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Comment by knuththetruth | Hacker News Reader

Supply is part of the problem, but the real culprit is that housing has been financialized and opened up as an investment vehicle for global capital. It doesn’t really matter if you change zoning laws if everything that gets built is to serve this kind of investment. Major cities in the US, such as LA and NYC, simultaneously have huge lots of vacant luxury housing stock and homelessness crises for precisely this reason.Vancouver has obviously taken steps to curb the worst excesses of this, but it’s still vulnerable to this form of “market failure.”

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I work in Vancouver and have lots of coworkers who have recently bought homes. The more I look into it, the more I think the majority of this problem is related to extremely low interest rates. As rates went down, real estate all over Canada shot up a huge amount. Now that rates are rising, it immediately cooled.

The solution to housing being used as an investment is to build so much housing supply that this investment becomes worthless.

Why SHOULDN'T we just let the Chinese build a bunch of empty buildings? It's their money and if they want to waste it building us cheap housing on an investment that will eventually go bust, I say we let them.

The solution is scorched earth, "LOL, you thought your investment was going to go up, but instead we built such a ridiculous amount of housing that houses are now free for everyone".

Nihilism is never a solution.

That's not nihilism, but a correct free market response to over-investment in a particular asset type.

The fact that this didn't happen is due to regulation and other market distortions.

I'm not sure why I should give the "correct free market response" any airtime at all, given that 1) it would appear to require making one of the top 5 Canadian cities into "scorched earth", meaning a wasteland of empty housing in order to drive out investment money so that... why? and 2) any one of a hundred or more demonstrable failures of free markets that have fueled the drive for regulation more than anything else over the same period.

Because having a bunch of free, empty apartments that investors paid for is wonderful! It means that they can be used and are available for all the productive things that building are, on the cheap.

If you could wave a magic wand and do the same thing for food and water wouldn't you do so?

If they fill up because they're cheap, that indicates market demand that will bring the investors back. You're not going to keep them out unless Vancouver becomes, in significant part, a ghost town.

Which has another cost: everyone here who owns their own property would see their most significant asset disappear as the value of their home plummeted along with all the investment properties.

If I could do the same for food, we'd soon live in a hellscape of rotten food.

This is a reply to the sibling comment rather than the parent (which I largely agree with). Politically incorrect rhetoric aside, it's clear than Vancouver's housing shortage can be easily addressed by free market mechanics.

Increased supply, even if not available on the market means that the owner or occupant will not outbid a local on a different housing unit. Multiple additional housing units will over time enter the market and reduce competition and rent increases. A more friendly zoning situation will also spur developers to bring in more housing capacity. This will stabilize or reduce rents, as has been empirically demonstrated in the past year by Seattle.

For the last 20 years Vancouver has had a building boom in which housing starts and completions have been at record highs. We're adding housing stock as fast as we can and faster than almost any municipality in North America. After 20 years, we're at record high prices, available rental properties are at record lows, and rents are at record highs. How is it that glutting supply has failed to drive prices down, correcting over-investment in our housing market?

Faster than Seattle on a population-adjusted basis?

Why not? Because we've seen places where that basic series of events took place.

That takes a long time to play out, and other factors come in to play during that time.

Places where the building was via foreign investment, in cash, absorbing all risk?

I think this contributes, but it's not the principal problem. The core problem is supply shortage, which given the current astronomical prices has everything to do with zoning. Relax that enough and the market will solve the problem in a matter of years.

This would be a satisfying solution were it not for the fact that Vancouver's housing starts and completions graph is a giant up and to the right. Vancouver has been building supply. At this point if you're a politician in Vancouver that is promising to solve the problem in a few years you're going to get dumped. People wanted this problem solved yesterday.

It takes years. Whether people like it or not. It's never too late to start doing something about it.

Absolute growth in housing supply doesn’t matter. It’s growth in housing supply relative to growth in population.

This is not empiracly true for Vancouver. Global capital is flooding into RS-1 and CD-1. There is very little speculation into RM-4.

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