The numbers don’t lie: The housing crisis is not caused by a supply shortage | CCPA
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Financialization, not demographics or supply, caused the cost of housing to explode in Canada.

the housing crisis has been created by banking practices that have directed excessive amounts of credit into the property market, and especially residential mortgages. As a result, buyers can bid prices up to ever-higher levels, resulting in a market where people must pay more for the same type of housing. Hence financialization can be defined as an inflationary tendency in the housing market that is induced jointly by banks’ desire to expand mortgage lending and buyers’ confidence that the value of their properties will rise.

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However, the image of a bubble bursting and prices returning to a more rational “equilibrium” level does not seem to apply to the housing market. Because housing is a necessity, people are willing to pay high prices for it. Bidding wars can therefore persist even when relative supply grows, so long as credit markets enable them.

  • sbv@sh.itjust.worksOPEnglish
    1·
    4 hours ago

    I agree with letting air out of the balloon slowly. That’s what rezoning and densification shoots to do.

    My experience with densification was seeing 600k houses (that I could almost afford) be replaced with 2-4 1.1m houses (that I could not afford).

    We should pursue densification and rezoning are positive for many reasons, but price isn’t one of them.

    But limiting available capital (ie: competing for mortgages)? In what world does that make sense?

    A world where prices are increasing faster than wages. We’ve had historically low interest rates since 2008, which has made borrowing large sums easier, meaning people can afford to pay more for houses.

    That was great for people who got in early: they could get cheap money that wouldn’t reduce their quality of life. But it means they could bid up the price of houses. Folks coming after had to pay higher and higher prices, until they did start to see a quality of life hit.