Zoning Reform: A Possible Solution to the Growing Housing Crisis?
Policy Brief by Ryan D'Souza.
The housing crisis is one of the most prominent economic problems in Canada, with the average house price increasing every year. In particular, the crisis has intensified in the Greater Toronto Area (GTA), with houses averaging $1,062,2561 [1] which has evolved the crisis from an issue of affordability to also one of limited supply.
Among the many solutions presented, one solution that is gaining both coverage and controversy is zoning reform. These usually involve a variety of reforms, but one sticks out: ‘upzoning,’ the practice of increasing zoning density in an area, usually allowing single-family homes to be replaced by multifamily homes. Advocates argue that it would inject much needed supply into the market. However, upzoning has met its own challenges and has often been an area of contention within communities.
Recently, the City of Toronto has investigated upzoning and has begun an initiative called the “Expanding Housing Options in Neighbourhoods” (EHON) [2]. It have focused on the area of Beaches-East York as its pilot project and has aimed to “build missing middle type buildings” on city-owned sites to serve as a case study on the feasibility of upzoning [3]. By ‘missing middle type buildings,’ the city refers to townhouses, low-rise walk-up apartments that would see middle density housing options. While the pilot project only started in January 2021, it has gathered much attention and support from zoning reform advocates.
In early planning reviews conducted by the City of Toronto, it found that residents were open to moderately increasing density to allow for middle density homes, in between single-family homes and high rises [4]. Advocates for zoning reform argue that such reforms would help to increase the supply of housing, which would lower outstanding demand. This increased supply would be necessary because Toronto and the surrounding areas are the fastest growing in Ontario, with populations expecting to grow by 40.9% by 2046 [5]. Another benefit touted by supporters is that moderate upzoning would help to slow the urban sprawl in the suburbs. As the population grows and the demand for housing increases, the need to build more single-family homes in the suburbs has tested the limits of the greenbelt. Advocates hope that upzoning will help to offset the environmental cost of building new homes and reducing the greenbelt.
However, upzoning presents its own challenges that could end up not helping the housing crisis. One major concern is that it would not necessarily lower the cost of homes since there is a significant risk that new units could be bought for investment or short-term rentals such as Airbnbs. Another concern with upzoning is its scale. While the Beaches-East York project sounds promising, small quantity upzoning projects would end up being more expensive due to lack of economies of scale. There would need to be larger projects in both the GTA and in Toronto that would lower the cost of production.
In addition to the question of whether upzoning would truly solve the supply issue, another significant concern is raised: what happens to the value of a house and the neighbourhood if it is upzoned? Despite the good intentions of housing reform advocates, housing is seen and encouraged as an investment tool by real estate companies, banks, and even the government who directly and indirectly encourage such action. Considering that Canadians often rely on home values for growing intergenerational wealth, the question of property value becomes an important one. In addition, considering the popularity and demand of single-family homes in the GTA, any sort of upzoning would see home values decrease, which could decrease value and wealth. Unfortunately, there would be little room for significant zoning reform unless it did not hinder the value of existing and converted homes.
In addition to the potential economic challenges faced by upzoning, there are also groups that oppose such reform more personally. Such groups, known as NIMBYs (Not in my Backyard), consist of residents of communities who oppose greater density development because it would be too close to their property, increase congestion or lowering their property values. Such groups can be extremely vocal in their opposition and can have a profound influence in affecting development in an area. Especially considering that Toronto and the GTA are politically important areas on all levels of government, NIMBYs have a great influence in housing development. Their opposition to new development (especially upzoning) poses a serious challenge since it could hinder any real progress towards reducing the housing crisis.
In the end, the proposed solution of zoning reform is not necessarily the silver bullet to the housing crisis; rather, it should be considered a crucial step in the road to housing affordability. While it may be good to see housing supply increase to meet the needs of a growing population, there need to be fundamental changes to how we view and deal with housing. Those can include increasing interest rates, limiting foreign buyers, increasing affordable housing, and changing the culture around housing itself.
Bibliography
[1] Toronto Regional Real Estate Board, “Market Watch September 2021”, (Toronto: Toronto Regional Real Estate Board, 2021). https://trreb.ca/files/market-stats/market-watch/mw2109.pdf
[2] City Planning Division, “Expanding Housing Options in Neighbourhoods”, (Toronto: City of Toronto, 2020). https://www.toronto.ca/legdocs/mmis/2020/ph/bgrd/backgroundfile-148582.pdf
[3] Chief Planner and Executive Director, City Planning, “Expanding Housing Options in Neighbourhoods – Beaches-East York Pilot Project”, (Toronto: Planning and
Housing Committee, 2021). https://www.toronto.ca/legdocs/mmis/2021/ph/bgrd/backgroundfile-159782.pdf
[4] Planning Review Panel, “Summary of Advice from the Planning Review Panel”, (Toronto: City of Toronto, 2019). https://www.toronto.ca/wp-content/uploads/2020/02/93c4-CityPlanning_TPRP_December-7-2019_MissingMiddlePlan.pdf
[5] Ontario Ministry of Finance, “Ontario Population Projections”, (Toronto: Government of Ontario, 2021). https://www.ontario.ca/page/ontario-population-projections#foot-1