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Business Commentary Big cities have a big problem, and the only way to fix it is to move on up

If you asked people to name Canada’s two biggest economic challenges, many would list stratospheric home prices and plodding growth. Perhaps, then, it’s time to consider an idea that takes aim at both problems.

The notion is simple enough: Do away with single-family zoning restrictions in big cities. Bid goodbye to the two-storey family house surrounded by a moat of lawn. Say hello to much denser development, centred on three- to six-storey townhouses, condos and rental apartments.

This is not a radical concept. It is, however, remarkably contentious. Proposals for densification are met with howls of pain from homeowners in the leafiest neighbourhoods of central Toronto and Vancouver. They don’t want to see their quaint neighbourhoods become more cluttered and urban.

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If it were simply a matter of aesthetics, they might be right. But defining how our cities should look is no longer a matter of taste. It’s a matter of deciding how Canada can grow faster, in a way that distributes rewards more equitably.

All over the world, major cities have become the primary generators of economic growth. Toronto, for instance, accounts for less than 1% of Canada’s land mass but has an economy larger than any province except Ontario and Quebec, according to a 2014 study by Statistics Canada. In the United States, the Boston-New York-Washington corridor and Los Angeles generate about one-third of the country’s GDP. London accounts for most in the United Kingdom.

In his 2012 classic, The New Geography of Jobs, Enrico Moretti, an economist at the University of California at Berkeley, laid out three reasons why superstar cities dominate global growth. For starters, these cities act as magnets for educated workers by offering “thick” job markets with lots of opportunities for job-hopping specialists. They also benefit from knowledge spillovers that occur when smart people work close to one another. Finally, they gain from a supportive ecosystem of bankers, lawyers and technical specialists.

Here’s the rub, though: In an ideal world, anyone in a smaller town should be able to move to where the growth is. But, by and large, people no longer can.

One big obstacle is the high housing costs imposed by zoning regulations that privilege single-family homes. Ed Glaeser, a Harvard economist, notes that Silicon Valley, between San Jose and San Francisco, is one of the most productive patches on earth. Yet local regulations mean it is still dominated by one-storey buildings, single-family homes and parking lots. That is bad news for excluded workers who cannot afford to live in the land of the affluent, but even worse news for national economies, which pay the price in lackluster growth.

In a study published in 2017, Moretti and Chang-Tai Hsieh of the University of Chicago calculated that constraints on building in big U.S. cities lowered aggregate U.S. growth by 36% from 1964 to 2009. Simply increasing housing supply in New York, San Jose and San Francisco would have made the average American richer by US$3,685 a year.

Canada might want to take note. Anyone searching for accommodation in Toronto or Vancouver quickly realizes you have to choose from among a Satanic trinity—paying a staggering amount of rent, shelling out a seven-figure fortune for a house, or enduring tedious commutes.

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The problem is particularly onerous for the lower paid and the young. The Canadian Centre for Policy Alternatives recently found that there were no neighborhoods in the Greater Toronto Area or Metro Vancouver where a minimum-wage worker could afford even a modest one-bedroom apartment.

Granted, this is a problem with many roots. But one issue is simply the difficulty of building affordable, multi-family housing in either city. In Toronto, for in-stance, a third of the city has been zoned exclusively for detached single-family homes.

Encouraging more density would go a long way to encouraging more affordable accommodation, and it would not be as painful as skeptics fear. Toronto and Vancouver both have considerably fewer people per square kilometre than San Francisco, according to the Fraser Institute. And each of the Canadian metropolises is only about half as dense as New York City or London.

Admittedly, some dense cities are ugly. Others, though—think New York and London, as well as Paris and Barcelona—are the furthest thing from hellholes.

The key is thoughtful density—density that offers affordable accommodation for people at all stages of life, and centres on neighborhoods that encourage walking and cycling. Dense cities like that can be a boon for their residents. They can also be a boon for national growth. We should embrace them.

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