Housing Revisited: Report of Ontario Affordable Housing Task Force, Part Two

In the first part of this article I reported on a broad range of suggestions that the Affordable Housing Task Force put forward. In this second part I'm going to something of a different tack to deal with one last set of recommendations---how to cut 'red tape'. After that, I will move onto some general comments on the report-as-a-whole. 

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It's taken me a fair amount of rumination to decide how to explain the issue of red tape because it's one of those things that I find excites strong opinions in people. I've written a couple articles in the past where it came up, but it requires a lot of nuance to avoid falling into the easy and sloppy cliche of dismissing it as nothing more than evidence of sinful socialism. That's because conservatives love to complain about red tape and usually suggest that the only real solution is to unleash the "invisible hand of the market place".

The problem with this trope is that a great many of the issues that red tape deals with come about as a result of very significant problems. What sometimes gets dismissed as "unnecessary red tape" are rules and regulations designed to protect the public from the "invisible hand of the marketplace".  If society really got rid of all "red tape", it would probably end up in the sort of "free market utopia" that Upton Sinclair described in his novel The Jungle. That was a world where a small number of individuals got very rich working a lot of poor people to death in dangerous meat-packing plants so they could sell tainted food to the masses. 

This is what you get if you totally remove all "red tape" from an industry. Public Domain image c/o McClures Weekly Magazine.

 

 

Having said that, there is a tremendous "opportunity cost" that comes from having a bureaucracy that simply cannot do things in a timely fashion. Canada is absolutely rife with this sort of thing. To cite a minor personal example, when I went through the process to change the status of my home from an illegal duplex to a legal one, part of the procedure was to get a fire inspection. This involved a SIX YEAR delay between application and a fire officer actually showing up. At that point, the officer told me to contact the Electrical Safety Authority (ESA) to get a mandatory electrical inspection.

I found out that at that time the only way to do this was by making a telephone call. Unfortunately, I found the line to the ESA office could be busy for hours on end. At that time, I only had a pay-as-you go smartphone---which meant that I would burn through my prepaid minutes and spend lots and lots of money more if I wanted to get through to book an inspection. So, instead I installed a Voice Over Internet Protocol (VOIP) system on my laptop so I could call the ESA office for free. I put the laptop on my kitchen table with the volume on high and went about my daily business to wait to get through. After several hours I did and made my reservation. (I asked in passing how contractors deal with this sort of wait time. The receptionist said that they have a fax number instead. I later found out that if an electrician has a good reputation, they just fax the paperwork into the ESA and it's "deemed as having been inspected"---even if it wasn't.)

This is just one example of the totally out-of-control bureaucracy we all have to deal with. I've mentioned this to several other people and almost invariably I get a somewhat similar example thrown back at me. What has really surprised me is when I have mentioned the need to speed up process times in situations like this and gotten back the bland response from elected officials that it never occurred to them that it was their job to make stuff like this more efficient. Instead, they thought this best left to the professional staff.

To be fair to politicians, I suspect that this attitude is an artifact of the division between elected officials and government agencies---which is a very good thing. We really don't want to have our politicians directly meddling in the delivery of individual government services. But having worked for an institution that I used to jokingly call "the Last Outpost of the Soviet Union", I would like to point out that paid staff in large public institutions learn to follow different directives than "serve the public" or "get the job done". Instead, there seems to always be a tendency to instead "cover your ass". That is to say, the job of the civil service often isn't to serve the public good as efficiently as possible, but rather to avoid being seen as having made a mistake. Bureaucracies often become incredibly risk averse, and this dramatically degrades the service they offer.

There are reasons why this comes about. For example, I've read several articles by experts that suggest a great deal of what happens at border crossings and airports since 9/11 isn't very good at keeping the public safe. Instead, it is not much more than "security theater". The suggestion given why it is so intrusive---if not effective---is because managers are obsessed by the idea that they don't want to be the person who was in charge "when a terrorist got through". So if we are lined up in security hours before our airplane departs and it takes forever to get through it's probably because management is "covering its ass". 

This collective fear of "getting caught with our pants down" shouldn't be confused with a concern about actually "getting the job done". If there really was a big chance of my duplex turning into a deadly inferno, for example, making me wait six years for an inspection would hardly have been a good idea. This is another thing I learned where I used to work. Filling out the paperwork often seems to become more important than the actual task at hand. Even if what they do doesn't even work, if they can be seen to be doing it---and there's a paper trail---their ass is covered!

This isn't the way the world has to operate. As I pointed out in a previous article, Estonia decided that they were going to make stream-lining it's bureaucracy into a national priority. It did this because it thought that if it cut out as much unnecessary red tape as possible, it would give the country a competitive advantage over other nations. They pay their taxes, charge out library books, ride the bus, get a fire inspection, electrical inspection, etc, with one single piece of plastic. ("One card to rule them all and with the blockchain bind them".) Different parts of the entire government bureaucracy share information, based on the rule that no citizen should ever have to give the same piece of info to anyone more than once. 

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A lot of journalism that I read is formulaic. The editor assigns a story based on research that says what does and doesn't generate ad revenue. The writer does some quick research and then hammers out a short text with graphics based on his or her ability to emotionally engage the reader. As a result, you usually end up with something that is just recycling conventional wisdom---generally with some sort of human interest angle. 

I don't do that. I spend a lot of time reading appallingly boring documents until I can get some sort of familiarity with the subject. Then I spend days obsessing about it until I feel like I have found the "nub" of the issue. Then I go through rewrite over rewrite in order to try to come up with the best way of expressing what are often really complex ideas that many of my readers will probably never have heard before. 

This is work. I'm happy to offer the results for free. But if you think what I do has merit and you can afford it, why not subscribe? Patreon and Pay Pal make it easy to do.

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It might seem I've gotten a bit off tangent with regard to housing. But from reading the Task Force report, it would seem that home builders have much the same sort of complaints about how hard it is to get an OK to build housing that I have had about getting my house registered. The difference is that all these delays cost developers a lot of money, and this gets passed onto buyers---which is part of what puts owning a home out of a lot of people's price range. 

The Task Force points out how out-of-control red tape has gotten in Ontario with a variety of startling statistics and illustrations:

One of the strongest signs that our approval process is not working: of 35 OECD countries, only the Slovak Republic takes longer than Canada to approve a building project. The UK and
the US approve projects three times faster without sacrificing quality or safety. And they save home buyers and tenants money as a result, making housing more affordable.

 

An Ontario Association of Architects study calculating the cost of delays between site plan application and approval concluded that for a 100-unit condominium apartment building, each additional month of delay costs the applicant an estimated $193,000, or $1,930 a month for each unit.

Another report---quoted several times by the Task Force report---is the BILD Municipal Benchmarking Study of September 2020. One of the more startling images it provided was a table of different types of studies that various municipalities require from developers before they will OK a proposal. (Click on the image to get a clearer version.)

And one last anecdotal comparison from the Task Force report.

Then: In 1966, a draft plan of subdivision in a town in southwestern Ontario to provide 529 low-rise and mid-rise housing units, a school site, a shopping centre and parks was approved by way of a two-page letter setting out 10 conditions. It took seven months to clear conditions for final approval.

And now: In 2013, a builder started the approval process to build on a piece of serviced residential land in a seasonal resort town. Over the next seven years, 18 professional consultant reports were required, culminating in draft plan approval containing 50 clearance conditions. The second approval, issued by the Local Planning Appeals Board in 2020, ran to 23 pages. The developer estimates it will be almost 10 years before final approval is received.

Just think about the last statement. There's an oft repeated story from climate activism to the extent that if you put a live frog in a pot of cold water and slowly heat it up, it will just sit there until it is cooked. (I understand that this isn't actually true, but it illustrates the point.) I'd suggest that our society is just a like a frog that is already well-done and well on it's way to become soup stock. Only people who have been absolutely beaten into submission would just accept that in the middle of a housing crisis it is acceptable to force developers to wait ten years to find out if the city will allow them to start building.

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I'm not going to get into the specific recommendations by the Task Force to cut red tape. There are a lot of them, and many quite technical. But I think it is possible to suggest some key factors to consider when we citizens think about these sorts of reforms.

• when a rule gets passed, assessing all opportunity costs must be part of the decision-making process
• when appropriate, computer technology should be used to stream-line the process
• attempts to involve the "triple bottom line" must be realistic and based on a willingness to trade off minor issues in favour of major ones
• appeal procedures need to be sufficiently onerous that they won't be entered into frivolously
  

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In economics an "opportunity cost" is the price you pay for pursuing one way of doing things versus another. With regard to the way municipalities and the province deals with housing, the reports that a developer has to commission and deliver in order to get a building permit come at the expense of the time it takes to get "shovels in the ground". If a large, numbers-driven institution---like a city or province---doesn't assign an actual specific cost to an activity, the natural tendency is for it to expand dramatically. When it does so, it can become a significant impediment to actually getting the job done.

One solution to escalating opportunity costs is to introduce "full cost accounting". That's a process where an attempt is made to itemize all the different elements of a specific activity in order to understand the opportunity costs. It's often used in environmental assessments in order to evaluate an activity. For example, where I used to work a decision was made to bring in a Star Bucks coffee bar to the library and charge the chain a fee for the privilege. A full-cost assessment would have included an evaluation of how this would impact house-keeping and building maintenance. (Shortly after the restaurant opened, the amount of garbage in the building dramatically increased. Coffee stains also became a huge issue with regard to the carpets.) If the university made $1000 off the coffee shop, but found itself spending an extra $2000 in garbage pick up and carpet cleaning, it wouldn't really make sense to bring in the franchise. 

Full cost accounting need not just be about money. It can also take into account time. If A process adds an extra $2000/unit/month to the cost of a home, or, delays building much-needed housing for 10 years, the logical option would be to either stream-line or eliminate it. 

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As I mentioned earlier, there are examples where computer technology can help speed things up. In my silly example with the Electrical Safety Authority, the logical thing to do would be to set up a web-page and allow people to email an application. (I'd be surprised if this hasn't already been done.) 

With regard to housing, the Estonian example would suggest to me that if you are dealing with largish businesses, it should be possible to squeeze some efficiencies out of the system. I would suggest, however, that this sort of thing be done carefully. A lot of bureaucracies have already suffered from things like cyber attacks and ransomware. So it won't do to try to do things "on the cheap". Moreover, there needs to be an appreciation that while privacy is important, efficiency and ease of use shouldn't be traded off by a risk-averse bureaucracy which has lost all sense of urgency. 

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One of the more important things our society has been doing over the last few decades is to introduce an appreciation of the need to consider "externalities" in its economic decision-making. This is a type of opportunity cost that involves one type of economic activity being subsidized by a decline in some public good. For example, when a timber company logs a stream bed and destroys a salmon spawning bed the timber companies profits are said to be subsidized by lost income from fishermen. 

This sort of analysis can also happen with regard to social problems. For example, I sat for a short time on the municipal committee tasked with finding a proper site for the casino that Mike Harris had decided to impose on Guelph. At the first meeting, several local charities told us that they refused to accept any money from a proposed casino because they said that a significant amount of the cash would come from people with gambling addictions---who would end up in poverty and cause problems for their entire family. (The rep from the Guelph Police services said that from what they'd heard from other police agencies this was absolutely correct. I've come to the same conclusion as a result of my article on gambling addiction.)

This is where the "triple bottom line" idea comes from. A project shouldn't be pursued unless it:

1. Can make a profit.
2. Can do so without imposing an opportunity cost on the environment that is higher than the profit in part "1".
3. Can do so without imposing a social cost on the human community that is higher than the profit in part "1". 

This principle is easy to understand in theory, but like a lot of economics, becomes very difficult to put into practice. For example, with my hypothetical example of the clear-cut forest and the salmon fishery, how do we measure the cost to the fishery? Should we limit the lost income to just the lifetime of the existing fishermen? Or should we include all the future generations of fishermen that cannot fish? If we do include the children's, children's, children---what about the cultural impact? If a vibrant local community of First Nation fishers gets destroyed because the fishery goes under, does that mean that the cost includes generations of people ending up with alcohol abuse and welfare dependency? 

Housing is something of a special case for the triple bottom line because one of the issues that is traditionally considered an "externality" (the impact on society), can and should be part of the "profit" section. That is to say, providing housing is actually a public good. This means that if society decides to not build an apartment tower because of fears that it may destroy habitat for the Jefferson salamander, not only do the developers not make a profit, workers and the local economy don't get money to build it, and, people who don't have a home cannot live there: protecting one part of the triple bottom line damages the other two.   

At this point municipalities who are in favour of the triple bottom line are on the horns of a dilemma. Do they treat each leg of this-three legged stool as something that needs to be considered and assign trade-offs that best address the concerns of each of the three concerns? Or do they see the process is one of achieving a consensus with profit, the environment, and, social issues each having an absolute veto? 

The problem with allowing a salamander the right to veto all potential housing in the city or province is that not building enough housing has a significant opportunity cost---namely that housing sky-rockets in price and lower-income people get hammered into poverty as a higher and higher percentage of their income goes into providing housing. 

Another complexity comes from the fact that some things are just going to happen in our society, whether people like it or not. One example that comes to mind is the Hanlon Creek Business Park. It was a very nice piece of unused land that had a trout stream and an old farmer's woodlot. Since the property was next to the Hanlon expressway and close to the 401 highway, it was also a very nice piece of premium property for the city to zone industrial and advertise to bring new businesses into the city.

The city went to a great deal of effort to minimize the environmental impact of this development. Take a look at the following map that suggests how much thought went into this effort.

To see more detail, click on the image. Graphic c/o City of Guelph.

 

Compared to what would have happened in the past, this was an amazing amount of careful work aimed at fulfilling the environmental demands of the triple bottom line. It should be remembered that all of this was done even though the property wasn't especially important from an ecological point of view. If memory serves from both past research and direct observation of the land, the small woods wasn't "old growth" because it had been selectively logged by the previous owner---which would have changed the composition of the trees populating the site. The trout stream was already under stress from things like illegal off-roading. The preparation for the business park actually aimed to not only protect the stream but to also remediate damage that had already been done. The rest of the property were over-grown farmer's fields with things like feral apple trees along old fence lines that had been "land banked" by speculators for several decades .  

But even that wasn't enough to satisfy everyone and a significant opposition movement mobilized against the project. While the city was eventually successful and businesses are now working in the area, the protests cost the city a lot of money and politicians ended up eating a lot of grief. 

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This raises a fourth way to protect housing development from red tape. Currently there are complaints about a huge backlog in appeals that have been sent to the Ontario Land Tribunal (the successor to the Ontario Municipal Board). The argument in the Task Force recommendations is that it needs to be harder to lodge complaints and there need to be significant penalties if the Tribunal decides that the complaints are frivolous or designed to cause delay. 

This raises an important point for a democratic society. If people don't like the policies of their government they have the option of voting for someone else. But what if the majority of people want things that are objectively unfair to a minority? That's why we separate the legal system from politics. That way a judge can look at the objective facts of a situation and decided whether or not the government of the day is following the law or just making stuff up as they go along. In addition, if they can also look at the law itself and decided whether or not it conforms with the constitutional values (ie: the Bill of Rights) that society has set above the law. 

All well and good, but people need to realize that there is a big difference between voting in an election and taking the government to court (or the Ontario Land Tribunal). That's because there are two significant opportunity costs involved in going before the legal system: it is hideously expensive, and, takes a long time. As I've pointed out above, delays and added expenses add significant amounts of money to the rent or cost of buying a home. To that end, it's important that society assign a real cost to accessing the legal system---or else people will just clog the courts.

As a matter of fact, just hiring a lawyer and going before a judge is generally sufficiently onerous to keep most sane individuals out of the court house. But a group of individuals sometimes get so incensed by a state of affairs that they band together, hire a lawyer, and, take on the "powers and principalities". The point is to balance the cost involved to participate so that it is high enough to discourage frivolous suits while not keeping out people with legitimate complaints. 

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I have myself been the plaintiff in one of these lawsuits. As part of a group of Guelph's religious leaders, I sued Walmart as an action aimed at protecting the Saint Ignatius Retreat Centre. We did this because the St. Ignatius property serves an important function for a great many religious organizations in the city---including Protestants, Buddhists, Hindus, Sufis, First Nations, etc. I won't go too far into the details except to say that this wasn't done lightly because the law we were using cannot be used by incorporated groups, which means that I could be held liable for court costs. And at a preliminary hearing I was ruled against and told to pay (if memory serves) something like $6,000 for a 15 minute session in front of a Divisional Court Judge. 

After that event our group set out to raise money for a legal defense fund. This was successful and we raised over $60,000 in a week. As the case developed, Walmart agreed to mediation with a judge from the Ontario Municipal Board acting as the "go between". I well remember him warning me that if the case went against me I would lose my house, all my savings, and, have my income garnished if I lost. (Eventually, we settled out of court and Walmart ended-up paying all the court costs plus a significant settlement to St. Ignatius.)        

I'd like to point out what I consider the salient points in the above story. First, the risks that were undertaken were significant, so it was obvious to all and sundry that the people involved were dead serious about the issue. Secondly, the people behind this action were important leaders of Guelph's spiritual community. Third, we had obvious community support because we were able to build a significant legal defense "war chest" in short order. 

In retrospect I wonder if I would have done this sort of thing again. Possibly not. I'm married now and wouldn't want to risk my wife's financial security. But having said that, I think that I got the calculus right about balancing the value to the community versus the personal risk I was running. St. Ignatius is still there, and the settlement it received probably has a great deal to do with that fact. 

Enough blowing my own horn---. 

It's important to allow people to have access to appeals, but there has to be such a high bar to doing so to prevent most projects getting drowned in appeals to the Land Use Tribunal. This could be done in a variety of ways, but I'm not going to get into them because this is a technical subject that will be settled by lawyers, not the citizenry. 

 

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I think though, that there is yet another issue that bleeds out of the above. One thing I've been really concerned about with both the COVID pandemic and the Ukrainian war is what seems to be a permanent "contrarian" constituency. By this, I mean people who seem to be opposed to stuff just for the sake of being opposed. This isn't to say that they don't have their reasons---it's just that when they state them they generally don't have anything approaching a logical reason or real evidence for being so inclined. And yet, they are very emotionally invested in ideas like the vaccines are dangerous and Putin has a right to invade Ukraine. 

 

My working hypothesis is that there is a significant fraction of the population that is very angry and upset about society and the economy. They want something different---maybe something better than capitalism, perhaps something more like the Olde Tyme religion of their youth. I've written about the danger of nostalgia, but I also think that there is a danger to contrarianism just for the sake of being contrary. Sometimes the business people and government are right---or at least less than totally wrong. I think the housing crisis is one of these---perhaps very rare---situations. The Task Force thinks that the biggest problem is supply, and ordinary citizens who don't want their neighbourhoods to change are preventing the new construction we desperately need. 

 

Of course, there are ways that new housing could be built either better or worse. Indeed, several of the suggestions from the Task Force were especially of interest to me: 

• finding land in the yellow belt 
• building the missing middle 
• getting rid of the two stair rule in small apartment buildings
• rethinking mandatory parking
• allowing larger mass timber buildings

These are not recommendations that I think will find favour with with the existing development industry. After all, these people have made their fortunes building suburban sprawl based on single-family homes. If discussion of housing continues to be dominated by NIMBYs fighting tooth and nail against all change, I fear that the conversation will be settled without significant public input, and these extremely positive suggestions will get left in the dust---leaving nothing but a heavy-handed provincial regime that allows the existing development community to build more suburban sprawl with the odd sacrifice zone choked with apartment towers. 

 

My suggestion to the community is to make the effort to research and try to understand the housing crisis from the point of view of people who don't already own their own homes and honestly face up to the complex, difficult choices that have to be made. Don't dismiss other people's problems with cheap shots about greedy landlords, money laundering, or, the need for federal subsidies. Democracy isn't about always getting your own way, or, being able vent your emotions. It requires citizens to educate themselves about the issues and to try to put themselves in the shoes of everyone else. There are a lot worse things to suffer through than having to see an apartment tower rise up in your neighbourhood.    

 

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Moreover I say unto you, the Climate Emergency must be dealt with!