Why are Housing and Transportation So Expensive?

Public policies affect housing and transportation affordability in many ways: they affect the types of housing that may be built, land requirements per housing unit, development and construction costs, and the availability of affordable transportation options such as walking, cycling and public transit. Many current policies favour expensive housing and transportation over more affordable alternatives.

These policies force households to purchase more costly housing and transportation than they really want. For example, given the option, many households would prefer to rent a small apartment or townhouse in a walkable urban neighbourhood over a larger, single-detached house at the urban fringe, but regulations that limit apartment and townhouse developments in residential neighbourhoods reduce supply and drive up prices. Current zoning codes add thousands of dollars in parking costs to housing that even car-free households must pay.

Similarly, transportation planning practices tend to favour automobiles over more affordable travel options. Minimum parking requirements represent a huge subsidy of automobile transport, worth thousands of dollars per urban car. Conventional transportation planning evaluates transportation system performance based primarily on automobile traffic conditions using indicators such as roadway level-of-service and congestion delay, resulting in the majority of transportation agency funding being devoted to automobile-oriented improvements. Walking, cycling and public transit receive much less consideration and investment.

In our a quarter of total trips than half of downtown trips are made by non-auto modes, but a much smaller portion of total government spending on transportation infrastructure is devoted to these modes. As a result, many neighbourhoods lack sidewalks and bike-lanes, and public transit services is inconvenient. Our Efficient and equitable transportation agenda would significantly increase investments in affordable, resources-efficient travel options.

CRD Mode Shares (2017 CRD Origin-Destination Study)

A quarter of regional trips and more than half of downtown trips are made by non-auto modes.


How Policies Affect Affordability

Because they require more land, construction materials and heating energy, single-detached houses typically cost 20-40% more to build and operate than townhouses or apartments with the same floor area. Each additional parking space adds $100-200 per month to housing costs. Living in an automobile-dependent, urban fringe location, where every adult needs a personal automobile, adds $300-600 per month in transportation expenses.

These add up! In most urban areas, a basic low-rise apartment could cost as little as $600 per month for rent or mortgage payments, plus $100 per month in basic utilities and $100 per month in transportation expenses, but shifting to more expensive housing types, adding the cost of a parking space, and locating in automobile-dependent urban-fringe areas each add costs, as illustrated below.

The most affordable option is generally a mid-rise (3-6 storey) wood-frame apartment or townhouse with unbundled parking (parking is rented separately from housing), located in a walkable urban neighbourhood where residents can live car-free. Current zoning codes forbid development in most areas: they only allow single-detached housing and require off-street parking, which drives up costs.

Although specific costs may vary depending on local land, construction and utility rates, the basic relationships apply virtually everywhere: compact housing with unbundled parking located in walkable urban neighbourhoods are most affordable overall. Public policies that discourage development of such housing, for example, by prohibiting multi-family housing in residential neighbourhoods and mandating parking, raise housing and transportation costs beyond what many households can afford.

Victoria Development Regulations

Most land suitable for residential development in Victoria (excluding parks and industrial areas) is restricted to single-detached housing (yellow in the map). In these areas, regulations prohibit affordable housing types, such as townhouses and apartments, and require at least one parking space per housing unit. These regulations reduce affordable infill housing development.

In addition, various public policies favour home ownership over renting, including lower property tax rates for owner-occupied housing and special subsidies for first home purchases. These are regressive because lower-income households are more likely to rent than own housing, and their financial benefits increase with property values and so provide the greatest savings to wealthier households. Policies that favour rental housing, or provide fixed grants unrelated to home value, would provide greater affordability.

Example: Density Restrictions Reduce Affordability

Development restrictions often reduce urban housing affordability, because the lowest-priced units are the first to be eliminated.

For example, in 2003 a developer proposed the Bohemia and Castana, a pair of three- and four-storey mixed-use buildings with 71 residential units, a third of which were to be moderate-price rentals, in the Cook Street Village, a walkable neighbourhood in Victoria, British Columbia. Local residents objected. They considered the buildings too big and tall, although critics could never explain exactly how a fourth storey would harm them. Never-the-less, the opponents were successful: the City rejected the proposal. The developer instead constructed a three-storey building with 51 condominiums but no rental units. In a city with nearly 50,000 houses, 20 fewer moderate-priced units is too small to notice, but if this is typical, it indicates that community resistance typically reduces affordable infill housing development by about 30% compared with what the market would deliver.

This and other examples illustrate a key point: When infill development is restricted, the lower-priced, less profitable units are the first to be eliminated, depriving lower-income households of housing options in attractive neighbourhoods. Infill restrictions harm low-income households.

Who Suffers?

Policies that favour expensive housing and automobile transportation over more affordable alternatives, and sprawl development over more compact urban infill, tend to favour:

  • Older people (who tend to own homes) over younger people (who rent, and may aspire to purchase a home).
  • Motorists over people who cannot or prefer not to drive.
  • Wealthy households (which tend to own homes and cars) over lower-income households (which tend to rent and rely on affordable travel modes).
  • Cars over people. When public officials impose minimum parking requirements that drive up housing costs, they are favouring housing for cars over housing for people.
  • Suburban expansion over the preservation of farms and wildlife habitat.

For more information:

Our Affordable and Inclusive Neighbourhood Agenda, describes eight local and regional policies that can significantly increase moderate-priced infill in walkable urban neighborhoods, which increases affordability and inclusivity, in order to achieve our local and regional affordable housing goals.

Our Efficient and Equitable Transportation Agenda identifies six specific policies to create a more diverse, efficient and equitable regional transportation system.  By improving resource-efficient travel, and providing incentives for travellers to use the most efficient options for each trip, it can achieve emission and traffic reduction targets and provide diverse economic, social and environmental benefits.

Cherise Burda and Mike Collins-Williams (2015), Make Way For Mid-Rise: How To Build More Homes In Walkable, Transit-Connected Neighbourhoods, by the GTA Housing Action Lab and Pembina Institute.

Dan Bertolet (2018), Want Less Expensive Housing? Then Make it Less Expensive to Build Housing, Sightline Institute.

Joe Cortright (2019), Will Upzoning Ease Housing Affordability Problems?, City Observatory.

Daniel Herriges (2018), Why are Developers Only Building Luxury Housing?, Strong Towns.

Todd Litman (2017), Affordable-Accessible Housing in a Dynamic City: Why and How To Support Development of More Affordable Housing In Accessible Locations, Victoria Transport Policy Institute.

 Sara Maxana (2016), YIMBY Keynote Speech, Yes In My Backyard Conference.

Dan Parolek (2014), Missing Middle Housing: Responding To Demand for Walkable Urban Living, Opticos Design.

Sightline Institute (2019), Cruel Musical Chairs (or Why is Rent So High?) A Simple Reason: We Don’t Have Enough Places to Live (Video).

Mac Taylor (2016), Perspectives on Helping Low-Income Californians Afford Housing, Legislative Analyst’s Office.