Land prices in Calgary are rising so quickly that an affordability crisis could emerge if the city doesn’t make building in the suburbs easier, a local home builder is arguing.
Jay Westman, the chief executive of Jayman MasterBuilt, says there’s a serious shortage of land that can be developed quickly, and it’s causing prices to escalate by the month.
He wants the city to speed approvals for suburban development, and place less emphasis on urban densification. Otherwise, he says, Calgary is on track to have the highest land prices in North America, excluding cities that are surrounded by water.
“We’re going to have this unbelievable acute shortage, and we’re seeing by the week, by the month, increasing pricing on land,” he said in an interview. Mr. Westman laid out his case recently in a piece he wrote for the Calgary Herald.
It’s a debate that has implications beyond Calgary. In a major report about the state of the Canadian economy last week, the Organization for Economic Co-operation and Development discussed the effects of Vancouver and Toronto’s densification policies.
“Land-use restrictions are often blamed for worsening affordability in major cities such as Vancouver and Toronto,” it said.
The OECD went on to lay out some of the pros and cons of densification.
“Most Canadian urban areas have low-density housing that makes public transit uneconomical,” the OECD said. “This has created heavy dependency on automobile use, thus contributing to very high per capita transport-related carbon emissions…”
The OECD said that containing urban sprawl and squeezing more homes into downtown areas can help improve environmental and social outcomes. And it suggested that developers who are building homes away from public transit should be charged higher development fees.
“However, the environmental and social benefits to urban containment should be weighed against the potential costs of densification such as overcrowding, higher house prices, traffic congestion and smaller living spaces,” the OECD said.
Policies that try to contain urban sprawl can push up land prices, the OECD acknowledged. It cited a study that found that the urban limits around Auckland, New Zealand, boosted land prices eight to 13 times above those of land that’s just outside the boundaries.
The OECD noted that Calgary’s land prices have shot up in recent years, and suggested that the major driver is oil prices.
But Mr. Westman says the situation’s getting worse quickly, and he thinks city policies are the real cause.
Rather than comparing Calgary’s land prices to Toronto or Vancouver, he looks to Edmonton.
“Over the last two years alone, the price spread on land between these two cities has increased by 35 per cent, with the average lot in Calgary costing $208,000 and $156,500 in Edmonton,” he wrote in the Calgary Herald.
And he tells me that he thinks that $51,500 gap could double to $100,000 in as little as six months if the situation in Calgary persists.
“Getting through the [city] approval process in a timely manner would help supply,” he says. “What would have taken a year to 18 months four or five years ago takes three to four years today.”
“The city’s aim to manage the growth of the city by reversing the long established, free-market-based demand of 70 per cent single-family, 30 per cent multi-family in favour of intensification through redevelopment of existing communities, might have been well intentioned, but as these numbers show, it is having dire consequences,” he wrote.
He argues that if houses in the city become unaffordable, rather than prompting families to downsize it will just encourage them to move to smaller towns around the city. “And that’s real sprawl.”