City charters open the door to higher home prices, taxes
Last week, Alberta Municipal Affairs Minister Danielle Larivee released her plans for City Charters, new provincial regulations that will give more power and control over local matters to both Calgary and Edmonton.
While the recommendations contain many non-controversial suggestions, like letting cities determine parking regulations, and allowing basic forms and applications to be filled out electronically rather than on paper, the proposal also includes a number of significant changes that haven’t attracted much attention, but could cost taxpayers dearly.
In particular, the provincial government plans to give Alberta’s large cities much more say over development rules and regulations.
During discussions on the new Municipal Governance Act, the minister indicated she wants to ease the high cost of housing in Alberta, but the actual regulations being proposed in the new City Charters will actually make housing prices even more expensive for many Calgarians.
Consider that politicians have been trying to interfere in the housing market for years yet — economic conditions aside — housing continues to become ever more unaffordable. Provincial and municipal governments continue to overregulate construction, introduce more demands and cost increases on development, set aside large areas of land that can’t be used for housing pushing up land prices, and “urge” developers to pay for their pet projects, all while claiming these policies will reduce costs.
Yet, despite the failure of these previous intrusions, the government now says they want to proceed with even more interventionist policies — a sure sign that consumers can expect housing prices to rise even more.
One new requirement that Calgary and Edmonton will be able to impose is something called “inclusionary zoning” — a policy that is included in new legislation introduced by the NDP.
For those who aren’t familiar with the policy, inclusionary zoning requires developers to set aside a set percentage of new developments for affordable housing. While some could argue the intention is noble, the results are counter-productive.
Instead of, say, a developer selling 10 new housing units for $300,000 each, the company could be required by the government to sell one of those units for, say, $200,000. Thus, in order for the developer to raise the same amount of revenue, the company splits the losses between the other nine units, raising their prices to $311,111 each.
Those looking to purchase a $300,000 unit are rarely anything but “rich,” but, due to the government’s inclusionary zoning plan, they will now pay an extra $11,111 for their home.
While the previous example may be based on hypothetical figures, the actual impact of inclusionary zoning has been well-researched and peer reviewed.
Just one of these studies, by Powell and Stringham, found that inclusionary zoning policies caused the price of new homes in the San Francisco Bay Area to increase by $22,000 to $44,000 in the median city, while in some areas the increase was over $100,000. Could you afford to pay another $22,000 — yet alone $100,000 — for a home?
Larivee claims that all of the government’s own research shows this won’t happen in Alberta, but she refuses to publicly release any of that research.
Regrettably, increased house prices aren’t the only change the government is planning.
While the most recent City Charter consultation document doesn’t mention any proposed new taxation powers for Calgary and Edmonton, the government has said discussions will start on new taxes next spring.
Could Calgary be granted the ability to levy a sales tax? Could Edmonton be granted the ability to charge its own gas tax? Who knows, Larivee repeatedly refused to rule out any new taxing powers for municipalities.
If the Alberta government is sincere about its claim to want to ease costs to Albertan households, the province should act to reduce their burdensome housing policies and rule out new taxing powers for municipalities.
Dan Osborne is an independent analyst, and author of the recent Manning Centre report: Modernizing Alberta’s Municipal Governance — Competition, Co-Operation, or Choice?
This column was published by the Calgary Herald on October 5, 2016