You’ve no right to a house
An American friend of mine, also an economist, says that every time he visits Canada the one thing people everywhere want to talk about is housing prices. It’s like the U.S. before 2008, he says, which obviously is not a good sign. Another bad sign: a recent headline suggesting prospective house buyers should get in before it’s too late. Buy now or forever hold your cash, because if prices keep going the way they have been — up 25 to 30 per cent year over year in Toronto — the only way you’ll ever afford a house is to win the lottery.
When you hear headlines about “before it’s too late” what that actually means is that before long the buying is going to be really, really good. Why? Because it’s a strong leading indicator the bubble is about to burst. When it does, alas, incomes will fall, too — since homeowners, having suffered a big capital loss, will cut back on their spending, maybe a lot — so that despite reduced prices, even people who wisely waited may have trouble buying.
When people ask about housing prices, we economists don’t really have a lot to say. Any price, every price, comes from two things: supply and demand. If you want to do something about prices, the only way to have any lasting effect is to work on demand and supply, supply and demand.
Last week Margarita Wilkins of the University of Calgary’s School of Public Policy put out some interesting numbers on rental housing in Canada’s four major “metropolitan areas ,” a.k.a. “big cities”:
Since 1 990, Toronto’s population has risen 57 per cent, but its stock of rental apartments grew only five per cent.
Since 1990, Vancouver’s population is up 58 per cent. Its stock of rental housing has actually fallen three per cent.
Since 1 990, Calgary’s population is up by 96 per cent — almost double — yet its stock of rental units has fallen by 24 per cent.
The only major city where population growth and rental units have kept pace is Montreal, where people are up 25 per cent and rental units are up 24 per cent. Unfortunately, Ms. Wilkins’ note doesn’t try to explain t he diff erence between Montreal and the other three cities.
Data from StatCan via the Canada Mortgage and Housing Corp. show that although there’s more of every kind of housing in Toronto ( from single- detached homes, through row houses, high rises, and so on) renting has been drying up across all forms of housing. In particular, whereas in 1991 only 16.8 per cent of highrise units were owned, by 2011, 33.4 per cent were. That still left 360,000 such units that were rented, but the trend is clear. Ms. Wilkins argues the decline of renting is important because many lower-income people have trouble saving for home ownership and therefore rely on renting.
Economics says that if renting is l ess common, it’s because there are fewer would- be tenants or landlords or both.
In fact, incomes in Toronto have risen a lot since 1990, so more people may have the desire and ability to buy (especially if many of them do believe they have to get in before it’s too late).
But given the rules and regulations landlords have to comply with these days and the extended rights that have been given tenants by various regulatory bodies, including human rights commissions, who in his right mind would aspire to be a landlord? Like it or not, one way or another, if governments want there to be more landlords, they will have to go easier on them.
If current trends persist (which of course they almost never do) and if renting does become a historical curios- ity, what then happens to Toronto’s poor people? Will anyone outside the one per cent be able to live in Toronto — including all those middle-class Canadians who are so important to Justin Trudeau’s Liberals?
To begin with, in 2011, according to the CMHC website, there were almost two million housing units in Toronto, and many more than two million people lived in them. Not all those people are super-rich.
So things aren’t as hopeless as they’re often made to sound.
But beyond that, it’s true: Toronto will not magically find new land. So if incomes do continue to grow and if more and more people do persist in wanting to move to Toronto — whether from other countries or f rom other parts of this country — and if Toronto doesn’t become friendlier to developers who want to increase the number of housing units, whether to sell or to rent, then, sure, prices will rise over the long haul and poor people will get squeezed out.
But where does it say in the Charter of Rights that every Canadian has the constitutional right to live on the most desirable real estate in the country?
RENTING HAS BEEN DRYING UP ACROSS ALL FORMS OF HOUSING.