Will ’22 bring fix to low housing supply?

This year will bring both provincial and municipal elections in Ontario. In the GTA, with housing inventories at near-historic lows, high demand for homes and rapid price escalation, housing supply and affordability will rank alongside COVID-19 recovery as defining election issues.

Insufficient housing supply exacerbates inequality, places a drag on economic growth and threatens the collective quality of life in the region.

Voters should demand meaningful platforms and policy ideas from candidates and parties.

After almost a decade of debate, the broad consensus is that lack of housing supply is driving the GTA’s affordability challenge. A 2021 Scotiabank report found that Canada had the lowest number of housing units per 1,000 people among G7 countries.

In the GTA, the causes of the supply dilemma are multifactorial and complex, but are rooted in constrained land supply, lengthy building times driven by unnecessarily complicated and bureaucratic approval processes, and a tight supply of skilled labour.

Layered on top of this is consistently strong demand for homes as a result of rapid population growth due to intra-provincial and rural-to-urban migration and immigration. This has resulted in an intense competition for limited housing supply, which in turn drives up prices.

Fees and taxes charged by all three levels of government also add costs, amounting to 25 per cent of the cost of a new housing unit in the GTA.

Solutions tend to be divided into two camps: those focusing on demand and those that focus on supply. Any long-term solution must be firmly rooted in supply, rather than the tax-and-restrict approaches of trying to cool demand for housing.

Past attempts to cool demand have had short-term, muted impacts at best.

Burdensome stress tests have kept young families off the property ladder, have caused difficulty in mortgage renewals for countless home buyers, and pushed those facing challenges to more expensive, higher-risk sources of financing.

Foreign buyer taxes, another way governments have attempted to cool demand, have yielded paltry returns to the government coffers and negligible impacts on housing affordability because the true cause of the issue is supply constraints, not foreign buyers.

Voters should be wary of political candidates who claim that adding taxes or other restrictions will increase affordability.

Instead, voters should be looking for candidates and parties to put forward solutions that will increase housing supply by addressing the root causes of land supply and approval times, and solutions that cap or lower the already large tax burden placed on new homes and homeowners.

Insufficient housing supply exacerbates inequality, places a drag on economic growth and threatens the collective quality of life in the region