Government Housing Policies are Adding to Risks for the Economy
TORONTO, Oct. 17, 2011 /CNW/ - A report by noted housing economist Will Dunning, entitled Restricted Land Supply and Rising Housing Costs in the GTA,
concludes that government-imposed costs and constraints on land supply
have caused both the prices of new housing and the level of economic
risk to rise. A higher level of house prices means that in the event of a
future economic slowdown, there is greater potential for a damaging
downturn in the housing market.
The
report was commissioned and released today by RESCON. "It points to
the very real need for government policy makers at all levels to pay
more attention to the affordability of housing and the consumer impact
of housing-related policies and associated taxes, charges, fees and red
tape" said Richard Lyall,
President, RESCON. "We are on an unsustainable track. Government and
industry cannot be complacent; steps must be taken to ensure that
average families can continue to be able to fulfill their dreams of new
home ownership."
To download a copy of the report, go to www.rescon.ws .
During 2000-2010, the average resale price in the Greater Toronto
Area rose 78%, or 5.9% per year and lot prices 141% or 9.2% per year.
These numbers are well in excess of comparative measures, such as
inflation, wages, or rents. The Dunning report makes three main points:
- First,
low interest rates have created "affordability space" in the housing
market. But, consumers are not receiving the full benefits of that
affordability space, as governments have sharply raised the costs they
impose on new housing. In addition, with land supply increasingly
constrained, land prices have also increased very sharply.
- Second, in consequence, the rise in house prices has been much greater than it needs to be; and
- Third,
with interest rates still at very low levels, prices may very well rise
further unless deliberate and effective actions are taken to control
government-imposed costs and improve land supply.
RESCON
believes that affordable housing is a fundamental prerequisite to the
region's continued economic development, private sector job creation and
social cohesion. "We are seeking a commitment by the province and
municipalities to reduce government-imposed costs for housing by a
minimum of 10% within two years, monitor trends and streamline the
regulatory system," said Mr. Lyall. "Housing must be kept in the reach of working families."
While
the high-rise housing market has been booming in the GTA, there remain
big gaps in supply (e.g for condo units able to accommodate families)
and prices are escalating. Toronto-area low rise housing faces the worst
of all worlds: reduced supply in the market means lower production and
higher prices, both largely been driven by government-imposed costs and
land restrictions).
Reports
from a number of different organizations also raised concerns about the
social and economic impacts of rising housing prices in the GTA. For
example, the Toronto
Community Foundation's recent Vital SignsŪ in 2011 identified housing
prices as a significant barrier to access for many families. A 2011
Metrolinx-funded report noted that rising government-imposed costs have
broad economic and social impacts and the potential to undermine the
goals of transportation investments. This will impact transit needed to
support higher-density housing development.
"We
agree with the Dunning report's conclusions that meaningful policy
changes are urgently needed, to benefit consumers and to reduce risks
for the economy," concluded Mr. Lyall.
RESCON
RESCON
is a builders' association focused on removing barriers in new
construction, eliminating unnecessary costs and promoting innovation in
materials and methods. It is committed to maintaining leadership in
quality, safety and competitiveness. Builders play a unique role in
society in that they produce the single most important thing people buy -
a home.
RESCON
fosters an industry that consumers recognize as second to none. Our
members are based in Ontario, a region that generates approximately one
third of all the housing inCanada. The 2010 value of new housing in Ontario was approximately $20 billion creating 175,000 jobs, $9 billion in wages, $4 billion in taxes and $1.5 billion
in CPP, EI and WSIB premiums. New housing is a weathervane for the
Province's economic health. A healthy balanced market is a prerequisite
for sustained economic development and prosperity.
