Four years ago I started a five-part series about housing affordability in Guelph with an article about the rental housing situation. It was pretty popular with readers, so I have been tempted to come back to the problem. But while I've seen evidence that the "powers that be" have become more aware of the issue (it was an issue in the last federal election), I've yet to see much evidence of anyone wanting to deal with the underlying causes---which I tried to document in those articles. But last week the Ontario provincial government finally published a paper that does seem to "get it". Because of that, I've done some rummaging through various other reports and thought I'd do a few posts about it as a way of refreshing my readers about what is really at the root of our present crisis before I talk about this new report.
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| Henry David Thoreau, c/o Wiki Media |
There are a thousand hacking at the branches of evil to one who is striking at the root.
As I see it, I have heard a lot about the branches, leaves, and, stem of our housing crisis from the news, politicians, and, my friends. These would be things like:
- landlords converting units to Air BNB
- offshore investors using real estate as a safe place to park capital
- greedy landlords that charge whatever they can get away with
- crime bosses laundering ill-gotten gains
- real estate speculators "flipping" houses
- real estate agents that use "blind bidding" to start bidding wars
I have no doubt at all that all of the above have some impact on housing costs, but to my way of thinking these aren't causes of high housing prices, they are instead symptoms. As such they are the leaves, branches, and, stem of our housing crisis---but not the roots of it.
If there was a glut of housing in Canada, landlords would have to compete for good tenants---which means they wouldn't rent out units as "party Air BNB"s because that would drive away other hard-to-replace tenants. Nor would offshore investors or the mob be buying housing, because it wouldn't be such a safe investment. Moreover, house flipping wouldn't make any sense because speculators wouldn't be able to count on properties always increasing in value. Finally, with a lot of houses on the market and buyers looking for a deal---instead of just anything they can afford---no one would deal with Real Estate agents who tried to start bidding wars.
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The above are just distractions. The real problem with housing is really simple: there just isn't enough of it being built to service the demand. If there were, then prices wouldn't be exploding all over the country.
I have talked to several city Councillors about this and the answer I get from them was that there's nothing they can do. They all said the only solution would be if the Federal and Provincial governments would shower cities with money to build more social housing.
Pardon my cynical ears, but I don't believe that's true. I got my first whiff of this when I interviewed a provincial cabinet minister who said that cities could build a lot more housing, but they don't want to because most municipal voters don't want intensification in their neighbourhoods. And, most city Councillors don't want to alienate voters, because they fear that they won't get re-elected. As a result, they refuse to allow developers to build higher density housing in existing suburban sprawl. Excuses get thrown around, but the fact is that if the voters don't want an apartment building in their neighbourhood, politicians won't force them to take it. Since most of the land in our cities---including Guelph---is full of single family, fully-detached homes, this means nowhere near enough housing has been built for decades.
The result of this endemic political cowardice has been the creation of what are called "yellow belts" (does the colour refer to the cowardice of municipal politicians?) in cities all over North America. If you've never heard of this, take a look at this nifty video from TVO.
The Yellow Belt is important to understand. Unfortunately, most people haven't because they are deep in denial about an issue that was first articulated in my youth: the limits to growth.
It's a simple idea, really. The human population keeps growing but the earth does not. Of course Canada has a lot of land, but as we all know, most of it is rock, swamp, and, tundra. That means when we do find good land to grow food, it is a really good idea that we don't pave it over to build subdivisions. That's why we have The Green Belt and The Places to Grow Act to limit sprawl.
Under these two guiding pieces of legislation, the job of Ontario city Councils was clear: they needed to encourage intensification of housing to deal with population increases. Unfortunately, most elected officials and voters responded to this legislation by having a temper tantrum every time someone suggested that they should actually allow an apartment building in an existing subdivision. This meant that the only places any developer could build tended to be in a small number of sacrifice zones (like downtown or along Gordon St. in Guelph), where they would build towers. Even there, developers found so much opposition that they never could build big enough to have the economies of scale necessary to actually push down the price of individual units.
Developers weren't allowed to build enough housing to actually approach demand, which means that they only build for the well-off who can afford to pay big prices. (After all, if you are only allowed to make and sell ten watches, what are you going to produce, Timex or Rolex?) This leaves lots of demand on the table, which resulted in existing run-down homes being bought and fixed-up by people (like me) who couldn't afford a ridiculously over-priced condo (even if it comes with a granite countertop and stainless steel fridge). This refusal to fix bad zoning resulted not only in no new housing being built for working and middle-class people---it also resulted in old, run-down, cheaper rental housing being taken off the market too. (This is called "gentrification".) That left the poor with fewer and fewer housing options. Gentrification means that the only option left for the poor is the social housing that the province and feds are supposed to provide, but chronically under-fund. (Which is probably why I've had Councillors believe more money from the feds is the only "viable solution" to the housing crisis.)
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I'm really annoyed about the way our society has created this stupid housing mess. If you agree---and you can afford it---why not subscribe? You won't hear this sort of analysis from the mainstream press and if people of good will won't support "alternative" voices, they won't get heard. Patreon and Paypal make it easy to support with small monthly payments.
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When I'm given the time to argue the above case to friends, I often get the response that they don't want Guelph to get any bigger, so why doesn't Council just stop people from moving here? I generally see this as an evasion, simply because I hope that everyone realizes that Council lacks the authority to set up armed check points to keep people out. But it is important to deal with this issue in some detail because the Home Builder's Association has identified this as an important reason why housing has become so expensive.
Escalating prices always have two causes, supply and demand. The decision of city Councils all over North America to cut supply through idiotic planning has been made much worse because of the dramatic increase in demand that came about because of immigration to Southern Ontario. A report published in 2021 by the Smart Prosperity Institute and titled Baby Needs a New Home: Projecting Ontario's Growing Number of Families and Their Housing Needs points out that
Ontario’s population grew by nearly one million people in the five years between July 1, 2016, and June 30, 2021, after growing by just over 600,000 persons in the previous five years. This dramatically increased the demand for housing, while the rate at which new homes were built stayed virtually unchanged. This increased demand, from young Ontarians that have started to, or would like to start, a family with no change in supply, contributed to rising home prices and a shortage of family-friendly housing across Southern Ontario before the pandemic.
We estimate that 413,753 households should have been formed, but only 349,039 new housing units, of all types, were built over those five years. This difference, of 64,714 households, can be thought of as the supply gap of housing over the period.
Page iii of Baby Needs a New Home
The impact of population growth came home to me personally last summer. For reasons I won't go into, it appears that in the next few years I am going to have to sell my present home and purchase a new one. Looking at the cost of housing in Guelph, it seems clear to me that I cannot afford as nice a place as I presently have---let alone one a little bit bigger. (My wife is now living with me and we both agree a little more room would be nice.)
With the above in mind, last summer we were looking at communities in Ontario where we could afford to live. We had a couple design criteria in mind---namely we want some place where we can live without a car, so public transit and a Via Rail station are mandatory. What we found that seemed to be within our means were Windsor, Brockville, and, Cornwall.
I suspected that the reason why these cities/towns seemed relatively affordable was because they are too far from Toronto to commute and are not doing too well economically---so most people don't want move there. I had these ideas confirmed by Baby Needs a New Home because it gives a population break-down for just about every community in Ontario. Here're the stats from Baby plus the most recent census data from 2021. (I couldn't find 2021 data for Brockville, so I left it out.)
- City: Population by 2001: & 2021: Percentage of change
- Cornwall: 47,462 & 47,845 increase of .8%
- Windsor: 218,222 & 229,660 increase of 5%
- Guelph: 110,819 & 143,740 increase of 30%
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This raises the question of just exactly who are these people who want to move here? Look at the following bar graph.
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| From Baby Needs A New Home, by the Smart Prosperity Institute |
As you can see, there has been a substantial acceleration in Ontario's population growth starting in 2016. The blue parts of the graph could show internal factors---births and people moving here from other provinces. There is an increase, but not huge. There also seems to be a similarly small increase in immigration, as the orange parts of the bar. What really stands out, however, are the beige parts that are described as "non-permanent residents".
The report suggests that most of these people are foreign students who have been allowed to stay a bit longer in Canada to continue work because of some relatively new legislation. These people also need places to live, so they too are competing with other people for living space.
Baby Needs a New Home identifies the Post-Graduation Work Permit Program (PGWPP) as the main culprit behind the increase in demand. (I'm not entirely sure if this makes sense, but since this is peripheral to the issue of this article, I'll just take it at face value.) In a nutshell, it is a program that allows students who are taking full time study at a Canadian educational institution the option of working after graduation in order to gain in-Canada experience while they are applying to get a work permit in Canada.
Let's give a hypothetical example. Someone from another country gets into a Canadian graduate program in engineering. This is good news for universities, because he gets money from a corporation that wants him to research something for them---and the university gets bucks from the grant to fund their labs. While working here, this guy decides that he likes the place, so he applies to immigrate or at least work here for a while. Unfortunately, it's hard for immigrants looking for a job to get credit for experience outside of Canada, though. So this program allows people who've already applied for residency, and who've just graduated from a Canadian school, to work immediately after graduation so they can get Canadian work experience. This means that no one will "make strange" at their credentials and work experience and companies can get the really skilled, top-notch employees they need to be successful.
The federal government considers this a "win" for the country, because the Canadian economy benefits from the skilled workers it can poach from other nations. The only problem is, however, that this new slug of immigrants need to have housing, and the province and municipalities didn't take this influx of new people into account when planning new housing developments. As a result, they've dramatically under-estimated the growth in need---when they were already failing to provide enough for the existing sources of growth. The result is "another fine mess" that we have gotten ourselves into!
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Speaking of "fine messes", as I was writing today, I heard that the Prime Minister is going to invoke the Emergency Measures legislation. This effectively puts the nation under martial law and allows him to order whatever he needs to do to end this pandemic of blockades and occupations. From what I can see, it needs to be done. I have to admit that I'm more than a little freaked-out by the level of support that these anti-vaxx yahoos are getting. But it does seem to me that the vast majority of Canadians are against them, and will support our elected officials if they have to get tough.
Maybe when the dust clears and we have a better idea of what is really going on, I'll write an article on the subject. Until then, try not to get too upset about what is going on. I recommend a good comedy---.
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