Re-Zoning to Higher Density Uses is Driving Price Increases and Resales in Vancouver
We have talked in the past about affordability problems in Vancouver. We argued then, as we argue now, that single-detached homes are likely to remain out of reach for most families within the city and that we need to re-evaluate how we think about the issue.
Vancouver is land-locked and the only way to accommodate a growing population is to change the distribution of the existing housing stock - we have to re-zone.
This article focuses on the effects of re-zoning on house prices and resale activity.
At Least 37% of Single-Detached Homes from 2001 Have Been Demolished
The effect of re-zoning on housing supply and prices is readily apparent.
- Over the 2001-2011 period, the number of single-detached homes in Vancouver declined by almost 18,000 on net (1,800 per year, on average)
- Over that same time period, we completed almost 6,400 single-detached home (640 per year)
- So if we built 6,400 but the total stock fell by 18,000, then we must have demolished 24,000 single-detached homes (2,400 per year) .
These 24,000 homes represent almost two-fifths of the number of single-detaches homes in the city of Vancouver in 2001. Furthermore, we are missing data since 2011, meaning that this is likely underestimating the current percentage.
So what has happened with those properties?
The Transition to Higher-Density in Vancouver
- We average around 3,300 single-detached resales in the city of Vancouver every year, though with a degree of variance;
- Some of the 2,400 average annual demolitions would be by the existing owners and would not be related to a home sale, meaning that we can't put an exact figure on it. However;
- If we assume that the completions over the same time period account for demolitions where the home was not sold, then we still have almost 1,800 single-detaches homes that were potentially sold for re-zoning purposes every year.
These are single-detaches homes that were torn down and replaced with something else.
The Effects of Re-Zoning
Re-zoning has the effect of increasing the stock of higher-density, lower priced homes, making living within the city itself more feasible and improving affordability. However, it also has the effect of raising the price of single-detached homes. This happens through two avenues:
- Firstly, it lowers the total supply of single-detached homes. As the supply falls, prices rise (all else constant)
- Secondly, it makes the land more valuable, as a developer can purchase it, demolish the homes, and build several dwellings on the same land.
The sum total of this is to mathematically erode affordability by increasing the prices of single-detached houses. We want to stress though, that this is not the appropriate way of thinking about the issue. Re-zoning to higher uses, especially along higher-order transit (such as the Cambie corridor) is the appropriate course of action for long-term growth.