Alain Bertaud: Zoning plans are wasting scarce land supply

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Metro Vancouver is threatened by an affordability crisis. The decision to reform cities lies with provincial elected officials, mayors and city councillors. They will choose urban reform only if they have a constituency that will support them. The crisis in housing affordability is a crisis of urban governance and it must be discussed in the media.

The rule-of-thumb is that housing is affordable when the house price divided by the household annual income is below four. Today, Vancouver’s price/income ratio is 12. It was 9.5 in 2012 and 5.3 in 2005. Today only Sydney, Australia, and Hong Kong are less affordable. Metro is in a position to lead other cities in a healthy direction.

Is Vancouver unaffordable because of high construction prices? No. Vancouver’s construction costs are only 22 per cent of the price of a typical house, while land costs represent 78 per cent. Winnipeg land costs are only 26 per cent. In a healthy market, land should be around 30 per cent of the total property value.

Vancouver land is expensive in part because of its topography. But when land is scarce, it has to be used with great economy.

One way to deal with the land shortage is to allow households to decide by themselves how much land they can afford to use to build the floor space they need in the neighbourhood of their choice. But in Vancouver, this has been fixed by zoning regulations set arbitrarily long ago without considering how the land cost increases housing prices.

In Vancouver, the high proportion of land-cost-per-house suggests that a single-family home close to the city centre would soon become a duplex or even a quadruplex if left to household demand. This could reduce land costs closer to 30 per cent.

Traditional but deficient land management tools are responsible for wasting scarce land supply. Zoning and master plans are tools that are obsolete for managing a city in the 21st century.

Zoning plans define for every lot what are the permitted uses and every detail of what can be built. Despite Vancouver’s lack of land, its zoning rules oblige land-users to consume more land than they would otherwise choose to. Regulations establish minimum lot sizes and not maximum ones, minimum setbacks, maximum building heights, etc. Zoning rules set arbitrary land consumption without considering household income and land prices.

Increasingly, urbanists recommend abandoning rigid zoning regulations. Households are capable of making trade-offs between these dwelling features; there is no reason for a legislator to make this trade-off through regulations.

Master plans are based on the illusion that a city is a complex building that needs to be designed in advance by competent professionals. In reality, cities aren’t large buildings, but products of spontaneous order created by the millions of initiatives taken by households and firms according to their own priorities.

Cities evolve constantly and are subject to external shocks, like the recent COVID-19 pandemic, climate change, financial shocks and inflation. Because master plans can’t anticipate these changes, particularly land prices and household income, they’re usually rather bland documents that enumerate “needs” without pricing them. They can deprive the permanent planning staff of resources to monitor on a day-to-day basis the evolution of the city.

Households and firms require infrastructure, transportation and social services that competent pros have to plan, design and implement. Planning infrastructure is a continuous exercise that must consider changing consumption patterns, new technology and external events like climate change. It can’t be done once every few decades.

Metro municipalities must address the issue of housing affordability if they want to remain competitive.

Regularly monitored indicators like increases in land cost, rents and housing prices will alert elected officials and urban planners that prices are escalating. Then they can increase the supply of developed land by increasing investment in infrastructure and transport, adapting land use standards to the new demand and accelerating the process of providing building permits.

Investments would be made according to the constantly updated database provided by the planning departments, and the social and economic objectives issued by the mayor’s office.

Relaxing zoning regulations is a real political and economic challenge. But the impact on affordability and the housing stock could be relatively rapid.

These changes have to be led by elected officials. Urban planners like me can only offer technical solutions to the cabinet ministers, mayors and city councillors. Political leadership and the media are essential in creating a popular constituency for reform. Without this constituency, no change will ever happen. As a president of the European Council once complained: “We know what to do to improve things in the long-term, but in the short-term, we do not know how to be reelected after we have done it.”

Citizens must get behind their elected leaders and support them in bringing these reforms.

Alain Bertaud is the former chief urban planner at the World Bank, author of the book Order Without Design and has over the years advised 50 cities around the world on urban design. Bertaud will be speaking at the Roundhouse Community Theatre on Sept. 19 at 7:30 p.m. Tickets at Eventbrite.com.

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