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OPINION
SUPPLY & DEMAND Why new development in Niagara is not the cause of our affordable housing issues
BY MARLEY “MK” KEYNES Whenever the topic of affordable housing is raised the inevitable question that arises is “how can the government fix this problem?” Solutions range from mandating a set number of affordable units in each new housing development, government subsidies to build housing and of course a very popular suggestion from those without economic background is rent control. One of the simpler solutions, however, is the exact opposite of what many people are claiming to be the cause. Quite simply, we need to build more homes. You might be thinking, that’s crazy – all the new development in Niagara has driven prices up. Time and time again we see projects that are never approved or are stalled so frequently with red tape that they are abandoned in the planning stages which is creating a rise in housing costs for the long term. The housing market is just that, a market. And market rules do apply, more specifically the rules around supply and demand.
When there is more supply than demand prices drop, this is such a universal truth of economics that such divergent thinkers as Adam Smith, the father of modern capitalist thought and Karl Marx, his counterpart on the communist side, acknowledged that supply and demand affect price. So why does it seem as though our politicians do not embrace this solution? If you ask me, it’s not sexy to campaign on because there’s no immediate results. Voters expect results and if you point to successes of affordable housing in places like Tokyo, you better have results like Tokyo by the next election or your opponent will trot out your “failures”. Furthermore, the best solution has particularly bad optics for politicians; you need to build more high-end houses, the so called “McMansions”. A politician running on a “build more homes for the rich” platform is not going to win any elections. Yet it’s a solution that makes a perverse amount of economic sense.
Everyone outside the top 0.01% of people purchase houses on a budget. People will typically purchase new over used when given the opportunity. Now what happens when you have two families with an after-tax income over $150,000 bidding on the same house? The price goes up! Unless you have a sufficient amount of new upper tier housing, removing the predicament altogether and providing the family that lost the bid a chance to simply find another home to purchase. Dare I say, it’s time we encourage and embrace more housing development throughout Niagara. This has become more than a place to visit, and with more people looking to make Niagara their home regardless of how we might feel about that, we need to be prepared to welcome them. The only way to do so without putting our existing residents at risk is to build new development at the rate we require.
REVEAL Niagara Business Magazine • Volume 1 Issue 2 • 2019
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