Meredith Dale spent years sharing flats with roommates during university and the early part of her career in Auckland, New Zealand.
Despite a few trade-offs — instability and less-than-ideal living arrangements — the rent was affordable. But in 2020, after New Zealand’s first COVID-related lockdown, Dale and her four roommates were forced out of their home when their landlord decided to sell.
The eviction pushed Dale, then in her late 20s, to explore buying a place of her own, a daunting prospect in one of the world’s priciest real estate markets.
With some help from family, Dale was able to purchase a two-bedroom condo in a 70-unit apartment complex for less than half the price of a typical single-family home. Her building and other neighbouring multi-unit buildings had replaced single-family homes following a 2016 densification policy that would change the housing landscape in Auckland and cities around the world.
“I think in New Zealand, we’re going on a journey and people are understanding that apartments can be livable and can contribute to neighbourhoods,” said Dale, who works with the Coalition for More Homes, an advocacy group that promotes equitable and sustainable housing. “And there’s going to be a bit of tension and people having different perspectives about change because it can be uncomfortable and difficult.”
Given the scale of the housing crisis, “I think it’s sort of a necessity,” Dale said.
Auckland was a pioneer in approving so-called missing-middle housing — townhomes, multiplex homes and low-rise apartment buildings — on single-family lots in an effort to slow rapidly rising house prices. The idea is that flooding the market with more units, either to own or rent, will bring down the cost of housing in cities where middle-class families have been priced out.
Jurisdictions around the world have followed suit: the Australian state of New South Wales, Minneapolis, Oregon, California, and soon British Columbia.
The wheels were set in motion in April when Premier David Eby and Housing Minister Ravi Kahlon announced a provincewide overhaul of municipal zoning rules that will allow three to four units on a traditional single-family detached lot, and even higher density in areas close to transit hubs. Vancouver city council might go even further. It is considering whether to legalize buildings with up to six units on a single-family lot on low-density residential side streets.
Eby has said these multi-family homes will be a sweet spot for middle-income families who can’t afford a single-family home but want more space than a one- or two-bedroom condo.
However, housing researchers who have studied the strategy in New Zealand and the U.S. are divided over whether it will temper hot real estate markets and make it more affordable for families to own a home. While there’s evidence it increases the supply of housing and brings down rental prices, it also inflates land prices as homeowners jockey to sell to the highest-bidding developer.
The consensus is that upzoning alone won’t make housing more affordable, which is why it must be coupled with massive spending on below-market and government-subsidized housing, experts say.
Ryan Greenaway-McGrevy, director of the economic policy centre at the University of Auckland, has studied the impacts of that city’s upzoning policy on housing supply and rents. Greenaway-McGrevy and his co-authors found strong evidence that upzoning stimulated construction: 21,808 additional dwellings were permitted in the five years after the zoning reform, making up approximately four per cent of Auckland’s housing stock. That added supply kept rents relatively stable compared to other cities without similar upzoning policies.
That influx of housing, though, has not been able to rein in Auckland’s runaway real estate prices. The city was ranked the seventh most expensive in the world, according to Demographia’s international housing affordability report released in March. The city’s median house prices were 10.8 times the median household income in 2022, a spike from 8.6 in early 2020.
“House prices have been going bananas in Auckland, like they have everywhere else,” Greenaway-McGrevy said.
Vancouver, in comparison, was ranked the third most expensive city in the world, according to the report, with median house prices 12 times the median household income.
The question researchers are trying to answer is whether house prices would be even higher in the absence of the policy.
There is evidence upzoning increases the land value of a single-family lot “which is what you’d expect in a perfectly functioning market,” Greenaway-McGrevy said, because more units can be built on a single parcel. However, he pointed out it’s still more affordable to buy a townhouse or apartment than a single-family home.
Christina Plerhoples Stacy, a researcher with Washington, D. C.-based think-tank Urban Institute, was part of a team that analyzed zoning reforms in hundreds of cities across the U.S. and the impact on rent prices.
The report found that while upzoning leads to about a one per cent increase in housing supply within three to nine years, the majority of new housing created is at the higher end of the rent price spectrum.
“We did find that the increase (in supply) occurred predominantly for rental units that are affordable to households with higher-than-middle incomes in the short and medium term,” she said.
This is consistent with anecdotal evidence in Victoria — the first B.C. municipality to allow up to six units on a single-family lot — that these missing-middle homes are still out of reach for working and middle-class families.
Take the backdrop for Eby’s missing middle announcement in April — a 34-unit townhouse and apartment development called Wilson Commons. It was built in 2021 across four single-family lots, replacing two duplexes, one single-family home and a vacant lot.
In that development, a three-bedroom, two-bathroom townhouse was recently listed for $999,000 in a city where the average price of a single-family home is just under $1 million. Opposition parties were indignant that a townhome in that price range was held up as an example of the policy’s promise.
Plerhoples Stacy acknowledged that patience is thin and the desire to see prices shift is immediate. The long-term hope, she said, is that increased housing supply will create a “filtering effect” where working professionals will move into new-build multiplex housing, freeing up some of the more affordable rental units for people with lower incomes.
David Schultz, professor of political science at Hamline University in Saint Paul, Minnesota, said he’s skeptical that upzoning policies alone will make it more affordable to rent or own a home.
“The elimination of single-family zoning is the most recent fashion statement, but I think (the policy) makes a lot of mistakes,” said Schultz, a former director of planning in New York state.
“Developers are going to produce the type of housing that gives them the greatest profit. So just because you remove regulations, it doesn’t mean it’s going to produce more affordable housing. What it’s going to do is encourage developers to buy undervalued property that used to be single-family zoned and then flip it into high-end more-expensive housing.”
Schultz said during a recent conversation with a colleague about housing policy, the friend quipped: “If densification produced more affordable housing, Vancouver would have some of the least expensive housing in North America.”
Vancouver has the highest population density in Canada, with more than 5,700 people per square kilometre, according to Statistics Canada figures. It also has the fourth-highest population density in North America after New York City, San Francisco, and Mexico City.
Metro Vancouver is one of the priciest markets in North America, with the average price of a single-family home hitting $1.9 million, according to the latest figures from the Real Estate Board of Greater Vancouver.
Michael Andersen, a Portland-based journalist-turned-housing-researcher at the Sightline Institute, said when looking at upzoning’s impact on prices, it’s important to look at the cost per unit rather than the overall land costs.
In Portland, he said, single-family homes that would sell for a million dollars are being torn down and replaced with a fourplex where one unit is listed in the $400,000 range.
“I’m fine if some dude makes more money as long as the product that they’re making is available to people closer to the normal income,” he said.
There’s an important distinction between affordability — bringing real estate prices within reach of the working and middle class — and affordable housing, which often includes below-market or government-subsidized housing, said Stephen Menendian, a professor at the University of California, Berkeley, who has studied the impact of single-family zoning reform on racial segregation.
“What effect does the zoning reform have on housing affordability? I would say it actually has a very big effect in the specific sense that it will reduce in the long-term housing price appreciation, because (restrictive) zoning throttles the supply of housing,” he said.
“There’s a lot of research that shows that as you create more housing, it slows property price appreciation.”
But it takes years for housing stock to be developed, Menendian said, which means prices won’t ease off immediately. “These are generational problems.”
He also said B.C.’s policy to allow four units on a single-family lot isn’t enough to dramatically shift the landscape.
“You need to have between six to 10 units. You’re not going to be able to do it in four units, quads, duplexes, triplexes. That’s not going to get you to housing affordability.”
Upzoning policies, Andersen said, only address one of two problems related to the housing crisis: the lack of abundance — or housing supply.
“The abundance problem is there aren’t enough homes for everybody and that’s going to drive the prices up into a spiral and we all get stuck in this cruel game of musical chairs,” he said.
The other problem, Andersen said, is distribution, which means some people have way more resources and housing than they need while others have nothing at all. That can be addressed through social housing programs such as co-ops and below-market housing.
“So from my perspective, you should be doing both of those things simultaneously and you should not be pretending that one is going to solve the other.”
Eby has promised to lay out a new vision later this year for social housing in B.C. through the NDP’s B.C. Builds program. During a public meeting in Greater Victoria Thursday, Eby said progress is being made and that the government has compiled an inventory of available public or First Nations lands where it can partner with private developers to build below-market housing and units with rent-to-own schemes.
Eby has also pressed for more federal dollars to fund below-market housing, slamming Ottawa in March for a federal budget that delivered no new money for social housing and gave no commitments that federal land would be freed up.
Postmedia News asked Eby about the impacts of upzoning policies in cities already forging ahead with the experiment and what he hopes to see here in B.C.
“We know that there is a gap between the number of people who are moving to British Columbia and the number of homes that are available, and that includes homes for purchase,” he said.
“We are not California, and we don’t want to be California. We’re British Columbia. And we have British Columbian challenges and we’re gonna address them with British Columbian solutions informed by approaches taken in other jurisdictions to make sure that they work for us right here at home.”
Source : Vancouver
