528, 533, 550 Lancaster St W | 10, 12, 18, 30, 30 fl | U/C

[nms]

Deborah must be unaware that the only way to decrease prices is to decrease demand (which ain’t happening) or increase supply.

One can pretend to decrease prices by instituting price controls. Too many people confuse this with actually reducing prices. I read an article in the Globe and Mail which argued that “we can’t build our way out of high housing prices”. Unbelievable. The exact opposite of the truth, which is that building housing is pretty much the only way to reduce housing prices.

Except what about this scenario:

Housing is built and purchased by real estate investors who need to get a return on their investment. They now have a mortgage that must be covered at a monthly rate that far exceeds a rental rates that matches what those living in the Region can afford to pay. This unit sits empty or is rented at the inflated price while the investor waits for the value of the unit to climb before they sell it to another investor who now has an even bigger mortgage that has to covered.  The renter(s) who need a place to live are forced to pay higher than expected rent while not having the ability to save up money to purchase their own housing unit.

If someone purchases a housing unit to live in (condo, townhouse, duplex, single family etc), they remove themselves from the market and the demand for housing has dropped by one unit.  If the housing unit is instead purchased by an investor, either local to the area, or from somewhere else, there is still someone locally who would like to purchase a house to live in.  Relative to the number of real estate investors that exist in the world, there is a finite number of people looking to live in Waterloo Region. 

In that sense, with an infinite number of possible real estate investors, we cannot build our way out of high housing prices.  The only way to do so would require some pretty strict controls on the levers that control the available capital which could include (not that I am advocating any of these, I am just proposing options that could work in certain circumstances:
- much higher mortgage rates for mortgages that are not primary residences
- strict limits on foreign investment and/or the number of owners on a house
- limiting housing purchase to those who already live or work within a certain radius

A couple of scenarios that I am aware of in my immediate neighbourhood that have driven up prices and prevented owner-occupied units:
- informal real estate arrangements where 10+ investors purchase a unit but only one owner is listed on the deed (this gets around the cultural sensitivity to collecting interest)
- investors purchasing homes for their children whose name is put on the deed, thereby reaping the various "first-time homeowner" benefits and/or the "my child sold their primary residence so they will pay less tax). The children may or may not live in the house