Economic Analysis To Guide Land Use Policies?

Economic Analysis To Guide Land Use Policies?

on February 27 | in Ag News | by | with No Comments

Ontario Federation of Agriculture Commentary By Mark Reusser, OFA Executive Member

The Fraser Institute recently released a study titled An Economic Analysis of Rural Land Use Policies in Ontario. The study, authored by economists Glenn Fox and Yi Wang, poses that economic analysis has not been properly used to develop Ontario land use policies including the Greenbelt and Niagara Escarpment Plans.

The study makes the controversial assertion that Ontario’s agricultural land is not disappearing at the alarming rate that most of us believe. Although a side issue to the basic premise of the paper, the assertion that agricultural land is not being absorbed by urban expansion causes concern to farmers who regularly see urban encroachment onto farmland across Ontario.

Backing up the assertion, the study distinguishes between cropland and farmland, explaining that cropland is farmland less pasture, fallow, woodlots, wetlands and barnyards. According to the study, farmland decreased in acreage by 39.33% while cropland increased by 3.29% between 1951 and 2011.

The reality is that cropland and pasture are farmland and that since 1951 pasture in Ontario has been converted to cropland as the livestock industry contracted and urban boundaries covered cropland. The fact remains – farmable land in Ontario is being lost at a high rate – measurable in terms of hundreds of acres per day.

As urban expansion accelerates we are seeing a reduction in farmland and a reduction in woodlots and wetlands. Because much of the best farmland in Ontario surrounds the Greater Toronto Area (GTA) and is engulfed by urban expansion, more of Ontario’s less productive farmland, farther away from the GTA, is being farmed. The authors suggest this change in land use is benign because “woodland and wetlands are less central to the agricultural economy” and that “high productivity frees up agricultural land for other uses.”

While the basic economics may be sound, OFA disagrees with the assertion that woodlots and wetlands are not significant factors in the rural and agricultural economies. As ecosystems they are an invaluable part of Ontario’s landscape and a key to sustainability.

This controversy aside, the study’s fundamental assertion is that “land use policy could benefit from increased regard for critical economic concepts”. The authors suggest using market failure analysis with non-market failure analysis to determine the net benefit of a proposed policy. On this point we can agree. OFA has recognized a real need for the Ontario government to apply economic impact analysis to proposed regulation via the Open for Business regulatory review process. As those impacted by a significant number of policies and regulations, Ontario farmers need to know the real impacts of government action. And, we suggest, so should the government.

The study does not go so far as to suggest exactly how economic analysis can be applied. They do note some of the externalities of farmland designations that should be accounted for, such as higher housing costs, less land for transportation, etc. However, the study does not note the externalities of the lack of hard boundaries and density targets which include more cars, the need for more roads, longer commute times, less wildlife habitat, less biodiversity, fewer wetlands and reduced food security.

OFA believes the economic analysis on land use policy will be extremely complicated ? much more so than an analysis of other regulations. But it is worthy of consideration.

The study also offers possible alternatives to land use designation including tradable development rights, compensation for landowners affected by development and payment for ecological goods and services.

While the Fraser Institute’s conclusion that Ontario is not losing farmland to urbanization and that agricultural land is not at risk is fundamentally flawed, they have opened a worthwhile dialogue on land use planning, in particular, and generally on the way Ontario develops policy and regulation. OFA applauds the Institute and the authors of the study for this contribution.

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