Protectionism

5 Nov

Zoning is a protectionist measure, which much like trade tariffs, constrain supply and restrict the ability of the market to respond to real demand. In the case of restrictive zoning, the housing market experiences a rise in the price of houses due to limited supply, a situation that leads to a market becoming detached from the real economy, to the detriment of the city and the region as a whole.

In a normal balanced market, the supply of housing stock either rises with the corresponding demand so as to keep prices stable, or rises only slightly more than inflation. In the condo market in Vancouver, comprehensive zoning allows developers to build sufficient product to meet consumer demand so prices neither rise nor fall dramatically. This is a healthy situation, as it allows future and current homeowners to better plan their housing needs, while at the same time permitting developers to better project budgets and sales revenues. Another benefit of this zoning environment is the neighbourhood can grow and evolve, meeting the needs and representing the ethnic diversity of a dynamic city.

Sadly in the case of a market distorted by a protectionist measure such as zoning, the prices of the available product rise quickly and unpredictably, faster than real wage increases. This reduces the number of potential buyers, as they fail to save fast enough to access the single family home market. Families, professionals with large amounts of student debt, seniors with rising property tax bills are among those forced to move elsewhere for their housing needs. Over time the profile of residents in a neighbourhood begins to narrow and become ethnically uniform, where more established ethnic groups who arrived in Vancouver early and benefited from the modern real estate booms, start to dominate the single family zones of the city. This explains why the City of Vancouver is a mostly Caucasian and Chinese city, while Surrey, much newer, is more ethnically diverse and representative of the population dynamics of Greater Vancouver.

I do not advocate turning Vancouver into a giant comprehensive development zone similar to the downtown, since this would lead to utter chaos in the market and destroy the livability of the city. What I propose is that each area in the city be up zoned, meaning single family zones become duplexes, duplex zones become more comprehensive low rise, and so on. This will permit more people to live in and enjoy the City of Vancouver’s amenities and give home buyers more choices than either moving to the suburbs or living in a condo in the downtown. It must be noted that the stock of single family homes will not dry up under such a measure, rather the market will adjust their price and quantity to match the buying power of potential home owners – those who want a single family home will demolish a duplex or retain a single family home. Up zoning will also preserve the aesthetics of the city without overly crowding neighbourhoods – one can just look at the success of the duplex zones in Kitsilano, which have preserved character and tree cover while providing a lot more housing than Dunbar or Point Grey.

The time to act is now. Restrictive zoning is strangling Vancouver, it creating a socioeconomic divide that is not healthy for our economy, our city and the region as a whole.

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