Demand comes from Landlords, not renters

Various parts of North America have a “housing crisis'” or “affordable housing crisis’”. This is very common in large cities. You don’t need to be a rocket scientist to understand the age old economic factor of “supply and demand”. If there is a shortage of available homes to rent you have a higher demand than supply. This drives prices of the available rental units up simply because if there is one item and five people want it, one of those people will be able to or be willing to pay more.

The whole term “affordable housing” rubs me the wrong way. When the vacancy rate of a city is below 1% and people complain that there is no “affordable housing” what do they mean? If every available unit is rented, people are affording to rent them, therefore they are affordable. Just because you can’t afford something doesn’t make it unaffordable.

World class cities are expensive because they attract world class people and supply world class jobs. New York, San Fransisco and Vancouver to name a few, draw people by the thousands creating high demand for residential properties. Someone that moves to a major city for a new job at a major tech company can probably afford $2,500 a month in rent, where as the person bagging groceries part time can not. The high paid tech employee will pay top dollar for rent, forcing the grocery bagger to somehow make more money, live with a roommate, become homeless or leave the big city. I know that is a bit harsh, but it’s how the market works. Supply and demand. I don’t walk into a Ferrari dealer and complain there are no affordable cars. Ferrari’s are completely affordable to the people that afford them. I am not one of those people so I need to leave the Ferrari dealer and look for a Toyota dealership, which is exactly what I did in my life. I grew up near Vancouver and left the area due to it’s extremely high cost of living. It’s reality. I needed to make a lot more money, or leave.

Now the real complaint I have is the governments policies that have been created to increase “affordable housing”. In the Vancouver area the government has created a vacancy tax, taxing houses that are not being lived in. They also brought in the foreign buyers tax which is a 20% property transfer tax to nonresidence of Canada. Recently the government also made it impossible to evict a tenant in order to do renovations unless you offer the unit back to the tenant at the price they were paying before the renovations. They also force developers to find suitable housing for tenants if they plan to take down a building and put up something with higher density. All this amounts to increasing the cost of property ownership or decreasing the profits of owning a rental property. Since when did making things more expensive make things cheaper? Does the government not understand supply and demand? Are these just more government cash grabs?

Vancouver and British Columbia in general are very pro tenant/anti landlord. It’s almost impossible to get a tenant out of a property once they are in, there is rent control which hurts profitability and with property prices skyrocketing it is almost impossible to make a rental property profitable unless you can afford to buy without a mortgage and then what’s the point?

What the governments are failing to realize in some of these “unaffordable” cities is the demand for rental units comes from landlords/investors, not renters. Renters can demand all they want, but without landlords there are no rental units. Why do governments and municipalities insist on trying to punish and grind landlords to make rents “affordable”? How are we the problem? Want more rental units? Support landlords and developers! If rental properties become more profitable in major cities more investors will want to buy rental properties creating demand. Then developers will have higher demand to build and develop more land and increase density. Once the developer builds and the landlord buys and puts the rentals on the market you create supply. How do you decrease demand and therefore make things more affordable, create supply! Yay, I just created a solution for the “housing crisis”!

In reality this doesn’t happen for one of two reasons; 1. The politicians want votes and supporting the small guys (the tenants) and punishing the big evil companies out to get rich (investors) you make it seem like you are the hero and the small guys vote for you. 2. The politicians failed economics 101 and don’t understand the simple concept of supply and demand. Either way, we’re all losing. If you are going to penalize landlords to the point of no longer being profitable, you will reduce the demand for investors to buy or build rental properties which hurts the investors and the renters!