Can affordable housing and rapid mass transit co-exist?

AACI | Vice President, The Regional Group of Companies Inc.
  • May. 22, 2018

Rapid mass transit is often regarded as the prescription for cities suffering from traffic congestion. A way for urbanites to give up the expense of owning a vehicle.

Columnist John Clark.

Columnist John Clark is Vice President with The Regional Group of Companies Inc.

But that convenience comes with a price – land values around transit nodes jump in value. These nodes become prime locations for mixed-use development.

Ottawa, which is (with fingers and toes crossed) opening its Confederation LRT Line to the masses by the end of November, isn’t buffered from this market reality. At least one city councillor is calling for steps to be taken to ensure a supply of affordable housing stock remains near the city’s new LRT and bus rapid transit stations.

In April, the Ontario Liberal government kicked off the contract bidding for Hamilton’s new LRT line with a promise to invest some $5.9 million to build or repair affordable housing along that line.

New transit systems offer city governments the means to drive greater densification in urban cores on the premise it won’t mean more traffic on already-choked routes. Just look at two recent deals in the Toronto area.

When $15M an acre is a bargain

Hong Kong’s Aoyuan Properties paid $200.8 million, or about $23.35 million per acre, for a plaza site in North York it intends to redevelop after it won Ontario Municipal Board approval to build up to 1.95 million square feet of density – 70 million square feet more than current city planning allows.

Meanwhile, literally across the street, Toronto Hydro sold its 8.1-acre site at 5800 Yonge St. for a “mere” $15 million an acre for a condo development, at the 1.25 million square feet of density allowed under current guidelines.

With those kinds of prices attached to the land, what kind of premium will buyers face to get into these developments?

Market forces are like an earthquake – really strong. If you try to resist an earthquake, one way or another, you are going to fall.

Unlike an earthquake, however, market forces are much more predictable.

An answer that actually works

While resistance may be futile, that doesn’t mean we should bury our heads in the sand. Affordability is a valid issue which should be addressed in the face of surging housing costs. I just have yet to see a good example of how to achieve it.

Publicly owned housing is a simple answer, but then you have to create a criteria for who can get in and who can’t. There will always be someone who makes $1 too much and can’t get in – is that fair? Too much public housing and the caretakers of the public purse will get antsy.

In the U.K., policies in the 1980s under then-prime minister Margaret Thatcher to sell off public housing (called council housing over there) did give many buyers bargain-basement homes which have since skyrocketed in value. Decades later, the long-term benefit is in doubt. Some politicians and economists believe it caused more problems than it solved because the sell-off wasn’t matched with construction of new public housing.

As a result, the U.K. now has a chronic shortage.

Congregating lower income people often seems to create problems, which is an argument against public housing. Rent controls often encourage reduced building maintenance and leave the rental pool in deteriorating condition.

In contrast, what I have always been a fan of is some form of guaranteed annual income program. This takes away the need for a lot of bureaucracy and puts decision-making on where to live directly into the hands of people.

Too much regulation . . . or too little

However, we need to also consider if regulation has contributed to affordability problems. We need regulation for sure, as I recall being in a shack a family occupied on the banks of the Rideau River opposite Ottawa’s RA Centre. I’ll never forget the smell of poverty in which they lived — and this was just a short 60 years ago.

Doing nothing was not the answer and still isn’t. However, we must always ask the question, what is the better reasonable choice?

While regulation is important in building standards, we need to make sure we don’t unnecessarily price some people out of the market with excessive standards. Recent articles I’ve read have indicated some municipalities, as a matter of ordinary policy, prevent the construction of small houses, effectively regulating some people out of the market.

It’s a sad and apparently inevitable characteristic of our society that some people will not have the ability to earn a liveable income – someone always seems to get the short end of the stick. So long as this is the case, we must make sure that people, and their children in particular, have decent and safe places to call home that are not hours away from a source of income. 

From my perspective, we need appropriate regulation, and quite probably a form of guaranteed income, with these viewed from the perspective of allowing as many people as possible to make their own decisions on where and how they are going to live.

Helping hand from new tech?

As an aside to this, there was an interesting article from Bloomberg recently that talked about how the rise of ride-sharing services like Uber and Lyft may in fact contribute to affordability around transit nodes. These services, along with the advent of electric cars and autonomous vehicles, provide alternatives that break the monopoly of rapid mass transit. This in turn could chip away at inflated housing prices around transit nodes.

Time will tell.

To discuss this or any valuation topic in the context of your property, please contact me at [email protected]. I am also interested in your feedback and suggestions for future articles.



John Clark is Vice President with The Regional Group of Companies Inc. He has more than 33 years of experience in the real estate appraisal field, is a fully accredited…

Read more

John Clark is Vice President with The Regional Group of Companies Inc. He has more than 33 years of experience in the real estate appraisal field, is a fully accredited…

Read more

Industry Events