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The Collateral Damage of Ontario's Greenbelt

02/05/2015 05:46 EST | Updated 04/07/2015 05:59 EDT
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Canada's largest cities are growing rapidly and what were once sparsely populated rural areas are quickly becoming city neighbourhoods. Driving north of Toronto brings you through cities like Vaughan and Brampton, which have more than doubled in population since 1991. This urban growth accompanies a concentration of prosperity in urban centers; best estimates place about one in every five dollars of Canada's GDP in Greater Toronto.

But today there's a growing belief that if left uncontrolled, Canada's expanding cities risk occupying too much space. One of the main voices of this line of thought belongs to Toronto's chief planner who advocates growth boundaries, such as Ontario's Greenbelt, to restrict urban expansion. According to this theory, greenbelts will help rein in runaway infrastructure costs and preserve natural heritage by forcing denser urban growth. However, data suggests they inevitably do more harm than good, depriving farmers of land value, and driving up home prices.

Farm owners inside Ontario's Greenbelt are amongst its greatest collateral victims. Farmland accounts for just over two-thirds of an Ontario farm's assets. Much of this value comes from the possibility of one day developing farmland into homes, a value that can be wiped away by urban growth boundaries. A study of the Greenbelt's effect on farmland estimates farms near Toronto and inside the Greenbelt's protected countryside lost an average of about 24 per cent of their property value when the law came into force. For Ontario farmers, many of whom are rapidly approaching their career's end at an average age just under 55, this loss of land equity can make retirement even less attainable.

But farmers are not the only ones hurt by the Greenbelt; it also threatens housing affordability as Toronto grows. The region is expected to accommodate an additional four million inhabitants by 2031, and land restrictions will inevitably cause rising prices as the city bumps up against its legislated boundary. Fortunately for those in the property market, the Greenbelt has left a few pockets of land open for Toronto's metro area to grow into, and we have yet to see a definitive impact on the housing supply. But experiences with older urban growth boundaries in the UK, South Korea, and various Californian cities show that supply constraints can contribute to ballooning housing costs as the city grows and open land within the Greenbelt becomes increasingly scarce.

It is true that the per-household cost of maintaining roads and sewers is cheaper in high density areas as more people share a smaller amount of infrastructure. And certainly, residents of new, low-density neighbourhoods should not expect these costs to be borne by downtowners' property taxes any more than urbanites should expect suburban subsidies for inner-city amenities. Still, stopping development outside of an arbitrary Greenbelt can hardly be considered a rational solution to the fiscal issues accompanying growth.

The choice of how to meet the needs of a growing region like the Greater Toronto area should be made carefully, striking a balance between judiciously selecting investments, controlling operating costs and relying on user fees and more efficient property taxation in place of harsh limits on growth. This requires careful intervention with a scalpel; the Greenbelt is more akin to a sledgehammer.

The Greenbelt Act is up for its first official review by Queen's Park this year. Affected communities across Ontario are calling for careful consideration of the Greenbelt's costs alongside its benefits. Preventing the GTA from growing beyond a line drawn in farmers' fields may help increase density, it may even make the region's infrastructure needs easier to manage, but these benefits accrue as part of an ugly, unnecessary trade-off.

This piece was co-written by Ian Herzog, Fraser Institute economist, and Josef Filipowicz, Fraser Institute researcher.