The Impact of Land-Use Regulation on Housing Supply in Canada /

As Canadians continue to converge on urban centres and concerns about the affordability of housing grow, it is crucial to understand why the country’s major housing markets have seen such dramatic growth in prices. This study presents evidence that the regulation of residential development restricts the housing supply, encouraging the growth of prices and distorting local economies. Growing demand for homes in a region is generally followed by growing home prices and a growing housing stock, but the balance between these two outcomes depends on the structure of the housing supply. Markets with a responsive housing supply tend to address demand with the construction of new homes, while less responsive supply leads to a rise in prices. This study’s empirical analysis suggests that costly and challenging land-use regulations have made the housing supply less responsive to demand in Canada’s urban centers.The study compares growth of housing stock between 2006 and 2011 with five measures of land-use regulation.