Is it simply that there is a multiyear lag before inventory starts coming on stream, or is there some fundamental reason why these larger cities can't provide enough housing?
* nepotism, current owners want to keep the inventory low so the price of their property and demand remain high
* nepotism, because owners are afraid tall building will make their city less appealing and lower the price of their property.
* silly zoning laws, because many believe central planning is actually a good thing despite the ridiculous amount of evidence that it doesn't work.
* simple inertia, bad laws and regulations are created all the time but almost never repealed.
I'm probably missing a few other reasons I'm sure others will point them out.
Also something worth saying, owners love to say that adding taller buildings and more buildings and people would kill the spirit of the city. But preventing new buildings has a effect of super high prices that makes it impossible to live in the city, in the end only billionaires can buy homes as investment and don't even live there while the few other building are rented to a few lucky high salary people which creates tension with the rest of the population. So you get a city full of empty houses, super rich people, high salary folks and regular people who are getting kicked out. Real people start living outside the city and its spirit is gone anyway.
"some zoning rules" is a veeery slippery slope.
Why is it so desirable for your landlord to be a business instead of a private individual who bought a condo? What problem does this solve?
> 40% have to be 3 bedrooms
What is this supposed to do? Yuppy roommates are still going to outbid working-class mom and dad every time. See San Francisco.
It prevents them from being bought by speculative investors and taken off the market. An alternative solution to the same problem is an empty-home tax, which is being rolled out in Vancouver.
> What is this supposed to do?
Its pretty obvious isn't it? It increases the supply of viable housing options for families.
I'm not trying to say this is the silver bullet - Its just some ideas.
My honest opinion is that Canadian housing should only be able to be owned by Canadian citizens, but that ship sailed long ago.
current owners want to keep the
inventory low [...] owners are
afraid tall building
In big cities the value of a low-rise house is almost entirely the value of the land on which it sits, and the owners would vastly increase their wealth if the zoning laws were changed so as to allow high-rise construction. Source of information: I own a low-rise house in the center of one of the world's biggest and most expensive cities, and I've tried hard to get building permission for adding a single floor, but that was denied on ground of making my building "out of character" with the neighbouring building.
I suspect that re-zoning is simply not a vote-winner (like e.g. adding a new runway to an airport), so politicians from all sides shy away from it.
It's worth remembering that a speculative boom creates extra demand.
As far as I recall it was almost universally accepted that Ireland had a shortage of supply ten years ago. Then the GFC happened and it very quickly became apparent that the shortage was of investment opportunities, not homes.
EDIT:
For some actual data related to this phenomenon, consider the Speculative Vacancies Report[0] published each year by Melbourne group Prosper Australia. Melbourne is, like many major anglosphere cities (London, Sydney, Vancouver, Auckland, etc), suffering something of a property price crisis. Each year Prosper Australia determines which Melbourne properties are vacant using water consumption data provided by the city's water utilities[1].
If you accept the narrative that is usually presented in the media; "prices are high because of a shortage of homes", then you would expect areas with the highest capital gains to be closely correlated with the areas that have the lowest vacancy rates. In actual fact the correlation is unintuitively the other way around - the areas with the highest capital gains have the highest vacancy rates (approaching 30% in the case of Melbourne's Docklands area).
[0] https://www.prosper.org.au/2015/12/09/speculative-vacancies-...
[1] Compare with the method for determining vacancy rates that is typically reported in the media: asking property managers what proportion of properties on their books are currently vacant.
Houston and Dallas: http://time.com/80005/why-texas-is-our-future/ or, somewhat less usefully, http://www.forbes.com/sites/scottbeyer/2016/08/31/why-is-aus....
The big problem is zoning: https://object.cato.org/sites/cato.org/files/serials/files/r... as it was implemented in the '70s: http://www.amazon.com/Zoning-Rules-Economics-Land-Regulation...
By the way, there is much heat in discussions about housing prices and urban development, but very little light and much misunderstanding. A good rule of thumb is simple: If you don't see any reliable sources being cited, there's a good chance that the assertions aren't true or don't encapsulate the most important parts of the supply-demand picture.
The Dallas area has no natural boundaries whatsoever; there are no mountains and no coast, nothing to stop development from sprawling out constantly. I was born in 1984, and I've lived in Dallas my entire life. I've seen the suburbs balloon in size like you wouldn't believe; and I'm not just talking population here, but area. The idea that we have continuous suburban development extending all the way north to Prosper (and soon Celina) blows my mind. Suburban development used to peter out in the northern half of Plano, and honestly southern Plano wasn't fully built-out either (there even used to be huge unincorporated enclaves in Plano).
Another is business culture; companies, especially tech companies, have largely chosen to avoid the central business district and instead locate their offices in the edge cities [0] and the boomburbs [1]. Blame historical happenstance: this phenomenon was entirely thanks to two companies who decided in the 1950s to locate their offices in Richardson instead of Dallas. One was Texas Instruments, which was founded as a startup in Richardson (none of the founders were native Texans, oddly enough), and the other was Collins Radio (now Rockwell-Collins), an established company from Iowa who decided to put their Texas campus in Richardson. Between the two of them, anyone in North Texas who wanted into the tech industry worked in Richardson. After that, the founders of TI decided to start a technology-oriented university so they can grow their own talent right there in Richardson. Soon, they handed over the university to the state, who promptly renamed it the University of Texas at Dallas (despite it actually being in Richardson). Since then, UTD has become the most prominent school for engineering and computer science in the entire southwest (when I went there, the phrase "MIT of the southwest" was bandied about a lot), cementing Richardson as the home of the tech industry in North Texas.
I find it interesting; housing prices actually have spiked in the Dallas area thanks to an unexpected surge of demand (I expect prices to go down soon, as new sprawl catches up to the demand), but Richardson is still one of the most affordable cities in the Dallas area, and it's still recognized as being one of the best cities in the US to live. That combination of affordability and quality of life is rare; usually, the two are inversely proportional. You can still find a good house in Richardson for under $300k, and if you look carefully, you can go below $250k.
Now, I don't know too much about Houston, but it's pretty low on natural boundaries. Sure, it's not too far from a coast, but that's only to the south, and right now Houston's sprawling north and west. No mountains, either. I don't know much about how the business culture evolved, though.
My interpretation is that in SF, NIMBYism and city council members have blocked most efforts to build high-density housing. This means that it forces the prices on available housing up. SF is experiencing a huge influx of people wanting to live there, and there just aren't enough houses. Affordability is a big issue, and probably the biggest, but there are people that are able to afford the high prices. That line won't go on forever though.
Toronto has not shunned construction, far from it. We've built thousands of condo units. The problem is that they were built for investors in mind. Oh sure, if you're single or a couple, you could manage to get by in a 450-600 sf. 1BD 1BA condo, but as soon as you start to have a family, it feels cramped. A 2BR unit helps, and they exist, but there are not that many. Furthermore, our mentality in Toronto is that to raise a family, you must live in a house. That means moving out to suburbia.
A single-family home, townhouse, semi-detached, or detached, is always going to be in high demand, no matter where you are. In Toronto, it's what most of us were raised in. Getting us to move families into condos is a huge undertaking, and it's made impossible by the fact that developers don't want to build these units simply because no one buys them. It's a vicious cycle. So Toronto's issue isn't a lack of construction, it's a lack of foresight.
Finally, all large cities have this issue because of commuting. In Toronto, your options to get to work in the city are:
1) Live downtown, close to work to walk, bus, or subway in
2) Live in suburbia and spend 0.75-1.5 hours each way driving and/or commuting by bus or train
If you try to find more affordable housing by living further from the city, you start hating your life as you commute the 2+ hours in. It's like trying to live in Walnut Creek and work in SF. It can be done, but why?
Housing is a multi-faceted problem that isn't simply solved by just building more houses. You need to adjust people's expectations, habits, and start building viable transportation options to help move people.
Shouldn't savvy investors be able to see the market opportunity and put money into larger units?
The city I live in only builds 1%er apartments for investors, and construction is absolutely booming for them, which is very nice for those investors. Those are some very nice empty condo towers. The market for the lower 99% percentile income is totally separate and different, and frankly empty. There is no crossover.
Perhaps its like gold, in that its a commodity for investment but once price exceeds practical use levels for connector plating and tooth capping, its no longer relevant to the practical use fields at all, and its price can completely decouple and head to the moon. At some point the concept of owning a box full of air downtown will completely decouple from the concept of a place where humans live. At that point investment prices can and will go infinite with no effect on human housing, solely dependent on national fed rates and international currency exchange rates.
The answer to this is to pressure companies to move their offices out to the suburbs.
One of the reasons why Texas still has affordable housing with good commutes is because a lot of companies have abandoned the traditional central business districts and moved into boomburbs and edge cities.
I live in the burbs, and of the four jobs I've had here, I've commuted farther out into the burbs for three of them (with a 15-20 minute commute by car). The one company I worked for that had offices downtown was the most poorly-run company I've ever worked for; them having offices in a place where no other tech company has offices was the least of my problems with them, but I did think "what tech company in Dallas makes people commute downtown?" when I was working there.
Why are people in Toronto's suburbs not just working in the suburbs? Is it because the businesses there are still stuck in the old model of having all their offices downtown? If so, let's throw huge financial incentives at them to get them to move their offices to the suburbs.
I've been mulling around an idea for a while of placing massive tax penalties on companies that hire people to work in a different county from where they live. Let's make employers pay ten times the income tax on every employee that lives outside the county where they work, and at the same time make it illegal for companies to make a current employee move or discriminate against a potential hire based on where they live. This will make them relocate to where their employees actually live. Or at least get them to switch as much of their workforce to remote as they can. I'm fine either way.
Aren't companies already highly incentivized to not locate in the downtown core, simply by the astronomical cost of real-estate downtown?
It seems to make sense that highly specialized industries would locate downtown, because that gives them access to workers from virtually the entire metropolitan area, since all transportation infrastructure points downtown. If a company were to locate in some arbitrary suburb/exurb, sure the people in that area would be knocking down their door to work there, but people cross-town from there probably wouldn't even consider it, since the commute would be even worse (assuming they can't move).
And if they somehow got it sooner? Still nothing they can do, because all the supply chain is also backlogged! You need to contract with a rebar installer now if you want to start building your fancy new condo in 2019.
The City of Vancouver raised development fees in order to hire more people to approve development faster. Some will say they're still apparently not adding supply fast enough. Maybe the rate of supply creation isn't the problem here...
The media focused on the south side murder rate but if you are north of the city there are plenty of safe and wonderful places to live.
The problem is that of speculative investment driven demand that is detached from local realities. This sort of irrational demand is endless and cities can't possibly be expected to keep up.
At this point this new housing supply is being partially left empty due to absentee owner/investors. It doesn't make sense.
Cities need to keep adding supply, but higher levels of government also have to have a look at new tools to control demand, such as more stringent lending rules and unoccupied housing taxes. In Canada foreign capital is an issue that has fuelled the housing bubble, but lax lending requirements and low residential taxes have also contributed.