One big bank is butting heads with real estate associations over how best to address affordability in one of the country’s priciest markets.
“What’s a week without a harangue on Toronto Housing?” Douglas Porter, chief economist with BMO mused in his latest economic report.
What’s a day? We ask.
Porter’s latest centred on affordability in Toronto; he argued increasing supply is not the issue.
“I spent the past week listening to presentations, sitting at roundtables, and reading opinion pieces where the received wisdom was that fixing the supply side is the answer to Toronto’s sizzling housing market. I respectfully disagree,” Porter wrote. “No doubt, policymakers should do what they can to alleviate supply constraints, and a shortage of listings is helping send prices skyward.
“But, history teaches us that in an overheated market, or what some (ahem) may even call a bubble, we have to look first at cooling demand,” he continued. “Otherwise, with prices screaming higher by 20%-to-30% per year, any moderate increase in housing supply will be swallowed whole in the great maw of raging demand.”
He expounds that argument by asking – rhetorically – if the right course of action with past bubbles, including the dot-com boom and America’s own housing bubble, would have been to increase supply.
“In each and every case the answer is an emphatic “no!”—the problem was overly exuberant demand,” Porter wrote. “This is not to suggest that Toronto housing is in the same league as those big bubbles, but we don’t want to get anywhere close to those episodes.”
That opinion flies in the face of recent diatribes by the various real estate associations.
“The provincial government should work with municipalities and related industry stakeholders to look at ways in which the supply of housing could be increased, including, potentially revisiting land use designations in built-up areas to allow for a broader array of home types to be built, streamlining the development approvals process, streamlining the permit process, and examining ways to incentivize land owners to develop," TREB President Larry Cerqua said last month.
It’s a stance echoed by the provincial board as well.
“The Canadian dream of home ownership is at risk in the GTA. This is the year for provincial and municipal governments to step up with solutions to ensure the dream of home ownership does not slip away from future generations,” Tim Hudak, Ontario Real Estate Association, recently said. “The housing supply issue is a real problem, but the solutions exist. We need the government to get real estate experts together on this issue, to hammer out a plan for putting more homes on the market and making home ownership more affordable for young families and first-time buyers.”
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