Michael Campbell on housing affordability in Canada
The following is an excerpt from the VERICO Economic Report written by Michael Campbell
The key to understand is that there is a big difference between addressing the affordability problem through reducing demand versus increasing supply. So far politicians have focused on reducing demand by implementing the foreign buyers tax in Greater Vancouver and just recently in Toronto, (and proposed in Victoria), to the changes to mortgage eligibility rules that impact markets across the country.
Vancouver’s foreign buyers tax introduced last August, seems to have had a short term impact on sales of single detached homes given the dramatic reduction in activity but it hasn’t made single detached homes (or condos) more affordable for people looking to get in the market.
That’s because none of those actions get to the root of the problem, which is lack of supply in both Vancouver and Toronto.
Greater Vancouver is expected to add 1.2 million people in the next 23 years, which guarantees a massive housing shortfall. In Toronto, the discrepancy between population growth and new units coming on stream is even greater. This year it’s estimated that 80,000 more people will come into the Toronto area but only 1500 more units are scheduled to come on stream.
It is interesting that politicians don’t seem to understand that restricting demand is negative for the economy while trying to mitigate the affordability crisis by increasing supply encourages economic growth. Sadly, the vast majority of politicians have chosen to attack the demand side. That strategy won’t work and it will cost the economy.