In the early 80's I bought a two storey pile of bricks just off Exhibition Park in Guelph. The price was just over 50 thousand, or roughly two times my income.
I couldn't afford that house now. In the ten years I owned it, it tripled in value. The next ten years, it tripled again... and today it's in the 800-900 thousand range.
Real estate inflation gives real estate owners an inflated sense of economic security. At the same time, it fosters resentment among the ever-growing slice of the populace who find themselves excluded from the market.
Real estate inflation is a simple case study in that staple of Economics 101, the law of supply and demand. Everything government has done thus far to supposedly alleviate our affordable housing crisis, has goosed the demand side, ensuring that prices will continue to rise. This does not address the problem, nor does it arrest the growth of that aforementioned resentful segment. All it does is give a few marginally qualified folks a leg up to get into the market.
This year Canada will see about 220,000 new homes built. Between legal immigrants (target, 350,000/yr.), foreign students, foreign workers, and refugees, we'll see somewhere around a million new folks looking for a place to live in the coming year. While that looks a lot like "that's only five beds per new build," bear in mind that most new builds today are studio to one bed condo apartments.
The law of supply and demand tells us we have two options if we want to ease the affordable housing crisis in Canada.
1. Slow population growth (demand).
2. Intervene on the supply side.
Either way, the situation can only be resolved via government leadership. Otherwise, we'll keep going down the road of increased homelessness, increased resentment from the ever-growing population of the excluded, and increasing hostility towards immigrants.
That's not a recipe for social cohesion.
So where is the leadership?
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