Vancouver May Get a Major New City Plan. It’s Not Enough

The Vancouver Official Development Plan, to be voted on by Vancouver city council soon, deserves credit for its ambition. It is, in many ways, a thoughtful, well-crafted vision for a more equitable, sustainable and inclusive city. It speaks with care about reconciliation, climate responsibility and belonging. It identifies, quite rightly, that housing affordability is the city’s defining challenge.

Where the plan falters, however, is in the diagnosis — and therefore in the prescription. It rests on the unproven assumption that simply building more housing, of any kind and at any price, will lead to affordability for ordinary wage earners.

This “more supply equals lower prices” thesis has now become dogma across Canada. The federal government, through the Housing Accelerator Fund, the CMHC and other policy creators, has fully embraced the idea that the problem is one of supply constraints — that we haven’t allowed enough additional housing units to be built in our cities.

The Vancouver plan follows suit, framing affordability primarily as a function of existing zoning and regulatory barriers. But after more than half-a-century of experimentation, Vancouver itself provides a living laboratory proving this assumption wrong.

Since the 1960s, no major North American centre city has added more housing units relative to its original base than Vancouver. Infill, high-rises, secondary suites, laneway homes — Vancouver has done them all, with remarkable consistency and speed. The city has more than tripled its housing stock within fixed boundaries.

Unlike many cities, it did not annex surrounding land or sprawl outward. Every new dwelling came through densification or construction on former industrial sites. And yet despite this, the median price of a home in Vancouver has risen to more than 10 times the median household income, the highest ratio in North America.

If adding supply were the cure, affordability should have improved. Instead, we’ve seen the opposite. The conclusion is inescapable: increasing housing supply does not automatically produce lower housing costs — at least not when the underlying cost of land is left to inflate unchecked.

A better prescription

Unfortunately, the Vancouver plan lacks any clear mechanism to suppress land price inflation or prevent it from being passed on to the tenant or owner.

There is nothing in it to keep new density from being captured as an unearned windfall profit to land speculators.

The plan fails to properly enlist tools available to redirect the unearned windfalls of rising land values toward the public good — funding social housing, opening avenues for new co-operative housing and permanently affordable rental homes. Those tools include:

Land value taxation. Vancouver already has a limited form of land tax in the form of its Community Amenity Contribution, a mechanism that for decades has captured a portion of the land value increases triggered by upzoning to fund public benefits benefits like affordable housing and parks. Yet in recent years, this tool has been weakened, its application diluted far below what is needed to counter runaway land price inflation.

Sadly, and strangely, the Vancouver ODP makes no mention of strengthening this existing tool to fund social benefits including permanently affordable housing.

If properly strengthened, land value taxation could provide a powerful and fair means of addressing our affordability crisis. By increasing the land tax rate and dedicating its proceeds to public land banking or the direct purchase of affordable housing, the city could ensure that future increases in land value benefit everyone, not just speculators.

Inclusionary zoning. The city already uses this tool, which requires developers to set aside a portion of new homes at below-market rents. When applied effectively, inclusionary zoning not only helps create more affordable housing, it also helps keep land prices from spiralling upward by discouraging speculation. But in Vancouver, this policy has been used too cautiously. Instead of being applied across the city, it’s often limited to a handful of large rezonings, and even then the “affordable” homes are priced far beyond the reach of most working households.

The current ODP makes no mention of strengthening such strategies, clinging instead to the discredited notion that simply adding supply will somehow make homes affordable — when, in practice, it has been associated with precisely the opposite.

The missing variable: The price of land

Yes, I fully expect the familiar objection that adding the costs of a raised land tax or requiring more non-market units in developments may make projects “not pencil out.” That concern is understandable but ultimately misplaced. Developers figuring the costs of the project know well a concept called land price residual — a term that exists because land values are, by definition, the flexible element in the equation.

When development costs, fees or taxes change, it is not construction or profit margins that must adjust first — it is the price of land itself.

If developers are made to contribute to affordable housing by paying a higher land tax that goes to fund other affordable projects, or by including more sub-market rentals in their own development, they may indeed not pencil out in the current market. Those projects may indeed pause as the market recalibrates. But over time, as expectations adjust downward, land prices will normalize to reflect the new economic reality. Developers will still make reasonable profits; they will simply pay less for land. That’s how markets work when the rules are clear and consistent.

Frankly, at this moment when the region faces an oversupply of expensive condos, a temporary slowdown is not a crisis — it’s an opportunity. It’s a moment to redirect the benefits of urban growth away from speculative windfalls and toward long-term public good: affordable housing, stable communities and a more sustainable urban economy.

It's the rising cost of dirt, not construction

For too long, housing discussions have focused on the cost of construction — materials, labour, permitting — while largely ignoring the cost of the land beneath. In Vancouver, as in most global cities, the majority of a home’s price now reflects land value, not the cost of the building itself. A modest bungalow in East Vancouver may be appraised at $2 million, but $1.8 million of that is for the dirt underfoot. The structure, often nearing the end of its life, adds very little to the valuation.

This dynamic is what economists once called land rent inflation. It occurs when land values rise faster than the productive economy — wages, for example — creating a wealth gap between those who own land and those who do not. As speculative demand increases, the price of land becomes detached from local earning potential. The home ceases to be a place to live and becomes, instead, a financial asset, traded for appreciation.

Every time a city announces new up-zoning or density incentives, that speculative engine revs higher. The promise of greater allowable floor space is quickly capitalized into higher land prices. This often happens long before a single unit is built. Developers must pay more to acquire land, and the resulting projects must sell or rent at higher prices to “pencil out.” In effect, the planning decision itself becomes the mechanism that drives unaffordability.

Vancouver’s history illustrates this vividly. After the 2010 approval of the Cambie Corridor Plan, which allowed mid-rise and high-rise residential development along a major transit line, land prices in the area doubled within two years. Modest single-family parcels that had once housed working families became speculative commodities, flipped multiple times before redevelopment even began. Today, the new homes built there sell at prices entirely out of reach for median earners. The result is not affordability, but displacement.

This is why the argument for “expanding housing choice in all neighbourhoods”— the language of the Vancouver plan — rings hollow. It presumes that the market, left to its own devices, will self-correct if only we add enough supply. Yet this view confuses the textbook logic of commodity markets with the complex reality of urban land markets.

Housing is not like cars or shoes. You can’t increase the supply of urban land. And when that finite resource becomes the primary vehicle for wealth accumulation, adding more units atop it does not change its speculative character. It intensifies it.

The filtering theory often invoked by pro-housing supply advocates — that new luxury units eventually “filter down” to become affordable as they age — has been disproven in cities like Vancouver. In practice, new construction sets a new benchmark for land value, raising prices across the board. Meanwhile, older rental stock is demolished or “renovicted,” removing genuinely affordable options from the market.

A path forward

None of this is to say that adding more density has no role. It does — but only when guided by clear, enforceable affordability objectives and non-market housing strategies. Upzoning, if applied without restraint, functions like a subsidy to landowners. But if linked to mechanisms that recapture the increase in land value, it can be a powerful tool for equity.

If we are serious about housing affordability for wage earners, we must understand that the market alone will not deliver it. The only period in Canadian history when housing was broadly affordable to working families — the decades following the Second World War — was also a period of robust public intervention. Co-operative and non-market housing made up nearly a third of new stock in Vancouver.

Vancouver once led in this domain. The city’s early social housing experiments at Champlain Heights, or the mixed-income model of False Creek South, demonstrated that it was possible to build vibrant, inclusive communities outside the logic of speculation and without direct taxpayer subsidy. We’ve since abandoned that tradition, replacing it with faith in market incentives and the rhetoric of “abundance.”

The challenge before us is not how to fit more people into the city; it’s how to ensure that the people who already make the city work — nurses, food service workers, teachers, carpenters, bus drivers — can still afford to live here.

The city’s invitation for public comments on the Vancouver Official Development Plan closes at midnight Wednesday.