Auckland, New Zealand
A blueprint for expanding housing supply and improving affordability in British Columbia may lie far beyond provincial borders, according to a new economic report from the BC Real Estate Association (BCREA).
The report, released Sept. 26, sheds light on recent findings from Auckland, New Zealand, which indicate that a significant policy shift can substantially increase housing permits and potentially provide some relief from escalating housing costs in under a decade.
Auckland’s success story
Auckland’s housing policy, known as the Auckland Unitary Plan (AUP), was implemented in 2016. This policy revolves around upzoning, relaxing floor-to-area ratios on residential land and enabling the construction of larger and more housing units in the city.
According to BCREA, the AUP led to a 50 per cent increase in housing permits within a decade, effectively doubling the rate of housing construction. Researchers found that increased permitting and construction resulted in a 5.1 per cent boost in the city’s housing stock and a twofold increase in construction activity by 2021. Furthermore, rents for three-bedroom and two-bedroom units were noticeably lower in Auckland.
BCREA economists say that the province’s forthcoming housing plan has the potential to spark a construction boom of similar magnitude.
“While it is promising to see that steps can be taken, affordability in B.C. deteriorated due to chronic underbuilding for decades and will not be swiftly remedied,” notes BCREA Chief Economist Brendon Ogmundson. “Nonetheless, if policymakers can rapidly and comprehensively increase housing supply through a combination of measures, there is hope that affordability can improve in the province once again.”
Implications for British Columbia
The B.C. government recently unveiled its “Homes for People” plan, which shares similarities with Auckland’s AUP. The plan includes allowing multiple homes on single-family lots, legalizing secondary suites province-wide, and expediting permitting processes. Additionally, the government’s Housing Supply Act incentivizes municipalities to bolster housing supply.
BCREA estimates the potential impact of a housing construction boom in B.C. akin to Auckland’s could result in a 50 per cent increase in housing starts by the end of the decade, leading to a 4.0 per cent reduction in home prices and a 2.0 per cent increase in housing stock compared to the baseline scenario. Affordability would experience modest improvement as incomes catch up to prices, and speculation would decline, with more buyers focusing on income-generating properties rather than speculative activities.
Ogmundson cautions, “These results are encouraging, but the scale and immediacy of the problem are considerable.”
The housing crisis in British Columbia has reached alarming proportions, with home prices surging by nearly 40 per cent since the onset of the pandemic. The scarcity of available listings has exacerbated the issue, leaving many prospective homeowners and renters grappling with the challenge of finding affordable housing.
BCREA says, “bringing per capita starts back to a more historically normal level, the affordability ratio can gradually be bent in the right direction.”
Read BCREA’s Market Intelligence report.