Through the Roof: The High Cost of Barriers to Building New Housing in Canadian Municipalities

Headnote

Barriers to increasing housing supply, many stemming from excessive regulation, are driving up the price of new homes in Canada. The extra costs range from an average $229,000 per new single-detached house in the eight most restrictive cities, to $600,000 in Vancouver. Municipal and provincial governments should review land-use policies and reduce development charges.

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Daniel Schwanen

Vice President, Research

THE STUDY IN BRIEF

The cost of housing has been going through the roof in many parts of Canada. Most government policies have focused on curtailing the demand for housing, but they have not taken meaningful steps to increase housing supply.

In any competitive market without barriers to entry, regardless of the product being sold, the overall market price should equal its marginal cost of production. The same is true of housing. The marginal cost of constructing a single-detached house is primarily due to the costs of labour, materials, and time during its physical construction. A well-functioning housing market results in the market price of housing being close to the feasible cost of constructing it....