Single-family home buyers shell out an extra $229,000 on average – study

The current regulatory regime is piling up even more expenses on an already overstretched consumer base

By Ephraim Vecina

16 May 2018

Buyers in Canada’s most overheated real estate markets paid an average of $229,000 extra per home between 2007 and 2016 because of regulations making it difficult for builders to construct more single-family houses, according to a new study from the C.D. Howe Institute.

The results of the research revealed that zoning regulations, development charges, and housing limits in and around southern Ontario’s Greenbelt have added around $168,000 to single-family houses in the Greater Toronto Area, and about $644,000 to the cost of others in Vancouver — a number the non-profit research organization said draws comparisons with Manhattan and U.K. housing.

The organization’s study also found regulations caused single-family home prices in Victoria to increase by about $264,000, Calgary costs to jump by $152,000, and Ottawa-Gatineau’s to spike by about $112,000.

Benjamin Dachis, C.D. Howe associate director of research and a co-author of the study, said that development charges levelled by cities to fund the infrastructure needed for new housing are largely responsible for some of the increases.

“Most people can’t afford to pay for their house all up front with cash, so they get a mortgage and pay for a house over time, but that is not what cities are requiring. They are requiring developers to pay for the municipal infrastructure all up front and not over time, so that all gets loaded onto the sticker shock of housing,” Dachis told The Canadian Press.

Dachis argued that the study proved that the charges are “flawed” because they get passed on to buyers. He urged cities to allow these add-ons to be paid over the course of a house’s existence, rather than when it is built, to help mitigate skyrocketing prices.

Dachis also said that the research found that prices spike when it is difficult for developers to get permits based on intensification and densification targets and when they are contending with restrictions on development on land between urban growth boundaries and the Greenbelt.

The C.D. Howe study noted that allowing development on land dedicated for the Greenbelt could reduce single-detached home prices by around $50,000 in Hamilton and between $25,000 and $30,000 in York and Halton regions alone.

Modestly increasing land availability for housing while cutting development and zoning costs would have an even larger effect. It would slash the cost of a single-detached house by more than $70,000 in Toronto, Peel, and Durham regions, $90,000 in Halton Region, more than $100,000 in Hamilton, and around $125,000 in York Region, the study stated.