| |
 
|
April 2008 - Mike Carson
The shortage of available residential building lots is not a new
problem for many municipalities in Southwestern Ontario. Some cities and
towns have worked through the issue and have usually been able to meet
the reasonable supply and demand as the new home market moves along. Some
communities are benefitting from a shortage by promoting growth and increasing
their tax bases.
In particular, we’re currently seeing a continued shortage of lots
in London, according to the Keep London Growing Coalition (KLGC), which
is made up of key leaders from the London Development Institute (LDI),
London Home Builders Association (LHBA), London Labour Councils and the
London St. Thomas Association of Realtors (LSTAR). The group is involved
in an ongoing partnership with city council and the planning committee
on how to get these issues resolved economically and fairly.
The following excerpt from the 2008 Demographia International Housing
Affordability Survey underlines the severity of this issue as a stumbling
block to the future prosperity of our great communities.
“Once again, the Demographia survey leads inevitably to one clear
conclusion: 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.
This is most strikingly shown by U.S. experience. In a country with considerable
population mobility and common interest rates, there are cities such as
Pittsburgh, Atlanta and Houston where housing is eminently affordable,
with median house prices three times or less the median household income
in those cities, and other cities such as New York and Los Angeles where
the Median Multiple is from seven to over 11.”
The one factor that clearly separates all of the urban areas with high
Median Multiples from all those with low Median Multiples is the severity
of the artificial restraints on the availability of land for residential
building. Australia is perhaps the least densely populated major country
in the world, but state governments there have contrived to drive land
prices in major urban areas to very high levels, with the result that
in that country, housing in major state capitals has become severely unaffordable,
with Median Multiples of eight in Sydney and seven in Melbourne.
Despite all the evidence, governments continue to pretend that they are
powerless to make housing more affordable or, worse still, implement futile
interventions that make the situation worse, as the New Zealand government
is proposing for this year. We all owe Wendell Cox and Hugh Pavletich
a huge debt of gratitude for making the pathway to affordable housing
abundantly clear: remove Metropolitan Urban Limits (urban growth boundaries)
and other artificial restraints on the availability of residential land.”
~ Dr. Donald Brash, Governor, Reserve Bank of New Zealand (1988-2002)
and Chairman, Centre for Resource Management Studies.
In recent decades, the median multiple has been remarkably similar among
the nations surveyed, with median house prices being generally three or
less times median household incomes. This historic affordability relationship
continues in many housing markets of the U.S. and Canada. However, the
median multiple has escalated sharply in Australia, Ireland,New Zealand
and the United Kingdom and in some markets of Canada and the U.S. London
is ranked 43rd in the affordability scale used in this report, with a
rating of 2.9. This means that the median house price in London ($173,900)
takes 2.9 times the median family income ($59,100) to purchase. In contrast,
the most unaffordable city in Canada is Vancouver with a multiple of 8.4,
a median price of $503,400 and median family income of $59,900.Clayton
Research released a report last year stating that $33,000 was spent in
the community each time a home was sold. This is a substantial part of
London’s economy if you consider that more than 9,000 resale homes
were sold in 2007.
Should we be concerned?
According to Jamie Crich, from LDI, “Any city that does not grow
does not have long-term viability – viability for jobs, viability
for the downtown, viability for its future.”
Jim MacKinnon, spokesperson for the KLGC and president of the London District
Building and Construction Trades Council, spoke to the consequences of
inhibiting growth, and how that affects employment in London. “We
are experiencing a softening of work by tradesmen that do the underground
servicing, which will result in less work for seasonal workers who do
asphalt and concrete sidewalks and curbs. This will be noticeable this
coming year and will result in fewer people being employed building houses
within 12 to 24 months. We have had 15 members in the last week alone
leave for northern Alberta where absolutely no workers are available and
employers are asking us to refer them members! We are going to experience
the slow down no matter what the city does in the short term, but if they
address (the) shortage issue as soon as possible then 12 to 24 months
out we should be back to having a reasonable selection of serviced single
dwelling housing lots available. Failing that, it will not be fixed before
the next municipal election.”
Lastly, JimVanderhoeven, LHBA President, confirmed, “The smaller
builder seems to be the first affected by the lack of lot availability.
They have purchased lots out of town (Ilderton, Lucan, Woodstock) in order
to keep their businesses going. The lot prices in new developments are
edging up in price due to the perceived supply and demand concern, but
prices of new housing overall (over the last quarter of 2007) have remained
stable. London is still considered a very affordable city to purchase
a new home and we are blessed with quality builders who offer a strong
variety of product.”
The message is simple: Housing creates jobs, and available building lots
are the key to affordable housing. In any housing market, there’s
always a danger of undue political influence where personal agendas attempt
to override market forces. Growth has been proven to pay for growth, and
some of our cities get this while others are hoping to get this soon.
|
