Opinion: 3 ways to help reduce house prices — construction targets, lower fees and zoning reform — via fpcomment
In theory, land purchase costs should only be about a quarter of total home costs. Anything more reflects barriers to accessing land. In areas that don’t have much land, builders put homes in more technically challenging — and costly — places and in higher-density configurations.
All sorts of rules discourage new builds, with the beneficiaries of such barriers being current owners wishing to sell to people willing to pay the high prices. Those who can’t afford supply-constrained prices find themselves stuck in basements or substandard homes.First, provinces should enact mandated minimum targets for municipal housing construction. They need to act because municipal governments typically approve fewer homes than an unimpeded market would.
Last week, Ontario expanded “strong mayor” powers to large cities that have agreed to meet provincial housing pledges. Mayors with these powers, including the one Torontonians will choose Monday, should enforce council-approved housing plans. Ontario should delegate assessing whether plans can achieve pledges to neutral adjudicative bodies. Such bodies should have the power to compel cities and mayors to revise their plans if the pledge is likely to be missed.
Second, governments need to reform upfront development charges on new housing. In Montreal, there are no such charges. In some places in Toronto, they add over $100,000 to the cost of new homes. Water and wastewater are the largest components of development charges. People who benefit from services certainly should pay for them — but over the life of the asset, not all at once up front. That’s not an efficient way to pay for infrastructure.
Where user fees can’t be charged over time, we should reduce existing fixed charges. To replace foregone revenue, provinces should allow cities to levy a sizeable land-value charge, which would encourage developers to plan for more units than if they had to pay a separate charge for each unit, as they now do.
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