The big picture on housing, density and affordability

How Edmonton's approach fights for affordability and fiscal efficiency

Rents are rising as the city bursts with growth, and the cost of a house — though still competitive compared to larger Canadian metros — is edging up. Yet, courageous choices Edmonton has made over the years have made our city the envy of the country in terms of market housing affordability.

Last year I was appointed chair of the Canada Mortgage and Housing Corporation, in part on the strength of work Edmonton has undertaken over the last decade to deliver nation-leading housing affordability*. [Though to be very clear, I am writing here in a personal capacity, and not on behalf of any organization I work with.]

I asterisk affordability above because while our city is doing comparatively well on the market side, all Canadian cities are struggling badly with a massive shortage of social and supportive housing, as I discussed last month. I am hopeful for change with the recent launch of Build Canada Homes, and grateful for increased federal ambition on accelerating mixed-income supply, including desperately needed rent-geared-to-income homes, and supportive housing to address homelessness.

Nevertheless, I will argue here that Edmonton should persevere with what’s working in the market realm while these necessary and ambitious national commitments to non-market supply ramp up in parallel.

Meanwhile, since the topics of housing, cost and growth pressures facing the city and — inevitably — property taxes are all front and centre in the current municipal election cycle, I hope some national perspective on what Edmonton has accomplished — and how — might add constructively to public debates here and beyond.

Relatedly, I’ve been asked whether I will weigh in publicly with any endorsements during the election. The main reason I have not is that the nature of my CMHC appointment requires me to remain publicly non-partisan at all levels, including municipal. I definitely have thoughts about the race — including deep concerns about the introduction of political parties to the municipal space — but I’ll confine this reflection to some big picture perspective on the issues at hand.

The basic math of cities is pretty simple: density drives efficiency. It’s the most important strategic shift the city can make to improve long term fiscal outlook.

Specifically, more activity and more building stock value per linear feet of roads, pipes and sidewalks is net fiscally positive over time. This is one key reason why the city has pushed to drive density way up, both in new developing neighbourhoods, as well as aggressive infill targets for the mature parts of the city. It’s not only financial upside, however, as density also yields more vibrant communities with greater demographic diversity and better conditions for local business; improved population health outcomes through greater walkability; and lower greenhouse gas emissions per household. Bottom line: you cannot build a more cost efficient city without the density.

Concurrently, you cannot keep market housing relatively affordable without abundant supply, which is being delivered by the city’s benchmark-topping changes to zoning, streamlining of permits, and commitment to keeping hammers swinging throughout the city. Recent reports show single detached homes are now the minority, even in the suburbs, and that new forms of multi-unit housing are surging in all parts of the city. Big picture, it’s working. The city is growing denser even as it still expands on its edges. Maintaining continued land supply at rising densities in the suburbs has been critical for affordability while Edmonton matures towards the City Plan objectives of accommodating a significantly higher share of its growth through infill.

Even still, nearly all of the city’s new and existing residential areas (save very high residential density areas like Wîhkwêntôwin) depend on cross subsidy from commercial and industrial property taxpayers. Businesses commonly pay a higher rate relative to residential in most Canadian cities, including in Edmonton. Our low density mature residential areas also require this subsidy, much more so per linear foot of road and pipe in fact, given the larger legacy lot sizes and lower densities. These dynamics have been well visualized here.

Equity and consistency are reasons why City Council took the very courageous position a decade ago to allow lot subdivision and more secondary suites (sometimes called Accessory Dwelling Units) in all mature parts of the city, not just the ones with less capacity to push back. Council stood up to resistance from homeowners who argued Not In My Back Yard every which way from parking to traffic to ‘we don’t want those people in our neighbourhood’ — meaning renters presumably. Whatever was meant, the othering of future neighbours was not persuasive to Council then, and it shouldn’t be now. Besides, City Council cannot lawfully discriminate between tenancies: for municipal land use regulatory powers, residential is residential, whether it’s owned or rented.

The loudest arguments against density came in the context of potential subdivision of very large lots with large 1950s bungalows then worth $900,000 into two ample lots with million-plus dollar homes, perhaps with a basement suite. Years later, those new homes more often than not host young families propping up the school population, helping the local businesses thrive, and yes, contributing more revenue to the upkeep of the same infrastructure. Extraordinarily, I’ve observed that some of these newer infill homes are sporting lawn signs explicitly objecting to further housing diversity in their community.

Some of the first ‘skinnies’ built in Edmonton a decade ago.

Once we saw more so-called ‘skinnies’ on subdivided lots, there was a criticism that the new homes were not ‘affordable.’ There is some truth to this since they were not cheaper than the end-of-service-life houses they replaced. Nor did they undercut new homes in the suburbs.

But it’s worth unpacking affordability here a but further into the total cost of ownership, including transportation costs, for two indicative households: a 2000 square foot, $700,000 infill in a more modest area, operating as a one-car household, within walking distance of good transit and schools. This household will own a more valuable capital gains-exempt asset after 25 years of mortgage payments, while spending way less on transportation. I’ve run the numbers, and depending on interest rates and car payments, the first household could easily outlay less total cash over that 25 year period than the family in a $500,000 suburban house of comparable size, but where location necessitates operating (and depreciating) two or three cars to get everyone to school and work — to say nothing of the time lost to commuting. As such, more infill is actually an economic development, productivity and wealth building strategy for our community. However, all this only applies for those households with the means to become homeowners in the first place.

To solve more deeply for affordability, and to get more units on the market, particularly as rentals for families, the city had to go further than allowing lot subdivision and secondary suites, with upzoning for yet more efficient use of the land and infrastructure, and to make multi-unit development — the so-called ‘missing middle’ — easier to advance at scale.

After the comprehensive changes to the zoning bylaw, and some further revisions, these multi-unit developments are now coming on-line, though not without controversy. I won’t weigh in here on the hot question of what’s the right number of units mid-block, other than to say this: from the perspective of fiscal efficiency for the city, and for the fundamental goal of housing supply, more is better.

From everything I’ve seen working on housing issues here and nationally, I strongly believe we need to support continued robust market supply to keep market rents competitive. I’ve heard the arguments that new housing should occur exclusively at the edge of town, or only at high densities above transit, but the best answer is not a false trade off between these options — it’s actually all of the above, including infill potentially beyond today’s comfort zone. I recognize that’s not what people living next to a new multiplex want to hear, and there’s good reason why it’s a significant topic in this election cycle.

Indeed, I have family and friends with construction pending or unfolding next to them and I feel their anxiety at the change to their neighbourhoods. I’m hearing statements like ‘destroying the neighbourhood,’ ‘nightmare,’ and ‘eroding my property value’ — strong language tied to strong emotions that accompany change and uncertainty. I respect that, and I feel for the disruption.

We heard similar concerns before lot splitting. After construction is finished, things will settle. And those people will be neighbours, which is almost never as bad as feared. And if there are issues, it becomes an enforcement issue if there is a real problem, as can happen today between any neighbours.

The main point is we can’t make city planning decisions based on fear. We need the courage to keep the big picture in mind. And that’s just it: we need to put ourselves in the shoes of precisely those people — a perspective that hasn’t been nearly as present in the public debate. We must consider the needs and aspirations of future neighbours who need a healthy, well-supplied housing market, abundant rental options, and more housing choices closer to school or work. And we all want a more efficient city, tax-wise.

I see the housing data every day, and in the parts of the country that have been less courageous than Edmonton, the supply outlook is very concerning. Cost of living is the defining problem of our moment — by far the top concern for Canadians in David Coletto’s most recent survey. My own teenagers worry about what kind of housing options they’ll have a decade from now. It’s tragic that Canadian kids have this uncertainty in their lives, and that housing scarcity is something they have come to fear.

In this moment of trial, now is not the time to step backwards on housing ambition, but instead to build on the courageous and bold track record Edmonton is known for across the country.

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Next time, I’ll unpack the role of lower development charges in Edmonton relative to most larger Canadian cities, and how this also contributes to lower rents and home prices, but also has driven higher property taxes and more municipal debt (albeit smart debt that costs less than amortizing these infrastructure costs through people’s mortgages). I would have liked to include these issues here, but it’s pretty wonky and is secondary to the equity and community planning considerations outlined above. Please subscribe if you’d like to get the nerdy companion piece on efficient cost allocation direct to your inbox!