'Carrot-and-stick' approach may obstruct federal efforts to ease Canada's housing shortage, says CMI Financial president
Canada’s goal of increasing housing supply may be undermined by restrictive local-level zoning policies, according to Kevin Fettig, president of private lender CMI Financial Group.
Fettig highlighted how local zoning regulations, aimed at protecting property values, could hinder the construction of affordable housing, despite federal initiatives.
"Pushing for greater density is central to the federal government’s strategy to encourage more affordable housing," Fettig wrote in a recent blog post. However, he pointed out that much of the zoning regulation happens at the local level, where governments often impose restrictive policies that limit new home construction.
These restrictive homebuilding policies are largely designed to protect the value of existing homes, which many homeowners see as their primary source of wealth and retirement savings.
“[Homeowners] view nearby change of any kind as a potential threat to that value. Restrictive zoning helps mitigate the risk of a decline in property value,” Fettig said, noting that while some homeowners may be seeking to influence policies for personal gain, many are simply trying to protect their financial interests.
“Aspirational at best”
The federal government’s $4 billion Housing Accelerator Fund, designed to increase housing supply, has been tied to zoning changes that would allow for more mixed-use and middle-housing options.
However, Fettig warned that the "carrot-and-stick" approach assumes municipalities need to be coerced into action, which has sometimes led to tension between local governments and their residents.
In Calgary, a proposed blanket zoning change sparked public backlash. The proposal led to the city’s longest-ever public hearing, lasting over three weeks, with approximately 70% of speakers opposing the changes.
Concerns ranged from the impact on neighbourhood character and infrastructure to fears of declining property values. The city also received a record 5,500 written submissions from residents opposing the zoning amendments.
Similar tensions have arisen in other parts of the country. In British Columbia, the provincial government acknowledged that housing legislation permitting additional units on single-family lots does not override old land-title covenants that restrict multi-unit construction on properties.
These covenants, which were often registered by builders when the properties were sold, have proven difficult to remove since many of the original developers are no longer in operation.
“This highlights that CMHC’s housing supply targets are aspirational at best,” Fettig said.
A legal barrier
“Faced with a cookie-cutter approach to housing policy,” homeowners in some areas are increasingly turning to restrictive covenants as a means of opposing blanket zoning changes, Fettig explained.
These binding legal agreements, which are registered on property titles, impose additional restrictions on what property owners can do with their land, often limiting the size or type of structures that can be built.
“Before municipal governments took on land-use zoning powers, restrictive covenants were a primary tool to organize towns and cities,” Fettig added. “These covenants could impose restrictions on the building size and appearance, as well as on the types of activities allowed.”
Read more: Improving timelines, zoning rules will help with housing affordability – OREA
In Alberta and BC, restrictive covenants remain in place unless they come with a specific expiration date. In Ontario, covenants typically expire after 40 years if no expiry date is mentioned.
Fettig noted that courts can discharge these covenants under certain conditions, but the likelihood of success depends on the specific wording and legal context of the covenant.
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