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Housing Cost Crisis 101

Updated: Sep 17, 2021

At the risk of sounding like I’m ranting (which I kinda am) or offending sensitivities (which will inevitably happen), I apologize now and pen my opinions in this blog.

I have read a lot of other positions lately about the housing cost crisis in Canada, and common themes consistently emerge. High inflation, low interest rates, bidding wars between wealthy buyers, covid savings and pent-up demand, the ultra-rich buying foregn homes driving market prices up, and the age-old … “not-enough-supply-to-meet-demand” … arguments are abound. Liberals are warning they will be getting involved (YEESH!), which really means they’ve identified a tax grab that progresses their agendas. House prices have risen as much as 30-40% in desirable areas all across Canada and the USA in the last two years. Housing has gotten out of reach for many millenials hoping to buy or own a home in the future, as a means of building equity while enjoying the minimal risk and predictable value increases that us past baby boomers benefited from. This is especially true with the new mortgage stress tests being announced, with the underlying messaging that interest rates are going up 2-3% in the next few years! After all, banks need to keep up with inflation too ….. right?

Personally, I feel Canadian housing footprints need to change (quicker) in the future. Why do 2-3 people need more than 900-1300 sq ft of living space? Single earners can live in spaces of 500-900 sq ft very comfortably. This world of excess-everything and access to credit (debt) has made it far too easy for people to buy more and hold more than they need, in all resource areas, including housing.

I wish people would change without government intervention but that seems very unlikely. What seems even more unlikely is that governments will deal with the root causes of the issues, at the risk of appearing non-humanitarian or opposing economic growth? This being said, in the case of housing, it may be coming that there are tax incentives for smaller housing and higher property taxes and federal luxury taxes applied to larger home footprints. Municipal zoning will start to focus on developing high-density housing in downtown cores, main streets, and business corridors, and put the larger, single housing developments farther away on outskirts so it does not infringe on this main corridor and infrastructure. This is not only a solution for housing supply shortages and affordability, it is also a solution to reduce the world’s environmental footprint. Smaller living spaces require reduced land usage, utilities, maintenance, and insurance. Centralized, high density housing allows people to live closer to downtown work, which is generally the lower paying jobs, thereby reducing their transportation needs and costs. You also get more bang for your buck with building supplies, as $1mm in building supplies houses more people per dollar for many logical reasons. Higher density housing infringes less per person on the environment as common areas are shared and land is used more efficiently. Overall, high density housing signifcantly reduces footprints and living costs.

BUT, if we are all being TRULY INTROSPECTIVE, it is the worlds’ HUMAN POPULATION GROWTH that is ultimately driving consumer demand shortages in all areas, and population growth is the crux of the problem the human race is racing to stay ahead of. We can do a lot to reduce consumption, waste, and availability of the world’s resources through ongoing, relentless innovation, and pivoting our basic consumer behaviours. But can we stay ahead of the extra 87mm people a year we continue to add on the back of mother earth? The human race is equivalent to parasites in many ways; multiplying, finding a a host (earth), and continually consuming that host to the point where they (parasite) eventually die. With the advent of medicine and drugs, and our ability to stave of pandemics and chronic illnesses, the earth is having an endless struggle trying to shake people off it’s back. Approximately 30mm people die from old age every year, though people are living on average 30% longer than they did 200 years ago. An equivalent amount (30mm) die every year from critical illnesses like cancer, heart disease, diabetes, respiratory illness, now covid, etc. These critical illnesses are largely brought on by humans through industrialization and the bastardization of our food chains, and have been trending up for decades. So if the world population grows by 87mm a year, and 60mm die every year, we are actually adding ~147mm people a year (the gains plus the losses) to the world and there is nothing out there right now to stop us? After all, we are at the top of the food chain, have no natural predators, and we continuously seem to find new ways to fight our way out of situations that would cull off members of the normal animal kingdom.

Migration is also party to the housing problems. In the USA, 1mm new Americans enter the country yearly, and 300k new Canadians enter Canada yearly. In markets that are aready house-strapped this appears to only add to the problem? This is not a slight on immigration, as I totally understand people want better lives, and the benefits of diversification to cultures and economies. I just don’t see how this helps housing problems we have not solved yet? We are simply transferring (over) population growth around the world, consuming abundant natural resources wherever they are easily found, until they are no more, and we move again. It's hard for me to share this opinion, out of fear of being misunderstood. The benefits of immigration outweigh the problems it creates, though I wish the Governments had a more wholistic plan that included housing.

We could have afforded to live in an oversized house in retirement, ... but why? We are only two people. We decided to downsize by ~60% and moved into a 2 bedroom, 1250 sq ft condo. Where we moved, we are right smack-dab in the center of a smaller, vibrant city of 35,000 people, surrounded by two large lakes , multiple golf courses, and in the middle of BC wine country. We are within 1-2 blocks of three grocery stores, three drug stores, a retail mall, two medical offices, and various big box outlet stores. We can get everywhere in the city for everything we need by either walking or biking (or cabs, buses, or e-bike/scooters in future). Our city has already devleoped a bike lane infrastructure and has a progressive plan to build it out further. There is a municipal airport 2 kms from here with easy access to international airports. Condo life is not for everyone I’m certain, and it definitely takes some getting use to after being a house owner for 35 years. Our decision to move to a condo was founded in we did not want housework, house maintenance, and house costs to restrict our time and ability to do other activities in retirement. We wanted to be able to walk and bike to everything. We wanted to be able to lock up and leave for much longer periods, and did not want to be drawn back to chores like yard work or the other magnetic effects of a large, single home. The change we made reduced our housing costs by 75%, freeing up cash for other things like entertainment, travel, and general piece of mind. Oh, … and some of you may be saying you couldn’t survive without a yard and your garden? Well, .. we joined a community garden about a half block from here and rent two garden plots (approx 100 sq ft) for $80 a year. With the community garden we enjoy other benefits too, including helpful gardening advice, community fruit and berry trees, zuchinnis, rhubarb, and herbs. Another $10/yr gets us a 12’ row of potatoes. Plus, if we (or anyone else) leave for a period, the garden community will pick up and water and care for the plots. All of this,… and it’s good for the world in terms of our reduced resource demands (costs) and overall environmental footprint. Are we doing enough, … likely not? We can all do more. But we are doing our part, and this makes us feel better. Problem is, now EVERYONE is moving here, and we are becoming a smaller scale model of the worlds’ challenges with housing and infrastructure.

I often reflect on if we are all doing enough to get control of the obvious mathematical problem of population growth, or even recognize that the absence of population equilibrium is inevitably pushing towards the worlds’ demise? The world population today is 7.5B and could very easily double in the next 90-100 years! Will the resources of today be there in 100 years, or will we have encroached on every remaining natural habitat with agriculture or ranching, killing the forests, jungles, oceans, and main fresh water streams, causing 1000’s of species to go extinct, and/or change the course of the world environment and climate irreversably and harmfully forever? Who knows? Maybe we will fight our way out of this one again, but I think the red flags have been waving for some time saying we are behind the eightball on this one. You cannot put any one industry or organization to blame. It is all of us, our insatiable need to procreate and dominate the living world, and our bias to consume every affordable resource in our path. It is our bias to support the wrong things with our dollars. Housing and any other resource shortages are only symptoms of the problem. The root cause of all the worlds’ problems is that the world’s population growth is outpacing the worlds’ supply of natural resources at an alarming rate.

A high school friend of mine with government accounting experience, a biology degree, and strong knowledge of ecology had somewhat contrarian views towards population growth I feel are worth sharing. In the end he agreed that the only sustainable outcome is fewer people using less. After proof-reading this BLOG, he said, “There are some demographic forecasts that indicate the human population growth is about to end, which is positive for resource consumption, but will cause great angst for economists. Even with the dropping human population, the increasing per-capita resource consumption will have huge impacts. Western USA is already well down a path of running out of water. A complete accounting of critical resource consumption (air, water, land) would aid in intelligent decision making, but fewer people consuming far fewer resources is the only long term sustainable outcome.”

He also believes world fertility rates are dropping enough to significantly reduce current population growth predictions. https://www.bbc.com/news/health-53409521 Furthermore, he believes we are trending away from traditional mathusium events, https://en.wikipedia.org/wiki/Malthusianism , which are changing old population growth models and the impending risks. Long-story-short, … people are hanging around longer now!

https://www.thelancet.com/journals/lancet/article/PIIS0140-6736(20)30677-2/fulltex

The underlying premise of this BLOG remains, there are far too many people consuming far too many resources! The results are detrimental on a grand scale.

Hopefully, …..you can handle the truth?

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