A recent essay by Mario Polèse provides an opportunity to consider the usefulness of making comparisons of housing costs in different jurisdictions. Polèse is professeur émérite at the Institut enational de la recherche scientifique in Québec City. His essay compares housing costs in the provinces of Ontario and Québec.
House prices in Québec are lower. Polèse sees Ontario’s Development Charges Act (1989), as a key in the differences in housing prices. Ontario’s legislation changed the financing process for infrastructure in new developments. Québec continued with the process that both provinces had used before. With Ontario changing its method and Québec holding firm, there was an opportunity to compare changes in house prices.
Infrastructure includes hard services like roads, water, sewers as well as new public buildings such as fire halls and libraries. Before 1989, both provinces paid for new infrastructure through taxation and municipal bonds. Ontario’s 1989 legislation allowed municipalities to calculate the cost of infrastructure for new development and require the businesses building the new housing to cover that cost.
Polèse contends that Ontario’s legislation set the stage for large firms to gain the upper hand when building new housing. He states that subsequent decisions in Ontario (notably the creation of the Greenbelt) have further shaped a development environment that privileges large firms.
Polèse strongly encourages decision makers in Québec to steer clear of development charges. His advice may be well received, especially with his credentials.
Polese has zeroed in on development charges. Could there be other factors at play? Let’s look at an earlier period, the 1970’s, when housing prices in Toronto were higher than they were in Montréal. Researchers at the time sought to find out why. They identified significant differences in land ownership patterns and the development industries between the two cities.
Around Toronto, the researchers found that there were a handful of landholders who owned the majority of undeveloped land. The development industry was similarly dominated by the same few large businesses. Between them, the owners were in a position to decide how much land would be developed each year. A growing population guaranteed that there would be a demand for the houses that were built. Crucially, the owners could also decide to build less than was needed, and increase the demand for the houses that did get built.
In Montréal, there was much less evidence of large corporations owning or developing land. Instead, there were many businesses with small landholdings and many small builders1.
Is the concentration of ownership in Toronto responsible for the higher prices? Or should we finger the Development Charges Act? These two examples demonstrate that making comparisons between jurisdictions is a tricky business.
The specific question applies to Québec and Ontario, but comparing jurisdictions is an analytical tool open to any location. Comparisons can teach us a lot, including that our investigations need to be thorough.
You can read Polèse’s essay in Policy Options: Why is housing cheaper in Quebec than in Ontario?
Footnotes
- For more on this research, use a Google Scholar search for James Lorimer’s book The Developers. See also Peter Spurr’s 1976 report titled Land and Urban Development
