The crisis of housing affordability facing many Metro Vancouver families is enormous. With suburban land prices exceeding $100 – $140 per square foot, this is the first time in the history of the region that a house on a quarter-acre in the suburbs is out of the reach of most starting families. And it’s important to mention that it will stay out of reach from now on.
Yes, a house on a lot in the suburbs of Metro Vancouver will stay out of reach. If you don’t like that fact, you can get mad at me.
My wife and I, and most of the people we knew, were able to afford it in the 80s, and even the nineties. It remained affordable even through to a decade ago (largely because of extremely low mortgage rates). But our kids probably won’t be able to afford that dream. Today, and from now on, a-house-on-a-lot isn’t how most new families will live in this region, for reasons we’ll look at below. But if that is indeed the case, then we have two obvious choices.
1) Families will have to move to a different region, or
2) Housing has to change.
The Reasons Why
My Parents’ House
Much of Metro Vancouver was developed at four lots per acre (“quarter-acre-gross-density”); after allowing for roads and lanes, the conventional lot in the suburbs was about 60’ x 120’, or about 7000 square feet. That was the property my parents bought in the late 50s, way out in the suburbs in a community called Coquitlam, where land was cheaper, where they could afford the $3000 for a building lot; add an 880-sq-ft two-bedroom house over unfinished basement, and the total price was $12,000. Subtract the downpayment, and you can calculate that my parents signed on to 25 years of mortgage payments (at 6%) of $64 per month.
StatsCan shows that at the time, average manufacturing wages were $79.20 per week (just under $2/hr.), and for those on salary, just under $500 per month ($3/hr, or $6,000 a year). So my parent’s house in the suburbs cost the equivalent of about two to three years of my father’s modest salary (mom stayed home to raise three boys); the mortgage payment likely consumed less than 20% of his monthly earnings. Add in utilities and property taxes, and it likely came in at less than 30% of income. They struggled in those early years, but they managed.
Today in BC, StatsCan shows average weekly earnings at about $925, or $4000/mo. (an average annual increase of about 3.5% over 59 years). And today, that same modest 58-year-old house on Edgewood Avenue in Coquitlam is assessed at just over $1 million (mostly the land value). That means that the house that my parents bought brand new in 1959 for 2-3 years’ typical salary is now valued at more than 20 times the StatsCan average yearly earnings. Mortgage payments (even at 3% for 25 years) would be $3800/mo, 45k/yr, roughly 100% of StatsCan’s average earnings figure, and obviously not affordable on an average single salary, even for a modest 60-yr-old house.
“Buy land – they’re not making it anymore.” — Mark Twain
So let’s contemplate the price increase on my parents’ home. Looking at the current (2017) assessment for that property, the land value alone went from $3k in 1959 to $977k in 2017 – that’s an average of 10.5% per year, compounded over 58 years, doubling in value every seven years on average, now worth 325 times its original price. Compare that to the price of the lumber or other materials used to build it; softwood lumber is currently about seven times as expensive as it was in 1959, an average annual increase of 3.4%.
Incidentally, my wife and I bought our current property as a building lot for $85,000 in 1991, and the property has seen roughly the same average 10%/yr increase in value over the past 26 years; compounded, it’s now worth 12 times its 1991 value.
That kind of price increase for a building lot is, of course, unsustainable. Something has to change.
What have other regions done to keep land prices low? Well, cities like Calgary, Dallas, Atlanta, Brisbane, and Houston have moderated land prices despite massive population growth, simply by allowing adjacent farmland to be converted to urban uses. And they’ve done that for decades. The Golden Horseshoe around Toronto has some of the best Class 1 farmland in the country, and much of it is now buried beneath sprawling urban communities. Montreal has seen exponential increases in urban sprawl.
“Sprawl suggests the city has collapsed, like a drunkard on a sidewalk, and is now spreading inexorably outwards…” – Robert Kirkman
Houston, we have a problem.
Consider Houston, a city with legendary urban sprawl, well-known in planning circles as the only major city in North America that has no zoning. Metro Houston (including The Woodlands and Sugarland) has a population of just under 7 million sprawled over 23,000 sq km. Those numbers are coincidentally almost identical 400 km away in Metro Dallas (including Fort Worth and Arlington), which does have zoning. Both of these metro areas are absolutely enormous and growing. In fact, each of these metropolitan areas covers more land than the U.S. states of Rhode Island and Connecticut combined. Using those numbers, average population density in Houston could be calculated at about 300 persons per sq km, or a density of about one person per acre. Of course, they’ve got high density areas, neighbourhoods like Gulfton and Westwood, to the southwest of downtown Houston, where some 90% of residents live in apartments, and density is about 24 persons per acre. But those neighbourhoods are anomalies; across metro Houston, 61% of residents live in single-family homes (remarkably, about the same as the percentage of all Canadians who live in single-family houses), a statistic that is enormously troubling for a large city like Houston, the fifth-largest metropolitan area in the U.S.
A section (to the west) of the sprawling single-family neighbourhoods that stretch in all directions from downtown Houston.
Take a tour of Houston by Google Earth, and you’re in for monotony. I used to visit Houston occasionally for work, and I was constantly amazed at the strip malls, the parking lots, the completely unwalkable urban environment. And the endless highways connecting sprawling suburbia.
This is a simplistic look at it, of course, since population density is more complex than that. But even so, while Tokyo has an average population density of 18 residents per acre, and the 17 million people of Dhaka (Bangladesh) are at 185 persons per acre, metropolitan Houston averages one resident per acre.
A few weeks ago when I started writing this, I had chosen to highlight Houston; that was long before Hurricanes Harvey and Irma, long before the recent flooding put the city in the news. And there are some really good reasons why Houston is an even more-relevant choice today. Houston has seen repeated flooding for decades, due to a sprawling, inadequate, and poorly-planned drainage system. Mind you, 30 inches of rain would overwhelm almost any drainage system, but the flaws in Houston’s infrastructure made it much worst. Add to that the fact that Houston has faced three 500-year floods in the past three years. But when Houston finishes its next ring road, it will encompass an urban area larger than Rhode Island, eating up the prairie grasses that act like a sponge during heavy rainfall, leaving the city even more vulnerable to extreme weather events. So sprawl can be about more than just bad land use.
Houston, of course, isn’t the only U.S. city with the challenge of sprawl. Los Angeles has long been the place of low-density expansion, something we in Metro Vancouver are trying to avoid early. LA didn’t try, which ironically means that it is now forced to face some of the very same issues we are trying to face early; at present, 92% of available land is used up, and they know they have to plan for a 35% increase in its population over the coming three decades, mostly by increasing density of existing development.
Mind you, this issue isn’t limited to U.S. cities.
Lots of other metro areas around the world, and what they’re doing to manage growth:
So, that’s the context. Obviously, here in Metro Vancouver, with land prices rising by three to five times the rate of inflation, housing costs will be unaffordable unless we can find a way to be more efficient in our use of land, to lower the land cost per unit of housing. In other words, density.
Density: The opposite of Sprawl
The housing market in Metro Vancouver is strained. Part of that is that we have very little undeveloped land left that we aren’t already protecting for some other purpose – agricultural, green zone, parkland, environmentally-sensitive areas, etc. In that kind of circumstance, as we’ve seen, many other North American cities would simply expand their boundaries and build roads to gain access to more land – sprawl. Is it possible to contain an urban area to avoid sprawl? Or is possible to choke off growth by restricting the supply of housing?
First off, let’s rule out the concept of stopping population growth. Of course, while it would be easier if we could just close the gates and stop people from moving here, that isn’t possible.
As I said before in this series, we wouldn’t be facing this issue if our region wasn’t a desirable place to live. There is no question that Canada is indeed one of the most desirable countries in the world to live – peaceful, clean, safe, stable, economically strong. Plus, Federal immigration policy has acknowledged that Canadian society is aging and, as a result, Canada will need to continue to accept about a quarter million immigrants a year, partly to help rebalance the demographic bulge of baby boomers that are currently in retirement age. And a large number of those new Canadians, along with many existing Canadian residents, will choose to settle in the Vancouver region because – let’s face it – it’s the best place in Canada.
As a region, the pressures we face from population growth are daunting. And in that context, some people would argue that we should stop development with the hope that it will stop the pressure and stop immigration and in-migration (Canadians moving here from other parts of the country). Clearly, though, while the resulting higher prices caused by further restricting housing supply might stop in-migration from other provinces (other Canadians can hardly afford to move here as it is), it wouldn’t stop the wealthiest immigrants from choosing Metro Vancouver, and from outbidding our own children for the limited supply of housing in the region. I suspect we all agree that we don’t want our children forced out of this region. As any economist will tell you, you can’t curb demand by restricting supply. As such, it is a clear and appropriate public policy goal to ensure that the demand for housing is met fully, and in as sustainable a way as possible.
But if we aren’t expanding the urban area (other than through the last remaining greenfield development areas within the Urban Containment Boundary, such as Burke Mountain, and parts of Surrey, Langley and Maple Ridge), how can we meet increased demand for housing? The same way every other successful and sustainable major city in the world has done it – through density.
Urban Containment Boundary
Metro 2040, Metro Vancouver’s “Regional Growth Strategy” (RGS), is now five years old. When the 22 municipal jurisdictions that make up Metro Vancouver unanimously adopted the RGS, they put in place an Urban Containment Boundary, a “hard line around development”, as part of a firm set of planning principles and designations intended to protect the livability of the region for future generations. Metro 2040 acknowledged at the outset that the population of the region would grow by about a million residents by 2040, and that we needed to accommodate this growth, not the way LA or Houston did it – through urban sprawl – but largely on the existing developed footprint in the region.
The five goals of the RGS are things few would argue with – 1) Create a Compact Urban Area, 2) with a Sustainable Economy, 3) while Protecting the Environment, 4) Developing Complete Communities, with 5) Sustainable Transportation Choices. Who could be against that? But it’s Goal Number 1, the Compact Urban Area, that is the most important, and potentially the most challenging. After all, it is often said that with land use planning, people are against two things: Sprawl, and Density.
When it comes to land use, people are against two things – urban sprawl, and density.
Many other regions have failed at this fundamental goal of avoiding sprawl, but I suspect that Metro Vancouver’s Urban Containment Boundary will stand at least for the next generation. Admittedly, that belief is based partly on the unique physical realities of the region, the barriers that make “spreading out” more difficult; to our west we have the Pacific Ocean, to our north are mountains, to the east is some of our most valued agricultural land, and to the south of us is a really big army.
But any economist will tell you that if supply of a scarce commodity is limited, amid rising demand, the price will increase. And as we’ve seen, the price of standard single-family land in Coquitlam has risen from 45 cents per square foot in 1959, to more than $140 per square foot today. With StatsCan’s 1959 average wage figure, a typical manufacturing wage ($2/hr) could buy four square feet of land for every hour you worked; today, even a whole day’s earnings might not be enough to buy a single square foot of real estate.
Housing vs. Transportation
If the designated urban footprint of the region is to stay the same for the next generation, we certainly know that we need to be more focused on efficient land use, and quite deliberate about regulating the development of the region. But that’s not the only issue. For example, at current car-ownership rates, a million more residents would result in 600,000 more cars, something our road networks cannot handle. In fact, just to PARK that many more cars would require us to pave an area the size of Port Coquitlam.
So, in working to ensure we sustainably accommodate the next million residents of this region over the next 25 years, we need some targets. And the most important Metro 2040 target, from my perspective, is the intent to accommodate many of the required new dwelling units, and much of the new employment, in Urban Centres and Frequent Transit Development Areas. Suffice it to say that land around Skytrain stations needs to be used as efficiently as possible, to ensure we can protect the livability of the region. We’ve touched on that in the previous two parts, and will explore it more fully in Part 5. Parts 3 and 4 are about the single-family home.
Densifying Existing Neighbourhoods
Most of Coquitlam – indeed, most of the residential land in the region – contains single-family homes, typically at four houses to the acre, about 6000 – 7000 square feet per lot.
As we’ve seen, these lots are currently selling in Coquitlam for about a million dollars (almost $150 per square foot), which makes it really challenging to try to use those lots to create housing that meets the needs of conventional families in our region. Standard economics has traditionally ensured that the end sale price of house is roughly 2.5 to 3 times the value of the land it sits on (that ratio was about five or six times back in the 60s, and has adjusted as property values in this region rose). So, if the lot is $800k, then the finished house sells for more than $2 million, far out of the reach of the typical family, even if the finished house has a mortgage helper in the form of a legal secondary suite. And the issue of “monster houses” taking over neighbourhoods is a big challenge, particularly if there is no alternative use for a $1 million lot.
The only way to get housing costs substantially lower in this region is to reduce the per-unit cost of land. As City Council can’t simply lower market values at a stroke of the pen, we obviously need to find a way to lower the amount of land needed per unit. As such, the single-family home on a quarter-acre lot no longer works in our neighbourhoods — in our region, for that matter. There are other public policy objectives in this direction, including the fact that quarter-acre-gross-density cannot support public transit, as it provides not enough residents near each bus stop to warrant frequent bus service for 18 hours per day, so the buses run mostly empty at an enormous subsidy. We need to densify those neighbourhoods. That essentially was the reason why Council more than a decade ago made it legal to have a suite in a single-family home — to lower the per-unit land cost, and allow for some important rental units and the densification of our neighbourhoods. Almost all of Coquitlam’s new purpose-built rental since 2000 has been in the form of secondary suites. In large areas of older Coquitlam, successive Councils have also allowed increased duplex development (two full units per lot) and subdivision of lots in two or three, where possible. And lately we’ve added Carriage homes (a suite on top of the rear garage) to the mix.
In Part 4 we’ll look at ways of densifying the “single-family” neighbourhoods of our community. This is a necessary reality that we all have to face, as the “single-family” home no longer works in this region. If you don’t like that fact, you can get mad at me.