If there’s one overarching theme to this past year’s real estate market in Southern Ontario, it’s been the inadequacy of supply in keeping pace with surging demand from homebuyers. This most fundamental of economic laws has served as an engine to drive prices ever higher in our region since early last year. Frustrated buyers are feeling left behind, and these sentiments are, in turn, increasing public pressure on government at all levels to act to ensure that residents of average means aren’t pushed out of the housing market altogether.
Now, given the size of the registered building industry here in Southern Ontario, you could be forgiven for thinking that this lack of housing inventory comes down to developers and residential construction companies dragging their heels on new housing starts. While it’s true that supply chain issues stemming from the pandemic have limited the availability and increased the cost of many critical materials and components necessary in building a contemporary home, homebuilders have actually been stepping things up in Kitchener-Waterloo-Cambridge since the start of the pandemic. Single detached starts are up by 42% over last year’s figures according to data accumulated by CMHC, while overall starts have increased by 52% during the same period. Why then do we seem to be unequal to the task of supplying new housing options for a consumer base which is so clearly demanding it?
Last week, I commented on the widespread public backlash against Core Development Group following its announcement of their plan to buy up $1 Billion worth of Canadian residential real estate to repurpose as multi-unit rental properties. The timing of the announcement aside (which was terrible, given the climate of public frustration over the rising cost of housing), I tried to make the case that this sort of private sector investment has been going on at scale in Kitchener-Waterloo since the 1960s at the very latest. The key difference is the intensive nature of this single investment. Nevertheless, this news only served to turn the screws on government to be seen to be acting to protect Canadian consumers. And how do governments act? By legislating.
It won’t come as a surprise to many of the folks who pay attention to this blog that I’ve got an interest in the world of homebuilding. Aside from my full-time gig as a Realtor, since 2014 I’ve also been running a custom building company here in Waterloo Region. From these past seven years’ worth of experience, I know very well first-hand how much red tape is involved in getting a new housing development off the ground, and it’s maddening to watch how the standard government response to calls from the public for action on housing prices so often result in ineffective (and often downright counter-productive) regulation. Circling back to that basic law of economics with which I opened this article (supply and demand), it should be clear that if we really want housing costs to stabilize, we need to make more housing units available for purchase as quickly as we can while being sure to adhere to existing safe building codes and standards.
But rather than easing regulations and opening the door for increased housing supply, the government has instead tightened the rules on what Ontario homebuilders are able to construct and where – all in the name of an ‘inclusive’ housing strategy. By mandating such things as the number of bedrooms on a given location and the size of living spaces, and by attempting to dictate a market rate for the end product, governments are instead making homebuilders’ jobs much more difficult. I understand that we as a society have a responsibility to ensure that nobody is unjustly left behind, but in any political system aside from outright socialism, we must also recognize that builders are also in the trade to earn a living and to provide a livelihood for their own employees. Additionally, we must also recognize that by easing restrictions to make more housing inventory available to the average consumer, prices across the board will become more reasonable as supply catches up to demand. Such a scenario would provide welcome relief to frustrated homebuyers, offer a more productive environment to building companies, and generally contribute to a lasting and more stable Ontario housing market for everyone.
