We Need More Dwellings

September 14, 2021 2:44 pm Published by

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In April of 2020, one month into the Covid experience when very little was certain, a good friend asked me if I thought it was a good time for his daughter to buy her first house. For the first time in my professional life, I flinched at that question. Long a disciple of the maxim that the best time to plant a tree was 20 years ago, and that the second-best time is today – until that moment I had never hesitated to encourage anyone interested in listening that getting into the real estate market at the earliest possible moment was sound advice. On this day, however, I hedged and ended up delivering what turned out to be poor advice, which was this:

Much is uncertain. The events that are about to unfold will almost certainly lead to expansion of the money supply, which can only lead to increased prices. But in the immediate term, it probably wouldnt hurt to see what the next 30 days bring. Oops.

Much has been said by more qualified real estate pundits than I about the effect of Covid on the housing market in Canada. Theories about more people working from home, foreign buyers, low-interestrates, and the role of real estate salespeople affecting the market receive almost daily coverage in the media and consequently have seeped into the current election campaign.

Depending on which side of the real estate ownership equation you find yourself, Canadians are either thrilled or devastated by the events of the last 18 months. The cost of securing a roof over your head whether rented or owned has increased at a rate outpacing both inflation and wages. Too many people are on the outside looking in.

All of these issues hold merit. Yes, being forced to stay home for an extended period of time made many people re-evaluate where they live, and changed their willingness to incur debt to make that home experience the best it can be. Yes, every home purchased by a foreign buyer is
one home that wont be sold to a Canadian buyer. Yes, interest rates remain at historic lows and yes, realtors are not blameless in our conduct. However, suggesting that the presence of a realtor somehow influences the price, is giving an awful lot of credit to our industry. It would be worth noting and remembering that when a house sale attracts twenty offers, nineteen buyers, (and nineteen realtors) will walk away disappointed. Changing the bidding process, or the realtors role in it, will not change the fact that one buyer got the house, and nineteen left empty-handed. And therein lies the problem. We have a supply issue. Everything else is smoke and mirrors and excuses.

Price is always a function of supply and demand. Within that relationship, there are endless influences on both, and I make no claims that anything is as simple and straightforward as it may first appear. Nonetheless, I present to you an anecdote that I think speaks to one of the
influences on the supply side of the equation. In June of 2012 on behalf of a client, I prepared an offer on a development ready parcel of land known locally as the Hart farm, fronting on Kortright Road, west of Gordon Street. My client was unsuccessful in his bid, and the property was sold to an experienced local builder/developer. That was 2012, and it was 2019 before these lands added to Guelphs housing supply. As I was not involved with the development process of this parcel, I will not attempt to speak as to what the hold-up may have been. However, as an interested party both professionally and personally in the local real estate market I will make this observation: no matter which side of the real estate equation you may find yourself on, taking over seven years for a development ready parcel of land to get to the shovel in the ground stage indicates the presence of a stifling influence on the supply side of the equation. Are the developers doing all they can to add to supply? One would think self-interest would be a heavy motivator to make every attempt to expedite the process. Is the city of Guelph doing all they can to add to the supply? Or do they even see that as their obligation?

The Clair Maltby Secondary Plan which, in laymans terms, is the process through which the city determines how a city will grow, and involves public input and plenty of studies (in this case to determine the future use of lands between Clair Road and Maltby road). The study was initiated in July of 2018 and is slated to conclude in 2022. Even if the study concludes on schedule, (unlikely), 4 years does not indicate a sense of urgency to address our housing crisis. When I make these points, I want to be clear that I am not advocating for the elimination of thoughtful city planning. What I do hope to articulate is the role a slow planning/approval mechanism plays in housing prices. The longer it takes to bring new product to market, the more expensive that product will be.

The housing debate has become impassioned in Canada, as it should be. The dream of homeownership needs to remain a reasonable and attainable goal for the next generation. But the solution will not be as simple as any of our federal political leaders will suggest in their
election platforms. Much will be made of the sale price of homes, with plenty of blame miscast on how we arrived at our current situation. Less focus on the successful bidder and more on the nineteen buyers left behind would solve a lot of problems. We need to build more dwellings.

Covid did not create this problem, it only shed a light on it.

Thanks for reading,

Jeff Neumann