“Supply!” they scream. “Give us housing supply! Only supply can quench the fires of this booming market, only supply can finally douse the raging inferno of ever-increasing home prices.”
You hear these cries loudest from the developers, of course, often while they claim just as loudly that it is only politicians who are holding them back from simply building us out of this mess.
Not so fast.
First off, let me admit that, all other things being equal, boosting the housing supply dramatically would bring down prices. If we could magically create 200,000 or 300,000 extra units of housing overnight, nicely divided between condos, rentals, single family housing, and affordable and seniors housing, yeah, that would have an impact.
And yes, there are things that various municipal governments could do to free up more land for development – and that’s without touching the ALR.
But (and you knew there would be a “but”) actually adding that much supply is more complicated than that.
First of all, we don’t actually know how much demand is really out there.
We know how much money people are willing to put down for a condo or a house, sure. But we still have no idea how many people buying pre-sale condos actually intend to live in them, and how many are just speculators planning to flip them.
We don’t know how much money flowed into the Metro Vancouver real estate market from crooks looking for somewhere to launder their money – but we know millions of dirty dollars were looking for somewhere to hide.
We don’t even know how many of those speculators and crooks have been leaving their homes empty, as investments, but we know there are definitely some homes that have never been lived in, or are empty as they are flipped over and over for years.
But for now, let’s ignore all of that. Dump enough supply, and we can swamp the speculators, forcing them to sell or rent their houses, right?
Okay, but how, exactly, are we going to add even more supply? Who’s going to build all these houses?
B.C. currently has the lowest unemployment rate in the country, at 4.8 per cent. The unemployment rate in the southwest region, which includes Metro Vancouver, is even lower at 4.4 per cent. Drive around and you’ll still see signs in fast food restaurant windows and retail stores screaming HELP WANTED. It’s hard to find people to wash dishes, sell clothes, wait tables, or do anything on the low-wage end of the scale.
That’s a good thing, but it means we have a labour crunch.
A year ago, when the Langley Advance did its Housing Crunch series, developers told us there were already shortages in some skilled trades. Slashing red tape at city halls won’t do anything to fix that.
We’ve seen wages rising everywhere, and construction is no exception. The average wage in B.C. for construction workers is $29.18 an hour as of May, and it’s been going up.
Assuming we could actually rev up the real estate market even more, where would we get the skilled trades from, exactly? And assuming that we can lure them away from the rest of Canada or even from abroad, how much are we going to have to pay them, and how much would that add to the price of a home?
How about the question of whether or not we’re building enough homes now?
According to Metro Vancouver, last year 21,806 housing units were completed. That’s a lot, a big increase over both the five-year construction average (18,685) and the 10-year average (17,571).
The Langleys did their part, adding 1,880 housing units. With an average occupancy rate of 2.8 people per dwelling, that’s room for about 5,264 people in the Langleys last year. The Canadian average is 2.4 people per dwelling, so we added space for approximately 52,000 people to Metro Vancouver.
Is that enough housing?
Well, it should be, according to the Real Estate Board of Greater Vancouver. A few years back, they estimated 30,000 new residents would arrive in the Lower Mainland each year. So we should be okay!
Well, 2017 was a good year for building. In 2016, we built just 18,148 housing units in Metro.
That adds up to room for more than 43,000 people.
These are, admittedly, back of the envelope calculations. But the core numbers are real. We are building a lot of homes already. If we’re building the wrong kind, maybe industry would like to take a look at its practices?
Supply? We’ve got a fair bit. We could get more, but it would be costly.
Unfortunately, I think the only thing to do now is to wait. Either there really is a lot of organic demand for housing, and a dire lack of supply, or there isn’t.
We’ll find out which, soon enough.