Land-use plan will make Montreal too expensive, too congested

The Montreal metropolitan region’s new land-use plan, which was given the green light by the provincial government last week, was adopted with impressive support from regional authorities last December. But it is likely to lead to a less competitive metropolitan area, by raising house prices and intensifying traffic congestion.

The cost of housing is the largest element of the cost of living and is the factor that varies most between metropolitan areas. The Montreal area has already suffered significant losses in housing affordability. The 2012 edition of our Demographia International Housing Affordability Survey shows that Montreal-region house prices have increased more than 50 per cent relative to household incomes in just seven years. As land available for new development has become severely constrained by agricultural zoning, formerly affordable Montreal has become unaffordable.

The more stringent land-use regulations that have been adopted will only make the situation worse. The plan requires 40 per cent of new housing to be built within one kilometre of métro or commuter-rail stations (or 500 metres from a rapid-bus station). As economics teaches, scarcity tends to result in higher prices, other things being equal. That is why there is such great concern about the price of gasoline when the supply of oil falls behind the demand by consumers. The same principle applies to creating land scarcity.

Not surprisingly, more restrictive land-use strategies, such as those in the new plan, have been overwhelmingly shown by economists to lead to higher house prices. Not only does the plan severely limit the urban-fringe development that young households prefer and can afford, but it also picks winners with respect to the land within the urban footprint that can be developed. In so doing, Montreal is hanging out a “Speculators Welcome” sign. The role of speculation in fuelling the house-price increases in Vancouver, California and other areas with similar restrictions is well known.

The second problem with the plan is that it would substantially increase population densities in favoured corridors, which would increase traffic congestion. International data clearly show that greater traffic congestion is associated with higher population densities. The traffic congestion will also lengthen work-trip travel times. According to the Toronto Board of Trade’s annual global cities benchmarking report, Montreal already ranks 20th out of 21 international metropolitan areas reviewed (Toronto ranked 21st) in work-trip travel time, worse than traffic-clogged U.S. metropolitan areas such as Los Angeles, Dallas-Fort Worth, Chicago and San Francisco.

Moreover, most transit commuting is to downtown. In 2006, 40 per cent of the Montreal metropolitan area’s transit commuting was to downtown, which accounted for only 15 per cent of employment. The reality is that despite its great value in downtown commuting, transit is generally not a viable alternative for the more than 80 per cent of jobs that are dispersed around the metropolitan area. A principal reason is that public transit is virtually always slower than a car for destinations outside downtown. Between 2001 and 2006, 70 per cent of new employment in the metropolitan area was outside the city of Montreal boundaries.

Traffic congestion also has health impacts. Residents of corridors with greater traffic congestion will have to endure more intense air pollution levels, because cars in congested conditions produce substantially more air pollution.

A Montreal with higher house prices, greater traffic congestion and slower work-trip travel times will be less attractive to new businesses, new residents and the continuing flood of international migrants. Further, it seems likely that the urban plan will work to accelerate the exodus of households to areas outside the Montreal region. It’s unfortunate that Montreal hasn’t learned from the mistakes of other urban areas that are suffering from the same misguided policies.

Wendell Cox is a senior fellow at the Montreal Economic Institute and principal of Demographia, a public-policy consultancy based in Belleville, Ill.