It is wrong to say that housing affordability is a serious problem. The affordability crisis is not ONE problem, but many. Each of these problems requires diverse, yet complementary, solutions that engage government in very different ways.
Posted at 9:00 a.m.
Simplifying a lot, let us distinguish four socioeconomic categories, which experience relatively distinct situations.
Households with high incomes complain about the high cost of housing in good neighborhoods. Competition, speculation, stepping into my backyard are making houses and plexes there unaffordable, if not for them, at least for their children. Their reaction is often to fall back on other neighborhoods, which they gentrify.
Middle-income households, on the other hand, are frustrated in particular by the increase in the prices of houses and condos that they would like to buy as their first properties, an increase that forces them to settle far in the suburbs to live in a house or to be satisfied with a small accommodation to stay in town. As they form a large group of voters, these households receive generous support from governments, which subsidize their home ownership and build new community facilities and infrastructure on the outskirts.
Households with more modest incomes suffer from the increase in rents in their daily lives. Proper housing requires a drastic reduction in all other expenses. Less expensive housing is smaller, less well maintained and/or less well located, which poses health and accessibility problems. Rent control, income supplements, tax credits, the supply of social housing and sanitation control help, but only partially.
Finally, those who have no fixed abode, who camp in our streets, in makeshift shelters or in temporary accommodation experience difficulties that others find difficult to imagine. Their problem of access to housing is often compounded by health and mental health challenges. Despite all the efforts made, long-term solutions remain very difficult to find.
Each of these different housing affordability issues requires distinct solutions. For the better off, the solution to the high cost of housing does not come from public action; they have the necessary means to find accommodation in the private market, which will meet their needs. On the other hand, the authorities must ensure that this response will take a form that is in the public interest.
For the others, it must be said and repeated: the private sector cannot produce cheap housing. Everything new is expensive.
On the one hand, construction is not benefiting enough from the huge efficiency gains that have driven prices down in so many other industrial sectors. On the other hand, our expectations for space and equipment are high. You only have to look at what consumers want in kitchens and bathrooms today to realize that what is normal today would have been luxurious in the eyes of our ancestors.
Caught between the hammer of expensive construction and the anvil of high standards, we advocate deregulation to reduce the cost of middle-class housing. However, while increasing residential densities and speeding up approval processes are indeed likely to reduce production costs (and bring environmental benefits), these measures will not make housing affordable per se; they’ll just make it a little cheaper. At the same time, it is necessary to act on the cost of construction and on the expectations of buyers.
For less well-off households, there is no salvation without major government intervention. It takes either help to the stone (supply side) or help to the person (demand side).
The resurgence of social housing does not seem to be a possibility in the current political climate. But, whatever their use, public spending on housing will have no impact if they are not massive. However, for the moment, they are ridiculously modest compared to those devoted to the car (that is to say to roads and highways) and they largely benefit the middle class.
For poorer individuals or households, even greater public expenditure per person is needed, as well as existing social housing or alternative housing, i.e. units that do not meet class standards average in terms of private space, but which nevertheless offer a healthy and safe habitat.
Yes, more housing needs to be built to better balance supply and demand. But without wise regulation, private provision will not create quality living environments. Above all, without massive government spending, it will not meet the needs of a large part of the population.