Rental Rules that Harm
Housing
Would you be willing to pay a much higher rent or purchase price for your new home so your neighbour could get a minimum 20% discount?
That's what government's "inclusionary zoning" rule is.
Governments pile on new rules that sound good to voters like making builders offer 20 per cent of new housing as "below market" priced rentals or purchase prices, called "inclusionary zoning" — or they won't approve those plans.
If those projects even complete, builders must pass on those distorted costs to others paying market rents or prices, to subsidize discounted units. And governments pretend they've delivered affordable housing. But you pay for it in the end.
The City of Vancouver recently built its own housing and didn't even apply all the rules and fees they always charge homebuilders to their own project!
How much does this rule harm housing? Read more. 👇
​ Impacts of 20% inclusionary zoning?
Thousands of new homes aren't being built. Why? Because cities that tell builders they won't approve a project unless 20% of the rental or sale units are offered at "below market" pricing, called "inclusionary zoning" are actually punishing home seekers. Many global academic studies prove these rules result in fewer homes built and higher rents or prices overall.
Imagine a city official refusing to issue a business license to a grocery store owner unless the store sells at least 20 per cent of their goods at below market prices no matter what their wholesale supplier, labour and tax input costs were. As a middle-income earner, your groceries might cost twice the price they are now because you would be subsidizing others paying lower prices. "Greedy grocers" would be blamed instead of governments who make the rules.
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Vancouver buried this "inclusionary zoning"requirement in a new 400 page City Council report with zero industry consultation on costs. Steep rental discounts for low-income individuals are subsidized by those unfairly paying an even higher, distorted market rent, making projects financially unviable for home builders.
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Around 73,000 "approved" homes in Metro Vancouver are not moving to construction because they're now too costly to build, buy or rent, resulting from all these government intervention policies.
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Even independent building financial consultants (Coriolis) have warned the cities these rules makes projects financially "unviable".
But are governments listening?
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Some are. Ontario recently reduced its below market rental requirement to five per cent under its "Building Faster and Smarter Act".
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Meanwhile, waitlists for social housing across Canada have grown by triple digits in many cities.
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Social housing operating authorities like the London, Ontario CEO have admitted their housing costs are not sustainable....
Global
Studies
Montreal tested "inclusionary zoning"
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Montreal tied housing project approval to builders offering 20 per cent of their apartments as "below market" priced rental in 2021.
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Consequently, the city didn't get any affordable housing built. "Much of the academic literature finds that inclusionary zoning can raise housing costs in jurisdictions that implement it."
Academic Studies on Inclusionary Zoning in California
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"Inclusionary zoning programs drastically reduced overall housing affordability in the California jurisdictions that adopted them.
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Inclusionary zoning reduced housing supply by 7 percent and increased prices by 20 percent between 1990 and 2000.
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Inclusionary zoning would be a clear tax on construction."
-George Mason University, VA, USA
End Don't Mend
Inclusionary Zoning, say Economists
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"A Reason Foundation study by two San Jose State professors found that inclusionary zoning increased the price of new homes by up to $44,000 in the 45 (San Francisco) Bay Area cities that had enacted the regulations. Bay area includes: San Francisco, San Jose, and Oakland and counties: Alameda, Contra Costa, Marin, Napa, San Francisco, San Mateo, Santa Clara, Solano, and Sonoma.
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The average city produced less than 15 affordable units per year, and the authors estimated that inclusionary zoning would only produce 4 percent of the Bay Area’s projected affordable housing need. Economists also found that new housing construction decreased by 31 percent the year following the adoption of the mandates.
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Inclusionary zoning laws in Los Angeles and Orange Counties increased the price of new homes by up to $66,000 to compensate for the mandatory discounts on the “restricted” homes."
Burnaby reduced "inclusionary zoning" from 20% to 15%
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Rising construction costs, interest rates, inflationary increases in material and labour, and hikes to development charges meant housing projects were too expensive to build with that inclusionary zoning rule.
University of California (UCLA) Studied Impacts
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Each percentage point increase in inclusionary zoning requirements between 1% and 16% is associated with a reduction of between 4,600 and 11,900 market-rate units.
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Beyond a certain level, higher requirements produce less below market housing and less market-rate housing. A 20% requirement, while producing 50,000 below market units, would reduce market-rate production by over 200,000 units!
-UCLA study quoted by National Association of Home Builders
