Maybe it’s time to cut the red tape to build more new homes

Using the Houston area for comparison, the Toronto Sun this week says that the government needs to be freeing up housing supply rather than trying to curb foreign demand. Both CMAs house about 6.5 million people, the paper says, but Houston planners approved almost 64,000 units in 2014 compared to just 36,000 in the Toronto and Oshawa census metro areas. Red tape at city hall, it says, is responsible for our failure to simply issue more building permits.

A per-unit regulations compliance cost of $50,000, long approval timelines when rezoning is required (which adds more than 4 months to the approvals process) and NIMBY opposition are other barriers.

Among the province’s 16 measures approved in the spring was an innocuous one for a Housing Supply Team to work with the development industry and municipalities to “identify opportunities to streamline the development approvals process” — vague enough to be meaningless. I can’t recall having heard anything about it since.

The “laws” of supply and demand would tell you that when you have a large supply of something, prices decline, and if you have a limited supply, prices increase. But housing is complicated. You can have great supply coupled with great demand, and still watch prices climb. Location is always a big factor in real estate, and city properties (like waterfront properties) never go out of style.

Of course, oversupply is a risk when you’re planning for developments that won’t sell for a few years. Builders have to balance what they think will happen with current market conditions, take their best guess and take a plunge. But that’s their job.

More important than maintaining prices for those who are still looking for profitability is helping people buy homes. We haven’t tried this thing yet where we clear away some red tape and let builders build — maybe it’s time.

The least affordable market

The sky may be falling, according to the Globe and Mail as their Michael Babad set to analyzing a clutch of recent reports.

We’re in the midst of the least affordable market in nearly a decade according to the latest National Bank of Canada affordability study, based on mortgage payments as a percentage of income. It now takes over 39 months to save for a down payment on a “representative home,” up from 35.3 months only a year ago. But that’s a national average. Dwellers of Quebec City are looking at just 25.5 months; we Torontonians at 105.6 and Vancouverites at 127.5 months.

Just let that sink in for a moment.

Here, that’s nearly nine years. The average since 2000 has been 38.1. Now we’re also looking at a (minor for now) hike in interest rates, which can lead to a downturn in consumer spending; a BCA Research study says that’s a “highly probable event” now rather than a risk. Fiscal policy, warns the group’s VP Jonathan LaBerge, begins in 2019 to become a “persistent drag on growth.”

A third factor at work would be a sea change in the inflow of foreign money, perhaps as a response to regulatory changes like those released in April.

With some pundits believing that the U.S. could be facing a recession in the next couple of years, LaBerge said, “Clearly there are additional macro factors that could trigger the onset of a major debt payback period in Canada, and chief among these would be the next U.S. or global recession.”

He said such an event could trigger a prolonged period of stagnant growth in Canada, if not an active “deleveraging event.”

As always, there is no accurately predicting these things, but there’s at least one thing you can do — take extra steps to manage your debt.