Cities are, at their core, labour markets. Although they serve many other functions, they wouldn’t exist without a functioning labour market. While this may seem like a harsh statement, it’s a reality we have largely ignored. Job growth fuels the amenities and services that make cities vibrant and livable.
Another key factor is scale—larger cities generate economies of scale, allowing businesses to reduce their production costs. They also create agglomeration effects, where firms and individuals benefit from being located close to one another, leading to greater productivity, specialization and economic growth. This concentration enables knowledge sharing, a more efficient division of labour, and the use of shared infrastructure.
As economist and policy expert Jack Mintz points out, Canada’s economy “is stagnant with virtually no growth in real per capita GDP in 10 years.” Yet, limited attention has been given to how regulatory burdens in our cities are contributing to this problem.
American economist Edward Glaeser, in a recent testimony to the US Senate Committee on Banking, Housing and Urban Affairs, highlighted the challenges the US faces from its housing supply problem. One of the key points he made was that housing prices are much higher in more regulated areas. He notes that the US is “less productive because we build too little in our most productive places.” Three economists, including Nobel Laureate Edward Prescot, found that “US labor productivity would be 12.4 per cent higher and consumption would be 11.9 per cent higher if all US states moved halfway from their current land-use regulation levels to the current Texas level.” A similar conclusion could be drawn for Canada.
Glaeser used data from the Wharton Regulation Index, which ranks communities and markets in terms of their regulatory restrictiveness, to make his case. Using a similar framework, CMHC engaged Statistics Canada to construct a Municipal Land Use and Regulation Index. Not surprisingly, they found that Greater Toronto and Greater Vancouver “have the highest Municipal Land Use and Regulation Index scores (100 and 98, respectively) and stand out sharply relative to other regions in Canada.” Given that both regions are effectively constrained either by geography or by policy (such as the Greenbelt for the GTA), they face a much more inelastic housing supply. It is no surprise, then, that both regions suffer the most with affordability challenges.
When we examine the data collected and presented at a Census Metropolitan Area (CMA) level, a major shortcoming of this survey becomes evident: it is voluntary. In Alberta, there are four CMAs – Edmonton, Calgary, Red Deer and Lethbridge. However, only one CMA, Edmonton, is shown in the report. Given that the index for Alberta is lower than Edmonton’s, it suggests that additional regions must have reported. While anonymizing data is essential to protect individuals, governments should want transparency to enhance accountability and citizen participation.
This desire to report at an aggregated level limits the value of the report. Even within the Edmonton CMA, it is unclear which areas reported, and it’s important to note that the Edmonton CMA includes both urban and rural areas.
Source: Edmonton Metropolitan Region
The areas that report will significantly influence the index values. This is even more critical when looking at the Toronto or Vancouver CMAs. If municipalities and regions are allowed to opt in or out of the survey each time it is conducted, it severely limits the ability to use this tool for policy or funding decisions.
While the index does have value, it needs significant changes. First, Statistics Canada should make reporting mandatory. Second, the report should present information at a more granular level. The government needs to take a tougher stance in collecting this data. They are providing significant funding to municipalities but are not collecting the information necessary to understand which municipalities are not effectively improving affordability. While this is only one indicator, it is crucial for improving both affordability and national productivity.
Independent Opinion
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