News: Ontario’s politicians tout the same fix; but experts say it’s not that simple
- Shael Soberano
- Jun 2, 2022
- 3 min read
In this week's Industry News (Week of 30 May 2022).
Ontario’s politicians all tout the same fix for the housing crisis: supply, supply, supply. But experts say it’s not that simple | Toronto Star
It’s an idea we’ve heard throughout this election campaign — if you build more homes, housing will become more affordable in the GTA. But there are dissenting opinions on how many homes we need and questions about whether flooding the market with more supply would actually bring the price of renting or owning within reach of more people.
It’s an attractive idea but it’s an illusion, says Luisa Sotomayor, associate professor at York University’s Faculty of Environmental and Urban Change. "It’s always politically effective to oversimplify a message and this is what’s happening here," Sotomayor said. "It is never as simple as supply and demand."
Based on the platforms of all the major provincial parties, the next Ontario government is likely to begin tackling the housing crisis starting from the most basic economic concept of supply and demand. But experts warn the housing affordability challenge demands a more nuanced understanding of the problem and solutions.
"The amount of housing that needs to be built to have an impact on the affordability of the market is too high," she said She cites a 2019 British study by the UK Collaborative Centre for Housing Evidence that reported computer modelling showed 1 per cent increase in the total housing stock would lower home prices between only 1.5 and 2 per cent.
"Existing homeowners see (housing) as an asset and this is their retirement and they’re interested in keeping prices high. Also, the real estate industry benefits; the construction industry; the suppliers; the developers … If prices are actually being impacted, the natural response by the industry would be to slow down the rate of construction," said Sotomayor.
Joel Roberts, a PhD candidate whose dissertation at York’s department of social and political thought, focuses on the drivers of rising Canadian home prices. "You can build all the expensive condos or suburban detached homes you like, it won’t make housing more affordable. What we need is a targeted approach that increases the supply of affordable housing options in particular — that means supporting non-profit organizations, community land trusts, social housing, or regulating the private market through tools like inclusionary zoning." He argues homes aren’t like other consumer goods because they are an investment or asset. "Asset prices are subject to different dynamics," says Roberts.
In January, Scotiabank reported that Ontario needs 650,000 more homes to address its share of a 1.8-million Canadian shortfall. That would bring our supply in line with other G7 nations. But Bank of Montreal chief economist Doug Porter noted that, while Canada’s per capita housing supply is similar to the U.S., our prices are about 60 percent higher. Independent economist Will Dunning is firmly in the camp of those who believe a supply shortage has played a significant role in driving up home prices. He says, "Lower interest rates have made it possible for people to pay higher prices but it’s the lack of housing that has caused prices to rise."
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Shael Soberano, CFA Konfidis Inc. Chief Investment Officer
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