The problem with encouraging builders to go hard with few restrictions is you end up with a low-density urban sprawl that introduces a ton of its own issues. You end up with massively long commutes and a ton of infrastructure that now needs to be maintained, and none of that cost falls on the builder so they happily build fields of new homes miles away from work places or services.

> The problem with encouraging builders to go hard with few restrictions is you end up with a low-density urban sprawl that introduces a ton of its own issues.

You only end up with that if that is what sells, i.e. that is what homebuyers want. If the average Canadian didn't want that, the developers would build something else.

Your real problem here is with the preferences of the people who buy new homes, and you aren't going to change those preferences by regulating housing developers.

People hold those preferences because when you live in the burbs you bear less of the cost of the externalities of urban sprawl. Basically, you get more bang for your buck.

The property tax rate is the same for a whole municipality whether you are downtown in high density housing or in the burbs.

You need more roads/public transportation/water mains/gas mains/buried cables etc to serve fewer people in the suburbs.

Make property taxes proportional to the infrastructure required to support a neighbourhood.

If in Canada they get gas, water, sewer and electricity paid by taxes then why not just charge the users instead? And yes, the payment for utility includes the maintenance cost. Roads wear depends on the amount of traffic so if you really wanted to be fair you might end up with the dense urbanites paying more (also we supposed to pay for this with the fuel and registration taxes in the US).

Public transportation in suburbia? Does it really happen in Canada? In the US suburbia subsidizes public transportation without using it.

This is a terrible argument. The costs associated with building wide, rather than building tall are hidden in future taxes and not disclosed to the homebuyer. Pretending there's some 'all costs' calculator over the useful life of the asset which is presented to homebuyers is incorrect.

Not only that, but tax funds are typically funneled from denser, more sensibly planned areas of cities to the more well-off sprawled suburbs. So people who aren't even involved in the process of participating in the market for sprawl built houses will pay for the resultant externalities created by the need for maintenance.

That’s true, but take a look at the zoning laws as well. Some places have better zoning laws than the US and Canada. I think that Japan is frequently mentioned here, because there are only a dozen types of zones and all of the ones that allow housing allow the property owner to rebuild at a higher density. (There are several types of industrial–only zones that give them a way to prevent homes from being built too near heavy industry.)

That's true, but it's also the case that most Canadians (and Americans) would be very dissatisfied with the quality of Japanese housing. Frankly it's crap -- thin walls, single-pane windows even today, no garages, tiny kitchens with two burners and no ovens...

In Japan people are far more reliant on the conscientiousness of their neighbors to maintain a peaceful and quiet environment than people in Canada and the United States are. They also have a low crime rate and safer, cleaner inner cities.

Obviously an entire population lives this way, and it works well for them, but that kind of housing situation would be a hard sell in North America.

That may be true, and it would be nice if people here were so considerate as well... yeah that's not happening.

However the ZONING codes could be adopted to much benefit. The BUILDING codes, I still maintain we need to spec even higher, so that I can have a refuge of solitude from the sounds, smells, and presence of Wheaton's Law failing humans.

Is Japan really what unusual? From what I hear the building codes are uniform so the spec for high density housing is similar to that of a single family home.

If builders in Canada have to build high density housing to a more costly specification then it’s justified that they won’t find it cost effective even if given the chance to do so.

In effect, the low cost of Japanese housing could be from both the zoning code and the building code. (As for culture, those two affect culture and are affected by culture so it’s hard to distinguish.)

The quality of the buildings that get built is unrelated to the type of buildings that are allowed.

What a current buyer wants in a Nash equilibrium of weird incentives and zoning laws, is the Just the Way Things Are?

Zoning laws don't come out of nowhere. People like living in suburbs, so their governments pass zoning laws that keep the area suburban.

Zoning laws are an expression of preferences by the existing homeowners who want their neighborhoods to retain their current characteristics.

Look at the history of how this happened. The suburbs did not magically appear out of nowhere after WWII against the wishes of the population, and they were not legalized into existence with zoning laws. They were built, people liked them and bought houses in them, and then they passed zoning laws to keep them.

Ban commuter cars from cities and watch the demand for high density urban housing explode.

Basically replicate the pre-car environment that the world's greatest cities were designed and developed during.

Many large city centers in Europe already restrict or outright ban commuter cars.

I was speaking more as a solution for American cities. :)

Yes. So, this is tried and known to work.

In that case it seems like the developers having more or less rules doesn't actually matter, no?

It does matter because most of the city of Toronto is zoned to prevent apartment buildings, low-rises, duplex, etc. Only a single family home is permitted.

The only things being built in Toronto are either single family homes, or giant 50 floors condos. It takes YEARS of consultations to build anything in Toronto so developers only bother going through that process for very very high buildings. It's not worth it for the type of higher density apartment of 3-4 stories.

It's called the missing middle, there's a good podcast/article here: https://99percentinvisible.org/episode/the-missing-middle/

If 10% of people have the means to be willing to pay 20x for a home constructed in a way that 90% of people can't afford, that is what your average homebuyer wants.

> The problem with encouraging builders to go hard with few restrictions is you end up with a low-density urban sprawl

Low-density sprawl is a result of local governments banning medium and high density building, not the free market. 80% of Austin is still single family homes despite a massive influx to the area. This is not because single-family homes are the most profitable to build, but because they are the only thing that you can legally build.

So you are of the belief that, if it weren't for the regulations, the suburbs would be full of high density housing?

...yes? If I can buy four adjacent $1,000,000 homes and put up a mid-rise with 25 units at $400,000/each, I've just made $9,000,000 minus construction expenses.

Then why aren't they taking the time and energy to get those areas rezoned? It's possible, and I'm sure it's less expensive than the potential profit, especially if they choose an area far enough out that there are few neighbors to complain.

>Then why aren't they taking the time and energy to get those areas rezoned?

Because of well-organized opposition from busy body homeowners. City governments aren't captured by business-interests the way state governments and the federal government are.

>especially if they choose an area far enough out that there are few neighbors to complain.

There are always enough people to complain about anything to kill it. A lot of people oppose anything new in their city entirely- not just in their neighborhood.

Why do you think those areas are restrictive with their zoning? Because people wrongfully want it that way. A developper is focused on making people and equipment work, not on being a provider of good zoning laws, and so won't fight against those tides.

In Canada, exclusionary zoning rules prohibited the construction of mid-rise housing in most cities. Developers would build it if the system wasn’t set up to stop them from doing so. They want to sell more units of housing per acre of land.

As I asked another user - so you belief that the suburban sprawl would be high density housing instead? We'd have giant apartment buildings on the edge of the city?

No, they would be in the center of the city where it is currently illegal to do it.

Listen to this recent podcast from 99% invisible (or read the summary), it explains it very well. Most of the territory of Toronto excludes apartment buildings.

https://99percentinvisible.org/episode/the-missing-middle/

> We'd have giant apartment buildings on the edge of the city?

Not necessarily high rises, but certainly apartment buildings, yes. This is the development pattern you see in places like Austin, Texas.

Yes, you see that in a lot of places. The city zoning laws mandate single–family homes, but then you get to the city boundary and revert to the county rules and a bunch of apartment complexes suddenly appear as if by magic.

Actually we already see apartments going up at the edges of some cities, because of a combo of these factors making it tough to do otherwise. However, I also found that in Winnipeg, condo owners pay the same property taxes as a detached homeowner in a brand new cul-de-sac. For a $330k cad condo (probably not going to get much higher in price later) you pay $4k in annual property taxes on top of your condo fees and mortgage. That's an entire month of food if you ate out every single day. Meanwhile in Vancouver, the same type of place literally costs $1m in a less desirable area, but you pay only ~2k in property taxes, which contributes to fund 58% of the city's operating budget, and the city is able to improve over time.

Same zoning problems though

Yes, this is a common sight outside many major cities. You end up with mid rise or high rise buildings randomly dotted around the burbs. It’s good that this housing exists, but because it’s not concentrated in the core, it doesn’t lead to the best possible outcomes. It’s hard to make the transit system work when housing and jobs are scattered around. You end up with lower-income workers commuting from an apartment over an hour away.

The vision of nice urban high density housing is a myth aside from very few exceptions that also happen to be quite expensive. Most people would want to escape that if their finances allow it. Pollution, noise, too much proximity to others are factors that makes this just plainly not attractive. Proximity to the work place is nice, but not the only factor that needs to be considered. This is primarily a problem of transport infrastructure.

look at the far outer suburbs of Dallas or most of the large cities in Arizona for some terrible examples of unconstrained urban sprawl.

By the free market alone, letting everyone get a home sounds like a terrible decision. There's a finite number of people that need a home and by the point everyone gets their own home, your business is doomed.

On the other side, letting housing to be crazy expensive, with few people capable of getting a new house, will always be profitable.

If the free market were one entity that could coordinate and say "nobody build more housing, let's squeeze as much money from what we have already", sure, that would be pretty profitable. But if there are enough participants in the marketplace (which depends on the barriers to entry to homebuilding, like regulatory capture, knowledge, capital, and permits) one will want to undercut the others and build houses marginally cheaper than the competition until their marginal profit is zero. Having everyone agree not to build houses and keep prices high is like the "nobody snitch" outcome of a prisoner's dilemma: it's not a stable state/Nash equilibrium. At least this is what I heard in Econ 101, I'm sure I'm missing much nuance here.

>At least this is what I heard in Econ 101

Yeah, and you probably also learned a laundry list of caveats which lead to the principle you're describing being non-applicable. Real estate is not a fully commodifiable good because it is non-fungible. A house in the middle of a city is not the same thing as a house 2 hours out of the city core. There is a limited amount of under-developed land to repurpose, and a limited amount of construction crews and machinery available at any given time to perform the work in question, so building production does not scale linearly with capital investment.

Construction has ALWAYS prioritized high-margin upscale dense construction where possible - if you own a block of rundown downtown shacks, you put a tower on it the moment you can. This isn't the issue - no one's complaining about Canadian Real Estate's ability to build a Class 1 commercial building or a high-end condominium complex. Toronto has been literally the number one city by crane count by a MASSIVE margin for years. The issue is how we can get widespread construction of low margin projects, Low-rise residential complexes, affordable housing, etc.

Why does a giant condo building have to be high-end? Wouldn't that be the most efficient way to house people even if they weren't focused on profit?

>Why does a giant condo building have to be high-end?

Because the margins are higher and you can't put up infinite towers.

>if they weren't focused on profit

They are.

>By the free market alone, letting everyone get a home sounds like a terrible decision

Ah, but that's the thing about the free market. It doesn't care, for better or worse. If the barriers to building new houses are low and demand is high, new houses will get built and prices will drop until an equilibrium is reached.

>On the other side, letting housing to be crazy expensive, with few people capable of getting a new house, will always be profitable.

You seem to have conflated a free market with one consisting of too few people with a great deal of regulatory capture, where the criticisms you've mentioned here apply.

Notably housing shortages are a new phenomenon, we weren't having this problem earlier in the century. The only difference between now and then is we have far, far more regulations and zoning rules in the way.

Technically houses are cheaper to build than in the past, knowledge and building materials are more plentiful, and capital markets are more efficient with more banks offering mortgages. So by multiple measures housing should be less of a problem, not worse.

This is the reality we've built by choice, people act like they don't know how we got here. If you go on Reddit they think if we all just became unionized and have more $$ we'd go back to the 1960s and all have houses again. But that problem with housing supply won't go away until we fix the root cause, throwing more wages (or gov money) at it without expanding supply will just increase prices further.

>the only difference between now and then is we have far, far more regulations and zoning rules in the way.

Some places have more or less run out of land. For example Vancouver is limited in it's north, west and south expansion by mountains, ocean, and an international border respectively. I believe there are similar issues in San Francisco, Seattle, New York, etc.

Indeed, higher density is the answer... I'm just pointing out that the increase in regulations is not the "only" thing that's changed.

>The only difference between now and then is we have far, far more regulations and zoning rules in the way.

No, the only difference is that a metric fuckton of money which used to be parked in productive equity investments ran out of productive uses because the taps were never turned off and started to slush into the real estate market via REITs.

The price of Toronto RE, for instance, has not tracked with regulatory costs - it has shot up shortly after the aftermath of 2008, when global capital watched Canada have one of the most stable real estate markets skip the fallout of the subprime mortgage crisis. Paired with the rock bottom cost of money, Canadian Real Estate was viewed as a particularly stable investment class, prompting both Foreign Investors and REITs to dump capital into the market. The value in the market is the fact that it WAS better regulated that the competition, but it's now a toxic asset class. No study that I can find indicates that the volume of regulatory costs associated with the Toronto or Vancouver housing markets can be attributed to the specific inflection points associated with our current pricing environment.

Wages cannot support the volume of leverage in the Canadian housing market. The numbers on display as reported by RBC yearly indicate that the average house in Vancouver costs more than 100% of the gross wages of the average worker in the city. This number is typically 30-40% in most functioning RE markets. So if consumer demand literally cannot create the numbers we're seeing, then we need to look at other systemic changes in the demand profile for the asset.

And it's pretty easy to see what's going on if you spend 2 hours calling brokers. Toronto condos aren't sold to people to live there; they're pre-marketed to block investors aiming to purchase groups of units for rentals and finance their purchases with rental cashflows - condominium sales come with rental guarantees for 3-5 years - even if the rental market crashes, even the speculative investors won't feel it until developers start to display counterparty risk issues to increasingly large groups of block investors. So why not leverage yourself to the tits? The entire market has to crater for your investment to fail to produce a return. The underlying cashflow supporting development of these units, rental dollars, don't actually need to exist for the investments to pay off (which makes sense, because they literally cannot as per the income/financing ratio described above).

Beyond this, REITs have a tax advantaged position in respect of other cashflow positive investment classes

The idea that regulatory burden is the cause of cost increases of this magnitude is lunacy.

Keep in mind that corporations are extremely focused on short term profits. Home builders would love to build every single person a home and make tons of money, even if it wasn’t a long term business. Add in the potential for convincing people to buy a new house every 20 years like cars and you’ve got a major profit center.

Why aren’t they building these homes? How are they being stopped? Typically the thing that is stopping homes from being built is governmental restrictions on how many homes can be built (ie zoning laws).

In a free market, no actor has the ability to 'let housing be crazy expensive'. If you don't build, someone else will and they capture whatever profit is there. This is the core of how the free market works.

People can only 'let housing be crazy expensive' when they can prevent others from supplying the market, which is only possible by wielding power, usually through the government. Which is what we have now.

Builders aren't monoliths, and they're not part of any cartel. They are competitors. It is always advantageous for a builder to be the only one creating new housing; they benefit from supply restrictions that drive prices up, while selling new supply. It is always best for them to build as much as they possibly can, because no one builder can build enough to affect the market by very much.

Only maybe if you imagine developers as one person. It would always make sense for some new greedy developer to build a bunch of extra housing to drive down the cost because they still make more money that way

You could ensure that very-basic shacks are affordable without destroying demand for superior products.

The market has no telos other than to perform price discovery. I'm not sure where people get the idea that a market will do anything beyond that. Price discovery of housing has no bearing on being able to provide all people with a place to live. It's akin to saying that a market of Fabergé eggs will ensure everyone gets an egg. The problem is simple, there isn't enough housing irrespective of market or planning. Plainly, market-panaceaism is exhausting.

I think the challenge is that people assume there’s a free market but in housing that doesnt seem to be the case. Restrictions on height, location, design, building standards, as well as zoning are all constraints that the market operates within. Additionally, many of the affordable units were built with government capital then privatized later only to be torn down or renovicted into different classes of dwelling.

If we had a truly free market up and down the supply chain then perhaps that would alleviate the problem. But that scenario simply does not exist today. Additionally, the market may even correct itself; but not withhout a day on the order of years or decades. Long after those affected will have made decisions as abrupt as perhaps ending their own life.

Not attacking you, your heart is in the right place. If COVID-19 has taught us anything, learning to make businesses more efficient doesn't actually result in a better outcome for consumers. Take Nabisco for example, churned out record sales, didn't pay their burnt out employees more and Oreos cost more than ever before...

> Home and multifamily builders should be unleashed to build as much housing as they can. Let them be greedy; let them get rich. It’ll make housing more affordable for everyone.

Yep. This is pretty much how all the existing housing stock got built. It was a gold rush for housing developers building entire subdivisions at a time. People seemed pretty happy about it at the time, too -- and now that it's harder to build, housing gets more expensive and it's the youngest generation that suffers most.

I feel like the best counterexamples to this are Singapore(82% of the population lives in public housing which makes it affordable for local residents) and Vienna(25% of the city lives in publicly funded social housing which decreases costs for everyone).

Wouldn't this drop housing prices for existing home owners?

As much as I agree with you, I don't think people who are left with expensive mortgage payments for a house worth 1/2 the original purchase price are gonna consider that policy to be the affordable option.

Trickle down economics, housing edition?