Increasing housing supply is the simplest, and best, solution

Supply scepticism is one of the major factors fuelling the affordability crisis, study says

Increasing housing supply is the simplest, and best, solution

Injecting new supply into Canada’s overheated residential markets might seem an intuitive answer to the crisis, but a combination of federal-level funding issues and housing authorities’ apparent resistance to the idea has made the solution easier said than done.

However, a recent study published by the Housing Policy Debate journal has implied that supply scepticism is at least a significant contributor to the problem, based on analysis of almost 100 analyses that have looked into the topic and its various manifestations nationwide.

“We ultimately conclude, from both theory and empirical evidence, that adding new homes moderates price increases and therefore makes housing more affordable to low- and moderate-income families,” wrote Vicki Been and her co-authors, as quoted by the Haider-Moranis Bulletin.

The study also cited unreasonably restrictive land-use rules and illogical zoning decisions in multiple markets as factors that should share the blame.

“Residents of neighbourhoods that predominantly comprise single-family homes oppose any attempt to densify and hence restrict the supply of new housing,” the Bulletin explained. “On the other side are those trying to impose arbitrarily high development densities in the outer suburbs and beyond that are inconsistent with demand and land economics. The result is the same: a lack of sufficient housing supply.”

Read more: Federal investment in housing supply to reach nearly $115M

Moreover, the supply additions in recent years have tended towards being valued at market prices, which might still push out considerable portions of the would-be buying segment. The report thus urged governments at all levels to work to “to ensure that supply is added at prices affordable to a range of incomes.”

“The challenge in housing affordability is to ensure that new housing is built to meet the shelter needs across the income spectrum and not just for high-income earners. It is true that even housing built to draw market prices and rents over time, through market filtering, will improve affordability for low-income earners. However, the filtering process takes time.”

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