GuelphToday received the following letter on why we're having a housing crisis.
In recent years, the most common refrain I’ve heard on the state of housing in Canada has been that it’s a “supply issue,” pointing to the shortfall in our housing supply as the main driver of the crisis we find ourselves in. The extension of this is usually an assertion that the reason we’re in this crisis is a direct result of government interference and unnecessary limits and costs associated with new construction projects. A belief that, if we just gave it some space, the free market would produce enough housing for us all at a reasonable price and all would be well and good.
Most recently, I read an article here on GuelphToday about the discussion raised around cutting costs associated with expanding city Infrastructure for new development projects; using more public funds instead to support the activities of a private developer. Fortunately, from the comments, it seemed that people were overwhelmingly aware of the issue with that approach. However, the fact that this was brought forward at all (and that this was due to other municipalities making similar changes) shows how profoundly we misunderstand what’s happening with housing. The problem is not that we have too many barriers to construction, it’s that the housing market is unhealthy almost by definition.
At a very fundamental level, the free market depends on an assumption that consumers have the choice to refuse a purchase if the price on a good is too high. In most markets this is an obvious feature which makes sure that each individual transaction generates some bonus value for society. However, when it comes to necessities like housing, this is not the case. Instead, we are forced to pay whatever price the market has determined in order to stay safe and sheltered, generating a gap between the price you have to pay and the value it delivers to you. This leaves us with an incredibly dysfunctional market which will invariably return to a state of crisis.
To make things worse, large developers, property managers, and the like are constantly maintaining their opinion that regulation is at fault, saying that the problem is zoning laws, tenant law, or whatever else. Convincing the world, once again, that it’s a supply issue: that the market would work great if we were just able to build cheaper and evict faster. These companies already operate from a hugely advantaged position, being on the winning side of an inherently broken market. Still, they argue and lobby every day to break that market even further, so that they can profit off of more public funds and exploit all of our needs for shelter even further.
I hope that this discussion of broadly cutting development charges is dead in the water, but I can already hear the accusations of NIMBYism and complaints that we’re contributing to the housing crisis by not giving developers a free ticket. I can already hear the next discussion we’ll have about how we need more market freedom so it can finally work properly. The fact is that the market completely fails to efficiently build and allocate housing and these companies are abusing that to capture an outsized portion of our society’s wealth. The discussion we need to be having is not how we can over-fund this broken market. Instead we need to determine how to provide alternative housing options when the prices to rent or buy on the open market are more than someone should be spending on housing.
This would restore the choice to participate to consumers, thereby making our existing housing market far healthier. Until we do that, whatever poorly motivated subsidy and band-aid fixes we put into housing will simply be siphoned away by these companies as we all remain in crisis. It’s not a supply issue; it’s a market issue.
Liam Ramshaw
Guelph
