The Zoning Effect in the Fraser Valley

Zoning requirements increase Fraser Valley home prices by hundreds of thousands of dollars. Small-scale, multi-unit housing reforms are just the start of what’s needed to restore affordability.

Although BC’s soaring housing costs have been on everyone’s minds, until recently there were no precise measurements of any of the proximate causes. That is no longer the case.

At SFU’s REM Planning program, I sought to isolate the effect of zoning on housing prices in BC as one potential cause of the housing crisis. In doing so, I aimed to provide clarity on whether supply-side housing reforms would be effective at reducing prices.

The “zoning effect” refers to the amount that zoning increases housing prices. It includes all policies that control building form in specific areas of municipalities, such as height limits, minimum lot sizes, and off-street parking requirements. It also includes the cost of the delays that result from the administration of these policies.

The zoning effect is an aggregate effect; therefore, it does not refer to the “land lift” that accrues to a single property when it is upzoned and allowable density is increased. Rather, it represents how much housing costs are increased across the board due to blanket limitations on housing supply.

Using a dataset of housing sale prices and assessed values from BC Assessment, I found that zoning increased the cost of detached homes by between $470,000 and $950,000 in the Fraser Valley in 2021, accounting for anywhere from 40 per cent to more than 70% of the cost of purchasing a detached home.

While the zoning effect may not be as high in the Fraser Valley as it is in Metro Vancouver ($1,000,000), it has grown more rapidly here since 2016 than anywhere else in the province.

High property values may be desirable when they reflect the inherent worth of the land, however a high zoning effect simply indicates an artificial scarcity of housing that should be remedied. The fact that the zoning effect is so high shows that zoning imposes a binding constraint on housing supply—and that high construction costs alone are not to blame for high prices.

The zoning effect in the Fraser Valley is largely due to spillover demand from Metro Vancouver, and zoning modernization is most urgently needed in neighbourhoods adjacent to the urban core. However, all municipalities can and should make a difference by reducing the restrictiveness of their zoning bylaws. Small-scale multi-unit housing (SSMUH) established by Bill 44 will be a starting point, but until cost-effective low-rise apartment buildings are allowed over a large enough area to meet regional housing needs, the zoning effect will remain a prohibitive barrier to young people and newcomers seeking to enter the real estate market.