The Politics of Planning
The Politics of Planning
Mon, 11/21/2011 - 17:31
It is not commonly known to homebuyers that along with the cost of land, construction costs, and government fees, that there is another large expense built into the purchase price of a home. There is a financial price that results from risk-adverse elected officials not willing to pay a political price that may cost votes at the expense of building more homes for more people; the votes of a vocal minority.
This purely political maneuvering is at odds with the economics of supply and demand, thereby driving up housing costs by constricting the supply of new homes. Too often new home project approvals are delayed or prevented from otherwise proceeding, not for any reason based on the merit of a project, but because of a deeply politicized planning system that has evolved at the municipal level in BC.
High quality development projects endorsed for approval by qualified and respected city planners – from within the local government bureaucracy – risk refusal by political decision-makers conscious of the election cycle. For instance, it does not matter that a project might create 4,000 jobs for a local economy, provide an increased supply of affordable housing, or fund local parks and child-care centres, if a marginal minority of objectors can influence the outcome of the next local government election.
This is not by any means a flaw of your local Mayor or Council, rather it is a flaw of the system over which they must preside. If planning approvals can be de-politicized, and governed by a non-political framework agreed to by all stakeholders, it will be much easier to meet the housing needs of current and future generations.
Any current homeowner that has ever undertaken major renovations, or upgrades to their property, will have experienced the tedious level of bureaucratic red-tape imposed on them by their local government. Home renovations are big undertakings often financed by borrowed money from a bank. The longer an approval of a second storey on a home takes, the more interest the homeowner must pay back to their bank. These approvals are generally undertaken without any political interference but remain costly.
Similarly, larger-scale builders of new homes borrow much greater sums of money from their bank and are therefore subject to much larger sums of interest and additional ‘holding costs’. The holding costs on a large housing project can be anywhere from $1,500 to $30,000 per day. Because of the nature of these projects in terms of size and scope, they regularly attract a high degree of scrutiny from a misinformed vocal minority. As a homebuilding project develops into a political issue, delays grow and the price of interest and other costs swell.
This politically imposed price – quantified at $1,500 to $30,000 per day depending on project size – is embodied in the cost of the new home project. If this price is too high for the market to bear then homes will not be built, supply will decrease, and house prices will increase anyway as a result.
What does all this mean to the homebuyer? It means we have created a system of planning so intertwined with politics at the local level; such that the system undermines housing supply and therefore new homebuyer’s ability to purchase quality housing at affordable prices. It is a hazardous risk, often not worth taking, for new homebuilders to navigate the unpredictable planning waters of local government politics.
The Vancouver region is expected to grow by a population of 1.1 million in the next 30 years. Without de-politicizing the planning process we will struggle to build more homes for more people.
The Politics of Planning
Mon, 11/21/2011 - 17:31It is not commonly known to homebuyers that along with the cost of land, construction costs, and government fees, that there is another large expense built into the purchase price of a home. There is a financial price that results from risk-adverse elected officials not willing to pay a political price that may cost votes at the expense of building more homes for more people; the votes of a vocal minority.
This purely political maneuvering is at odds with the economics of supply and demand, thereby driving up housing costs by constricting the supply of new homes. Too often new home project approvals are delayed or prevented from otherwise proceeding, not for any reason based on the merit of a project, but because of a deeply politicized planning system that has evolved at the municipal level in BC.
High quality development projects endorsed for approval by qualified and respected city planners – from within the local government bureaucracy – risk refusal by political decision-makers conscious of the election cycle. For instance, it does not matter that a project might create 4,000 jobs for a local economy, provide an increased supply of affordable housing, or fund local parks and child-care centres, if a marginal minority of objectors can influence the outcome of the next local government election.
This is not by any means a flaw of your local Mayor or Council, rather it is a flaw of the system over which they must preside. If planning approvals can be de-politicized, and governed by a non-political framework agreed to by all stakeholders, it will be much easier to meet the housing needs of current and future generations.
Any current homeowner that has ever undertaken major renovations, or upgrades to their property, will have experienced the tedious level of bureaucratic red-tape imposed on them by their local government. Home renovations are big undertakings often financed by borrowed money from a bank. The longer an approval of a second storey on a home takes, the more interest the homeowner must pay back to their bank. These approvals are generally undertaken without any political interference but remain costly.
Similarly, larger-scale builders of new homes borrow much greater sums of money from their bank and are therefore subject to much larger sums of interest and additional ‘holding costs’. The holding costs on a large housing project can be anywhere from $1,500 to $30,000 per day. Because of the nature of these projects in terms of size and scope, they regularly attract a high degree of scrutiny from a misinformed vocal minority. As a homebuilding project develops into a political issue, delays grow and the price of interest and other costs swell.
This politically imposed price – quantified at $1,500 to $30,000 per day depending on project size – is embodied in the cost of the new home project. If this price is too high for the market to bear then homes will not be built, supply will decrease, and house prices will increase anyway as a result.
What does all this mean to the homebuyer? It means we have created a system of planning so intertwined with politics at the local level; such that the system undermines housing supply and therefore new homebuyer’s ability to purchase quality housing at affordable prices. It is a hazardous risk, often not worth taking, for new homebuilders to navigate the unpredictable planning waters of local government politics.
The Vancouver region is expected to grow by a population of 1.1 million in the next 30 years. Without de-politicizing the planning process we will struggle to build more homes for more people.
2 Comments
The vast majority of development at the local level does not require rezoning and is therefore not political. It's straight forward development occuring within permitted zoning and happens every day without any opposition.
Tell me about it. This is just another reason Vancouver is so unaffordable!