Do we really need government intervention to cool the housing market?

Arguably second only to talking about the weather, talking about real estate has become our national pastime. Are we in a bubble? Will it burst? How can we cool the market? Where is everybody going to live? How involved should the government be? Will the market correct itself?

Unfortunately, much like the weather, a lot of it is beyond our control. Forces of nature will do what they do, and our GTA housing market has indeed become a force of nature. With every cover story on the magazine racks and expert panel we see on TV, the only thing that is becoming increasingly clear is that nobody knows where we’re headed, and we’re raising more questions than providing answers.

Toronto mayor John Tory met with federal and provincial finance ministers to discuss what can be done to rein in runaway prices and unsustainably low vacancy rates. Normally, we would wait to hear about the outcome of the meeting, but I’m gambling there won’t be any concrete answers.

Tory has said that three measures are needed to help Torontonians: a plan for affordable rental housing, better data as to how much of the market is being played by speculators both foreign and domestic, and the consideration of a tax on vacant homes. A clear and present danger is trying to formulate solutions when there isn’t enough data, and Tory has expressed concern that when looking for something to dampen the market, we need to understand what has been lighting it up, as well as expressing concern for the as-yet-unknowable consequences of introducing measures at all.

Trying to get a handle on it all seems like herding cats. Just when you have a hold on one, another one scoots past you.

The government has already tried introducing some measures, such as the new “stress-test” regulations for mortgages, in spite of not having all the information or a crystal ball to predict the fallout.

Time management experts and life coaches all have their version of the “SMART” goal: to give it any chance of success, a goal should be Specific, Measurable, Attainable, Relevant and Time-based. The government has yet to say what their actual goals even are, let alone provided a deadline to achieve them. Their “goals” are so nebulous as to not be goals at all.

Do they want home prices to drop or supply to increase? Or both? What average price are they looking for? We know (sort of) what’s at stake — the economy of the entire country. But what price are they willing to pay (or more accurately, have us pay) to achieve their goals, if they even knew what they were?

Plus, there’s a bigger question for those of us who are unabashed supporters of a free-market economy — should legislators even be involved in measures that are essentially designed to save us grown-ups from ourselves?

Investopedia.com defines a housing bubble as a “run-up in housing prices fueled by demand, speculation and exuberance … At some point, demand decreases or stagnates at the same time supply increases, resulting in a sharp drop in prices — and the bubble bursts.”

Much of the government’s talk has concerned addressing speculators and increasing supply, so are they actually trying to burst the bubble? How radical are they willing to be? Would they go so far as to cap sale prices? What’s a reasonable profit? What does it mean for supply if they drive builders away by lowering their margins?

According to OntarioContractors.com, it costs $150,000 to build your own 1,500 square foot, two-storey home, but that of course doesn’t include land, which can run you anywhere from about $30,000 for a rural patch way outside the city to many millions for a teardown in the core. But most people have little interest in taking on the unpleasantries of building a home themselves.

Once you factor in the costs undertaken by developers — not just development fees, but the time and staff it takes to jump through all our bureaucratic hoops, not to mention ongoing costs like marketing, office rent and administration — and the price of walking into a turn-key, brand-new home with no hassles doesn’t seem all that crazy.

Our political representatives are just that — representatives. They are there to represent our interests, not to pursue their own agendas. If we’re going to let them insert themselves into a free-market economy, we should first be forcing them to answer a whole bunch of questions, starting with this seemingly simple one: What is it, exactly, they’re trying to accomplish? Maybe the meeting of the minds offered some insight, but I’m not holding my breath.