war on the suburbs: california & elsewhere: s implications for the … · 2017. 7. 23. · 12...
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War on the Suburbs: California & Elsewhere: Implications for the GHTA
Institute for New Suburbanism
Toronto Wendell Cox 12 July 2017
PERSPECTIVE Issue is not suburbs It is standard of living
and poverty Los Angeles
Core: Toronto Centre &
Spadina-Fort York FEDs
12%
Balance: City of Toronto
7%
Suburbs 64%
Exurbs 17%
Toronto Growth in Suburbs: 2011-2016 DOMINATED BY SUBURBS
Derived from Statistics Canada data
OUTLINE
Background: Middle Income Housing Affordability
Middle Income Housing Affordability in the GHTA
Urban Containment (Greenbelt) Policy
Protecting Land or People: A Question of Values
The Future & Economy: GGH & Canada
Brisbane
FIRST PRINCIPLES G20 COMMUNIQUE: 2014 Better standard of living
Less poverty
Background: Middle-Income
Housing Affordability
Housing the Largest Household Expense BENEFITS OF HOME AFFORDABILITY
Foundation of the middle-class More to spend on other goods & services Neighborhood stability
13th ANNUAL 9 Nations
92 Major Markets 406 Total Markets
MEDIAN MULTIPLE Median house price
divided by Median household income
Rating Median MultipleSeverely Unaffordable 5.1 & OverSeriously Unaffordable 4.1 to 5.0Moderately Unaffordable 3.1 to 4.0Affordable 3.0 & Under
Table 1
Housing Affordability Rating Categories
International Housing Affordability THE DEMOGRAPHIA SURVEY
Middle-Income Housing Affordability MINIMUM REQUIREMENTS
AT THE HOUSING MARKET LEVEL (Metropolitan Areas)
(1) Comparison to Incomes
(2) Comparison to history
(3) Comparison to other areas
0
1
2
3
4
5
6
7
8
9
10
1950 1960 1970 1980 1985 1990 1995 2000 2005 2010 2015
Med
ian
Mul
tiple
Less Restrictive Markets More Restrictive Markets: Outside California California (All More Restricted Markets)
Illustrates the Contrast: California & US LIBERAL V. URBAN CONTAINMENT POLICY: 1950-2016
Derived from Census Bureau, Harvard University and Demographia.
MEDIAN MULTIPLE Median house price
divided by Median household income
1,281,000
-1,056,000
-1,500,000
-1,000,000
-500,000
0
500,000
1,000,000
1,500,000
Median Multiple 3.5 or Less Median Multiple > 3.5
Net
Dom
estic
Mig
ratio
n US: People Move Away from High Prices
53 US MAJOR METROPOLITAN AREAS: 2010-2016
Derived from Census Bureau
Harvard study: Affordability drives
migration
Middle-Income Housing
Affordability in the GHTA
Focus: Toronto CMA
4.3 3.9
7.7
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
1971 2004 2016
Med
ian
Mul
tiple
Unprecedented House Cost Increases
TORONTO CMA: 1970 – 2004 – 2016
Derived from Statistics Canada and Demographia
MEDIAN MULTIPLE Median house price
divided by Median household income
0
1
2
3
4
5
6
7
8
9
2004 2006 2008 2010 2012 2014 2016
Med
ian
Mul
tiple
Figure 13
Middle-Income Housing Affordability TORONTO CMA: 2004-2016
MEDIAN MULTIPLE Median house price
divided by Median household income
72.0%
38.6%
85.8%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Consumer Price Index Condos Detached
Chan
ge
RBC: Share of Income Needed 2017 Q1: MEDIAN INCOME % FOR AVERAGE HOUSE
Source: RBC Economics Research Figure 14
#1 Reason House Prices are Rising ONTARIO’S “PLACES TO GROW” PROGRAM
Benjamin Tal, Deputy Chief Economist, CIBC World Markets, Inc.
“Affordability and Places to Grow cannot co-exist”
Land supply restrictions resulting from the plan called, Places to Grow, is "the number one reason GTA house prices are rising,”
$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
$800,000
$900,000
Jun 2016
Sep 2016
Dec 2016
Mar 2016
June 2017
Med
ian
Hous
e Pr
ice
Recent Price Plateau Still Very High TREB: TORONTO AREA
ACTUAL
AT 2000 RATIO
-124,700
6,600 5,600
-15,900
-140,000
-120,000
-100,000
-80,000
-60,000
-40,000
-20,000
0
20,000
City of Toronto Suburbs
Net
Mig
ratio
n
Elsewhere in Ontario Inter-Provincial
Toronto: Moving Away from High Prices TORONTO CMA NET DOMESTIC MIGRATION: 2010-2016
Derived from Statistics Canada
Urban Containment (Greenbelt) Policy
Hong Kong Median Multiple:
18.1
$5,620
$11,990
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
Median Family Income Levittown House
The Legacy of Low Cost Suburban Housing AFFLUENCE IN CANADA AND THE U.S.
Derived from US Census Bureau, Levittown ad
Median Multiples Were 3.0 or Less DATA FROM 1987
Adapted from Reserve Bank of Australia, Courtesy Frontier Centre for Public Policy
Urban Containment Policy GREENBELTS & URBAN GROWTH BOUNDARIES
Intensification requirements
(infill)
https://commons.wikimedia.org/wiki/File:Oil_Prices_Since_1861.svg
Supply Limits Result in Much Higher Prices EMBARGO & IRAN SUPPLY LIMITATIONS 1973-1980
1
3
5
Price
of L
and
Distance from City Center
Urban Containment: Higher Land Prices URBAN GROWTH BOUNDARY (& RELATED STRATEGIES)
Adapted from Lincoln Institute of Land Use Policy
City Center Exurbs
The “killer app” of urban planning
Impact of Urban Growth Boundary DESTROYS COMPETITIVE MARKET FOR LAND
Portland 2010
United Kingdom differences up to 400 times (Permitted v.
not permitted)
0
3
6
9
12
1970 2004-2005 2016
Med
ian
Mul
tiple
Toronto Montreal Vancouver Ottawa Calgary Edmonton
Figure 26
Huge Spike in House Prices: Canada CANADA: MAJOR HOUSING MARKETS: 1970-2016
0
3
6
9
12
15
1981 1986 1991 1996 2001 2006 2011 2016
Med
ian
Mul
tiple
Sydney Melbourne Brisbane Adelaide Perth Hobart Canberra
Figure 27
Huge Price Increases: Australia MAJOR MARKETS: 1981-2016
3.9
7.7
5.1
8.5 9.2 9.3
10.0
11.7 12.2
18.1
0
2
4
6
8
10
12
14
16
18
20
Toronto: 2000
Toronto Liverpool London (GLA)
San Francisco
Los Angeles
Auckland Vancouver Sydney Hong Kong
Med
ian
Mul
tiple
(Hig
her:
Lee
s Affo
rdab
le)
Housing Affordability Examples: 2016 URBAN CONTAINMENT METROPOLITAN AREAS
Median Multiple: Median House Price/
Median Household Income
Demographia International Housing Affordability Survey, 2017
Housing Affordability’s Killer App GREENBELT (URBAN GROWTH BOUNDARY)
Severe unaffordability (Over 5.0 median multiple Only where there is urban containment policy
or severe land rationing
• “Number of years supply” allocations are ineffective and inaccurate.
• Only reasonable indication of sufficient supply is the price of land: Finished land should be about 25% of final house and land cost.
Principle of A Competitive Land Supply ANTHONY DOWNS (BROOKINGS INSTITUTION)
Speculation Fuels House Price Increases BANK OF CANADA GOVERNOR
Stephen S. Poloz, Governor, Bank of Canada
There’s no fundamental story that we could tell to justify that kind of inflation rate in housing prices … Demand is being driven more by speculative demand, or investor demand, as opposed to just folks that are buying a house
Speculation Caused by Urban Containment SUFFICIENT LAND SUPPLY NEEDED TO AVOID
Shlomo Angel, New York University
Speculation leading to high land prices on the urban fringe can only be avoided if limits on urban expansion are generous enough and credible enough to ensure that land will be in plentiful supply for years to come, and that hoarding it will not be profitable in the long run
Not Enough Land Supply Allowed INTERVIEW WITH PETER GILGIN, CEO, MATTAMY HOMES
TO GOVERNMENT: Consider what you are doing to a whole generation of people by basically turning off the taps.
NOTES: We own lots of land We can’t get anything approved We have little to sell. Smoke & mirrors on land availability Bring us land, we’ll have checkbook out
Paul Cheshire London School of Economics
TORONTO STAR: Paul Cheshire thinks Ontario’s anti-sprawl Smart Growth policies might just be one of the dumbest ideas that Britain ever exported. “you try and force people to live in houses they don’t want to live in, in places they don’t want to live and they end up bidding up the prices of those houses that they do want to live in.”
Adding to the Problem NOT ALLOWING HOUSING PEOPLE WANT
HOUSING PREFERENCE ISSUE IGNORED ”... the only viable solution to dealing with deteriorating longer-term affordability – significantly increasing the number of new ground-related housing units built."
$0
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
$1,400,000
$1,600,000
$1,800,000
Winnipeg Ottawa Toronto Vancouver
Average Construction Cost Latest Average House Price
Difference is Not Construction Costs DETACHED HOUSE CONSTRUCTION COST & PRICE
Sources: Altus Construction Guide and Real Estate Board reports Figure 36
Land Rationing is the Issue DESTROYS HOUSING AFFORDABILITY
Donald Brash, Governor, Reserve Bank of New Zealand
1988-2002 Introduction to
4th Annual Demographia International Housing Affordability Survey
... the affordability of housing is overwhelmingly a function of just one thing, the extent to which governments place artificial restrictions on the supply of residential land.
VIEW OF MARKHAM, FROM https://upload.wikimedia.org/wikipedia/commons/8/8a/Markham-suburbs_aerial-edit2.jpg
Protecting Land or People:
A Question of Values
39 39
Densest World City: Dhaka, Bangladesh REFERRED TO AS SPRAWLING
15x as dense As Toronto Population
Centre
0
500
1,000
1,500
2,000
2,500
3,000
USA Los Angeles Canada Germany Toronto
Popu
latio
n pe
r Squ
are
KM
Population Centre (Urban) Densities: 2017 SELECTED WORLD AREAS OVER 500,000
Source: Demographia World Urban Areas, 2017.
2.1%
97.9%
Extent of Urbanization: Canada 2016 CENSUS & PEAK AGRICULTURAL LAND
Agricultural
Urban Development
Derived from Statistics Canada
http://diymaps.net/userimages/569308.gif
Agricultural Land Taken Out of Production FROM PEAK TO 2016: EQUAL TO MARITIMES LAND AREA
Farmland reduction:
9x urban land 2016
0
500
1,000
1,500
2,000
2,500
3,000
3,500
Consolidated (Greenbelt) Business As Usual (No Greenbelt)
Urb
anize
d Ar
ea: S
quar
e KM
2031 Additional Without Smart Growth 2031 Added with Smart Growth 1999
Greenbelt & No Greenbelt Compared GREATER GOLDEN HORSESHOE
Derived from Neptis 2003.
"Suburbs rarely cease growing of their own accord.
The only reliable way to stop them … is to stop them forcefully. But the consequences of
doing that are severe."
Cheshire, Nathan & Overman URBAN ECONOMICS AND URBAN POLICY
… the ultimate objective of
urban policy is to improve
outcomes for people rather
than places
The Future & Economy of the GGH &
Canada
Virtually all increased inequality
is in higher housing values
Much due to
Housing regulation
-Rognlie, MIT
All Lost Equality in Housing? THE “DISAPPEARING” MIDDLE CLASS
$14.4
$16.4
$0
$2
$4
$6
$8
$10
$12
$14
$16
$18
With Stringent Land Use Regulation Without
GDP
(Tril
lions
of U
SD)
$2 Trillion GDP Loss in the US LARGELY DUE TO STRINGENT HOUSING REGULATION
More than $16,000 per household
Source: Hseih and Moretti, 2014.
Bank of Canada: Ottawa
Fears of a Housing Bubble BANK OF CANADA, OECD & OTHERS
PROSPECTS FOR THE GREATER GOLDEN HORSESHOE
https://commons.wikimedia.org/wiki/File:A_tea_pot.jpg
LIKELY TO WORSEN
ALREADY SPREADING TO THE REST OF THE
GREATER GOLDEN HORSESHOE
STRONGER
INTENSIFICATION REQUIREMENTS
$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
$800,000
$900,000
Jun 2016
Sep 2016
Dec 2016
Mar 2016
June 2017
Med
ian
Hous
e Pr
ice
The Need to Restore Affordability FOR THE NEXT GENERATION AND THE ECONOMY
ACTUAL
AT 2000 RATIO
Restoring Housing Affordability: Strategies AND SERVING THE NATION & ECONOMY
• Establish housing affordability reporting
• Policy: Glide path to affordability – Auckland
• Event triggered greenfield land expansion
– New Zealand Productivity Commission – Issue is land price, not planning allocation – Not a call for deregulation.
• Municipal utility districts
– Texas