's Den free on CBC Gem. Brought to you in part by National Angel Capital Organization, empowering Canada's entrepreneurs through angel investment and industry connections. This is a CBC Podcast. Hi, I'm Jamie Poisson. It's not many rental in the city. And then for buying, and then the price is crazy sky, market high.

In Greater Vancouver, the benchmark price for a single family home is over 1.8 million bucks. Well, we're a family of four, and we're just waiting for the market to chill out. You know, the most we could see is like a townhouse, but it's all like, still pretty without of our range, you know? And that's even looking like Surrey, Langley, like all the like Abbotsford even we considered. That's about like an hour drive. Apartments and condos go for over $700,000. Vancouver is a beautiful place to live. We've got beaches, we have mountains. It's just, it's stunning. So you're paying for that in a way,

but I feel like it doesn't make a lot of sense, you know, and it would be really nice in our time and our generation to be able to get a property that could be passed down later, you know, but I just don't know at this point if it's possible. pass down later, you know, but I just don't know at this point if it's possible. Rents have gone up too. If you rent, I do not need to tell you this, an average two-bedroom apartment is going for $2,000 a month. That's if you can even find one because vacancy rates are at around 1%. I'm trying to move to a new rental, so it's gonna cost me like most probably Vancouver is one of many cities in Canada in the middle of a housing affordability crisis. And this week, B.C. Premier Dave Eby floated a new plan that would mean some big changes. Premier Dave Eby floated a new plan that would mean some big changes.

Well, this fall, the B.C. government plans to introduce legislation that will allow up to four units of housing on a single family lot. If you don't have workers who can work in the coffee shop, if you don't have teachers who can work in the school, if you don't have nurses in the hospital, your city's future is very much in question. Other municipalities are speaking out against the sweeping nature of the province's housing plan. It's a blunt instrument to just change all zoning everywhere all at once. Today, we're going to talk about that and more. Mike Moffitt watches housing policy closely. He's an assistant professor at the Ivy Business School at Western University, and he's a senior director of policy and innovation at the Smart Prosperity Institute,

a think tank focused on policies that grow the economy in an environmentally sustainable way. Hey, Mike, thanks so much for coming back on to FrontBurner. Well, thank you for that kind introduction. Happy to be here. much for coming back onto FrontBurner. Well, thank you for that kind introduction. Happy to be here. So the big headline grabber out of this new plan is the move to allow up to four units on single-family home lots in the province of BC. So NIMBYs beware. Explain to me how that would actually work. Well, there's still some details to be announced. So this is more of a broad picture. But the idea is that

you could, you know, currently on a single family lot, if you could build a single family home, you know, one housing unit, as long as you conform to all of the other rules, and you don't need any kind of special approvals. If you wanted to build a duplex or triplex, two or three units, you'd have to go through a whole kind of zoning process, a rezoning process, get approvals from the municipal government. And, you know, there would often be community hearings and all those NIMBY neighbors would come out and give their opinion of it. Well, that would go away under this idea that if you wanted to build two or three units, and that could be on a greenfield site or on infill, replacing an existing home.

Now, whether or not that actually works and actually people are able to do that will often depend on all of the other rules that go around it. So there are rules about how far back from the street the house could be. There could be rules about parking. So we could say, okay, yeah, you can build four units, but you need to have four parking spots and that might become difficult. So whether or not this actually drives, allows people to do this in practice, not just in theory, it's going to depend on all of those other rules. But I certainly think that this is a movement in the right direction and this could be very transformative. And when you say, you know, all the other rules around it, is it fair for me to say that the plan

that has been released thus far doesn't necessarily have all those details about parking spaces, et cetera? Yeah, it doesn't have those details. And as well, most of those rules are still municipal in nature. So it does somewhat require municipalities to sort of play ball. And that's always one of the challenges on housing policy where, you know, the provincial government, and that could be in British Columbia, Ontario, wherever, you know, they can set these sort of high level policies. But if municipalities, you know, want to block it or want to accelerate it, they can find creative ways of doing so. So it's, you know, we're going it or want to accelerate it, they can find creative ways of doing so. So it's, you know, we're going to have to see a year or two years from now whether or not

people are able to take advantage of this. But I think it's a first step. And if it doesn't, you know, if it turns out there isn't a lot of movement, then we could start to look at some of those other rules and say, okay, do we need to start changing those as well? I want to keep going on this track with you. But first, let's just back up for a moment. You said that you think that this can be transformative. How bad is the situation in Vancouver when it comes to housing affordability? It's absolutely dire. A single detached home, you're not going to find anything under a million dollars in Vancouver. The average one bedroom apartment runs at about $2,700 or $2,800, depending on the site you look at. So, you know, that's massively unaffordable. So for a new family to afford even a one-bedroom apartment, they're probably going to have to be earning next to

six figures. And that's, you know, just absolutely unrealistic. So in Vancouver, you know, we've got families leaving, you know, we've got kids who can't leave their parents' basement. We have people living in very crowded, uncomfortable conditions. So it is a crisis. It's been a crisis for some time. And unfortunately, it's only been getting worse. And broadening that out to the whole country, for me, how bad is Vancouver compared to other places? Like, is it fair to say it's the worst? Or is Toronto like a real close second year? Yeah, Toronto is a really close second. I mean,, the differences, again, if we go to that one bedroom apartment, the differences are about $100 to $150 a month. So it's relatively close. And it's certainly much higher than other, let's say, cities with NHL

teams. It's twice as expensive as your Calgary's, your Edmonton's, your Montreal's and your Winnipeg's. You know, Ottawa's not quite at Toronto levels. But overall, it's exceptionally expensive for a city of its size. So look, let's say that the province, as they want to, they want to move forward with this rezoning legislation. Will enough people actually want to do that to their homes for this to make a dent? Well, I think most of the activity is probably going to be more on the sort of investor builder side. So you are going to see, I think, some homeowners try to use this, again, depending on if all those other rules work. Because you can see the attractiveness of taking a home, making it larger, making it two units so grandma and grandpa can

have one unit and mom and dad and the kids can have another. So I do think you are going to see movement there. But I think where you're more likely to see movement is a bunch of small boutique builders and that kind of thing who will look for smaller distressed properties, buy that up for the land and replace one units with four units. So I think, again, as long as the other rules work, I think the economics are really attractive where you could buy a $2 million piece of land, put up four homes, and sell each of them for under a million dollars and still make quite a bit of money. And then who's that going to help, I guess, is my next question. Because certainly we've seen in this country the financialization of housing, corporations coming in, buying up homes at premiums. Is that not just going to drive up the price of land and make it even harder for regular people to afford a home?

Well, it will depend on how much other land is made available on greenfields and things like that. But overall, if this works as intended and it actually drives a bunch of infill property, that overall it should reduce the demand for both housing and land because you're actually building those units. So you probably will have isolated pockets where land goes up, but that will be offset by other areas that are now less popular. So this is going to have some distributional effects. I think the biggest economic effect it's going to have is creating a lot of these opportunities for, again, smaller builder renovator types who all of a sudden have this new market that they can tap into, which larger guys probably aren't going to want to touch just because they want to have scale. But you have a lot of two or three or four person companies who would want to buy up

these existing homes, renovate them, put in additional units. I think they're going to do very well by this, or at least they could. Yeah. Would it create, in theory, the right kind of housing stock though? Because you mentioned, let's say in theory, like a small boutique builder buys the land for 2 million bucks and then puts up four units and sells them each for a million bucks. That's still really expensive, right? Yeah, absolutely. So it is going to act as a drag, again, if it works as intended, that you won't, because you're getting more supply on the market, you should see those home prices, which, or rents, go up at a slower rate. So Vancouver rents are up year over year, and this could help drive down that growth, but it's not going recognize that we have two housing crises working in parallel. One is just a lack of affordable housing. And this is probably not going to address that. I think there's a lot of housing that the market simply cannot build and make a profit.

And there you have a role for governments and nonprofits and social builders. But you also have the second crisis of just housing affordability, where people with good middle class and sometimes middle upper class jobs, they still can't afford a home or find a home. This is going to help that side of the market, not so much the affordable housing side. Right. They're now looking at something that's a million as opposed to 1.7 million and maybe. 45, 60 minutes east and then driving into the city. Whereas now you've given them an option that's closer to work, closer to transit. They don't have to drive everywhere. So I think a lot of the benefits here are more so environmental and stopping sprawl because again, you can build this density in a way that you couldn't before. for. Watch new episodes of Dragon's Den free on CBC Gem. Brought to you in part by National Angel Capital Organization. Empowering Canada's entrepreneurs through angel investment and industry connections.

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vision together. To listen to this podcast, just search for Money for Cups. I understand other cities have tried this blanket rezoning. Portland, Oregon, right? New Zealand. Well, not cities, but New Zealand. And so what have we learned? So it's worked particularly well in New Zealand. New Zealand had one of the worst real estate markets in terms of affordability. And it's still not an affordable place, but we've seen supply, the rate of building double, and we've seen this sort of downward pressure on prices. And one of the sort of policies that BC has announced here is the ability to build more density near transit lines. But they haven't specified, okay, well, how much density, how near a transit line. One of the things that New Zealand did that I think British Columbia should look at is their rules are you're allowed to build up to six stories, so six-story mid-rise apartment anywhere within one kilometer radius of a major transit stop.

If Vancouver did something like that, that could be hugely transformative. It might also be politically contentious. So it's a matter of how much political capital and political courage the provincial government has. But something like that could be very transformative. The government here, the BC government, has laid the groundwork for that with this kind of vague announcement. And then we'll have to see, OK, well, once the details come out, how aggressive are they willing to be? Put aside for a moment all the potential pitfalls here, like the issues with different levels of government, how complicated this can get.

Can you just take me on a tour of a neighborhood that you want to see that actually got stuff done to help make housing more affordable in one of our major cities, be it Toronto near a subway stop or Vancouver near transit? What does it look like? What does this neighborhood look like? Well, actually, I think the best way to answer this question kind of ironically is to go to a neighborhood from 100 or 120 years ago.

So it's kind of a back to the future kind of thing where you have a mix of housing types, have a mix of housing types where you have six-story apartments near duplexes and you have walkable neighborhoods where you can get your groceries, you can walk the kids to school and that kind of thing. So we have this whole movement across the globe called 15-minute cities, which is just basically this idea that you can build up density, build up different housing forms, create walkable neighborhoods with parks and schools and other amenities close by, so you're not having to load up the kids in the minivan all the time. You know, sometimes you'll have to, sometimes you want to go to a different city, but, you know, you at least have that choice

so i think that's what that looks like and again that's the real irony of this that the future if we get it right looks like kind of how unaffordable things are. And looking at this plan put forward by the B.C. provincial government, it includes other things like a flipping tax and other initiatives. I've heard people say that it's one of the best plans they've seen, and yet it feels so far away from what you're talking about right now. Is that like a fair characterization? I think that is a fair assessment, that this probably is a best-in-class plan, at least sort of Anglo-Canada.

I would say Quebec has always been, Montreal has always been better at building these kind of mixed communities. But those sort of 15-minute neighborhoods that I described. So there's more work to be done. And I would say in defense of the B.C. government, it's hard to do all of these things at once, that there's a need to try a few things, see what works and see what doesn't, and then sort of course correct. Do we have that time, though? I guess what happens to our cities in the meantime and the people who live there? Yeah, and that is a big, big challenge. So, you know, if you look at, I'm going to bring it to Toronto. If we look at Toronto, we lost almost 100,000 people, just so that's gross, not net, but moving out of the city of Toronto to other parts of Ontario and Canada.

not net, but moving out of the city of Toronto to other parts of Ontario and Canada. And it's a lot of sort of young families that, you know, it's gotten to the point where your Toronto's, your Vancouver's and so on, you just can't raise kids or afford to raise children, or at least it's very difficult. So I think you do lose that vibrancy. And I think one of my biggest concerns is if we don't move fast on this and far enough on this, that we're going to create cities without children. And we, you know, we can point to places around the world where this has happened, where, you know, the San Francisco Bay Area, that's starting to happen. You know, there's few kids and the few kids who are there oftentimes can't find teachers because teachers can't afford to live in Silicon Valley. So, you know, there are, there are warning signs out there. There are some real challenges. And I, I, I do really wish we did have more of a sense of urgency than we do. What's the number of new homes that we need in this country? Like, like, can you just put a number on it for me? So, you know, the, the low estimates say that we need to this country? Like, can you just put a number on it for me? So, you know, the low estimates say

that we need to double what we're doing and the high estimates seem to say that we need to triple what we're doing. And we're seeing that in provinces as well, that the Ontario government has committed to basically doubling home building over the next decade relative to the previous decade. So that's the scope of the challenge,

that, you know, this is not just, okay, an extra home here or there. Like this is going to take a wartime-like effort if we're going to create affordability anytime soon. And just fair to say that wartime-like effort is not happening anywhere right now. Not at the scale that we need. Absolutely not. And, you know, we've seen both the federal and provincial governments in Ontario be criticized of that, that, you know, they make housing announcements saying, again, 3.5 million over

10 years, 1.5 million in Ontario over 10 years. And then you look at housing forecasts for housing starts, and it's barely half of that. So absolutely, we have a lot of good programs out there across provinces, across the federal government, but they're all off by an order of magnitude. If we could take everything that we're doing and just stick a zero on the end of it, that would be fantastic, but we're not quite there yet. That would be fantastic. But we're not quite there yet. The other thing I want to ask you about is what the federal government is doing.

So we're seeing policies from the federal government that have made it or they're trying to make it easier for people to buy a home, to take on more debt. I think the latest is that you can contribute more money to your RRSP, right? So you can take it out tax-free. I think it's up to $40,000 now to put down on a home. And is that helping or hurting? Yeah, I would say it's actually actively harmful. So I get the idea that, okay, well, houses are expensive, so help first-time homebuyers save money. But what happens is that why houses are expensive in the first place is that there's so few of them. So basically, giving people more money or allowing people to save more just increases the number of green pieces of paper chasing the same number of homes. So it would be like playing Monopoly and just giving everybody 10 times the amount of money. That doesn't change the number of properties on the board. What that does is whenever a property comes out for auction, we're going to just outbid each

other far, far more than we otherwise would have. So all of these sort of demand side instruments, and again, I get why they're popular politically. This government does it. The previous federal government did it as well. But I would argue that they're at best neutral and at worst actively harmful. And I would like to see that money redirected to building social housing and addressing the supply side of the equation rather than trying to boost demand. And I guess just the final question I have for you today, I know we've talked about some initiatives like building social housing, rezoning, working on these 15-minute cities. If you were in charge here of building more housing and you didn't have all of these

bureaucratic red tape nightmares to deal with, what's the first thing that you would do tomorrow? Okay. So this is my interview as a federal housing czar. Yes. Yeah. You're like the guy, you got nothing in your way. Yeah. I got nothing in my way. I can kind of do what I want. Okay. First thing that's going to happen is we have a lot of our housing issues in this country. Our population of students, particularly international students, has risen, but we're not building student residences. We could change that today.

If we get more student residences built at our universities and colleges, that not only helps those students, but that eases some of the rental pressures off of other communities. That's the first thing I would do. The second thing is we need to build more apartments. Back in the 1960s, we had the same issue. And the government put in a number of tax provisions that made it attractive for investors to build new housing units. So all of those big gray cement apartment blocks, which are kind of ugly, but they're very, very useful because they house a lot of people, those were built in part thanks to those provisions. So I think what we need to do,

because you mentioned financialization, which there's a lot of different ways to describe that, but part of financialization is just international and other investors buying up existing properties. We can actually tweak the tax code to say, okay, instead of chasing that money, trying to chase that money away, why don't we redirect that money into building new units? I think the third thing we need to do is build more social housing. There's parts of the market that the free market is not going to be able to handle. You're never going to be able to turn a profit on it. So we need to accelerate these programs, and we need to find creative ways of doing that.

So in Hong Kong, the subway authority is actually one of the largest property builders because what they do, they put in a subway station. They build an apartment building right on top of that. It actually helps subsidize transit, but it creates somewhere where people live. And if you have your sort of first job and you can live right above a subway station, kind of stumble out of bed and go to work in the morning, that's an attractive thing. a subway station, kind of stumble out of bed and go to work in the morning, that's an attractive thing. So when we are building so many things like transit stations, subway stations, that kind of thing, let's think about how we can use that to address the housing side. So it could be on top, it could be sort of around, but create these transit-oriented communities, but do so in a way that is affordable,

particularly to people starting out and seniors as well. So I think those would be the three things that I would look at. Building student housing, tax reform, and building more social housing, particularly social housing near transit lines. You do those three things, this is gonna get us a lot closer

to that 3.5 or 1.5 million target. All right. Mike Moffitt, imaginary housing czar. It's very nice to dream with you a little bit. Thank you. Thank you very much. Well, thank you for allowing me to give this job interview pitch. So I hope the governor general or somebody is listening to this this you know where to find me so before we go today as we were recording this conversation authorities in vancouver were moving into the city's downtown east side where people have been living in tents and makeshift structures and cleared them many in the area struggle with addiction and mental health issues. One of our producers was down there speaking to people as this was happening.

And we're working on a story about the larger reaction to both the downtown Eastside and tensions in cities across the country. Tensions that revolve around a lack of mental health care and more attention placed on violence and crime. That's all for today. I'm Jamie Poisson, and we'll talk to you tomorrow. For more CBC Podcasts, go to cbc.ca slash podcasts.