Market urbanists such as myself tend to believe that if a place suffers from absurdly high housing prices, there is probably not enough new housing being built to accommodate rising demand.
A recent paper argues that inadequate supply is not a significant part of the problem in high-cost Vancouver, primarily because the number of housing units has kept up with the number of people (p. 11) It seems to me, however, that this theory overlooks people priced out of Vancouver, thus understating demand.
To put the matter in hypothetical form: suppose that in 1991, Nimbytown had 20,000 people and 10,000 housing units. In 2011, Nimbytown had 30,000 people and 15,000 housing units; however, 30,000 more people are priced out of Nimbytown. Obviously, it would be silly to say that housing is keeping up with demand.
Vancouver is, to be fair, adding housing supply- but at about the same pace it did 20 years ago. From 1991-95, Metro Vancouver added about 18,000 housing starts per year, ranging from just over 14,000 in 1991 to just over 21,000 in 1993. Housing starts then nosedived, not reaching the 20,000 level until 2007. Between 2007 and 2011, the region averaged about 16,000 housing starts per year, slightly fewer than in the 1990s. In a region with a stagnant population, this would be a strong performance. But from 1991 to 2011, the number of Vancouver households grew by over 40 percent, from just over 600,000 to almost 900,000. So should a region with 900,000 households have the same number of housing starts as one with 600,000? I don’t think so.
The paper blames Chinese investors for Vancouver’s high housing prices- and logically, any increase in demand should, other things being equal, increase housing costs. But the author of the paper has written elsewhere:
There is very little good, government-collected data on the question of foreign ownership. No one disagrees on this point. This is to the discredit of federal and provincial authorities, who for years resisted gathering rigorous data, even though Mark Carney, then governor of the Bank of Canada, warned quite clearly in 2011 that the Vancouver real estate market was being affected by money from East Asia. The fact that five or six years could pass without any effort to collect data is stunning and can’t help but stimulate a tinge of conspiratorial thinking.
But there seems to me to be a contradiction between arguing that (1) Vancouver is expensive because it is being overwhelmed by a tidal wave of foreign demand and (2) there really isn’t enough data to determine whether there’s a tidal wave of foreign demand. So we really don’t know very much about the demand-side element of housing costs in Vancouver.
