Housing costs

[ijmorlan]

You are partially right about your first statement, but what about when local wages have become completely detached from the cost of housing? If you look at the government reported incomes for any somewhat large city in Canada, and compare it to the cost of housing... it just doesn't make sense. I am more than double the median individual income, and my spouse is above the median as well, yet all we can look at in the housing market is the bottom ~15%. I don't think there is enough local individual wealth to make up for this difference from wages.

If some people don’t have enough housing, they need more. If construction costs are preventing them from obtaining housing, then increasing wages may allow them to (indirectly) fund the cost of building more. If it’s just not possible to build more housing, however, it doesn’t matter how high their wages go; all the higher wages will do is bid up the cost of the existing stock.

We have to be careful about how we talk about this because to many people the most obvious way to allow more construction is to eliminate agricultural zoning and allow the suburbs to spread forever, which would be (already is) an environmental, health, and economic disaster.

Better ways to allow more construction are to dramatically loosen the zoning code and eliminate pointless restrictions. It’s simply nobody’s business whether I build a single-family house, semi-detached, or townhouses on a big-enough plot of land. Some people might not like townhouses coming into their nice suburb full of gated mansions, but part of living in a city is that one will generally not approve of everything that happens in the city so that is just tough. Similarly, if apartments built into upper floors of a strip mall will rent, it’s nobody’s business to say that they shouldn’t be built there. It’s easy to wander around Google aerial photo view and find places all over the city where hundreds or even thousands of living spaces could be built without even knocking down an existing building or tree.

This is why Toronto house prices are so crazy. In most of the city it is illegal to build at a higher density than single-family houses. So the wealthiest people pay whatever they need for the existing houses and everybody else has to try to find apartments being built in the few places where higher density is permitted. Same thing in Vancouver, except to an even more absurd extent.

In particular, rent controls or other price controls cannot solve the problem; all they do is make it so that instead of needing to have lots of money, a prospective occupant needs connections, or a great resume, or be willing to pay a bribe (OK, that might imply lots of money, but it’s a complicated combination of money and willingness to engage with a corrupt system), or some such. Price controls cannot actually house more people, only construction can do that.