June 6, 2011

A Case for High Density

UDI points out that condo developments built around transit corridors help supply affordable housing while reducing urban sprawl and our reliance on the automobile.

BY MAUREEN ENSER

Residential highrises near SkyTrain offer families quick and easy transit to their employment.

Whenever there is any discussion on housing and real estate with friends, family and work colleagues – particularly in Vancouver and the Lower Mainland – the conversation inevitably steers towards the enormous cost associated with owning or renting a reasonable quality home. Unfortunately, for many young couples and working families in B.C., and particularly in Metro Vancouver, home ownership remains nothing more than a pipe dream. The Urban Development Institute (UDI) is working proactively with all levels of government to seriously address the high cost of owning a new home.

So why is home ownership, a reasonable aspiration (some would say right) of most Canadians, so far out of reach for many in Vancouver and surrounds? Let’s start with the crushing burden of municipal, provincial and federal taxes forced on to the new homeowner. Excluding the costs associated with rezoning the site, the price of a typical single-family home in Vancouver attracts about $180,000 in various taxes, charges and fees hidden in the purchase price of the home. Home purchasers interested in the same family home in the City of Surrey are required to pay $110,000 worth of taxes, or nearly 20 per cent of the overall purchase price, of the home.

When you compare that to the approximately $45,000 in tax-related costs for a typical single-family home in the City of Calgary, it is clear that Vancouverites are the tax victims of geography – a tax system that is intimately tied to the higher cost of land in the region compared to elsewhere in Canada. Construction costs, development financing and professional fees (such as architects and planners) represent the remaining significant costs included in the sale price of new homes.

Representing about 40 per cent of the cost of a typical new single-family home (and proportionally higher for existing homes), the land price component of a house in Metro Vancouver is heavily dictated by the lack of supply. Constrained by the North Shore Mountains, Pacific Ocean, U.S. border and the Agricultural Land Reserve, the land cost burden on homebuyers can only be curtailed through the wise and efficient use of scarce available land. Maximizing density, particularly around transit, offers the most viable solution.

Maureen Enser is executive director of the Urban Development Institute

For instance, a new apartment in the City of Vancouver is typically one-third the cost of a single-family home. The land cost efficiencies, which can only be achieved through higher densities on a particular piece of land, directly translate into lower costs and savings elsewhere for new home purchasers. Considering that taxes and charges on new homes are variables related to the cost of land, higher density condo development in Vancouver attracts up to $140,000 less in taxes than that of a low-density single family home.

The advantages of increasing densities around transit are many. Perhaps most importantly is the reduced cost of housing in readily accessible areas, where families have quick and easy access to employment. There is also the benefit of maximizing the communities’ return on expensive infrastructure investments through increased ridership of public transport.

Density around transit reduces reliance on car usage and is the most environmentally sustainable use of urban land in Metro Vancouver. It reduces the community’s impacts on climate change, reduces urban sprawl, and helps meet the affordable housing needs of families, young homebuyers and a growing population.

UDI recognizes that the cost of owning a home – new or old – in Metro Vancouver does not have to be out of reach for many aspiring buyers as is currently the situation. A proactive approach between municipalities and the home building industry that facilitates increased densities around transit corridors must be part of the solution if we are serious about easing the financial pressures on prospective homebuyers in the region.

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