Real estate experts I’ve talked to do expect rents and home prices to keep rising in markets where population has been surging, and for that to lead to new construction. The key to restraining prices, they emphasize, is to make more land available. To some extent this will happen anyway. With permanent hybrid work-at-home arrangements — now almost two days a week — more people will live farther from city centres in suburbs and small towns with larger, cheaper homes.
The very worst policies are rent controls, originally adopted with price and wage controls in the 1970s. They kill the incentive to construct new — or improve old — rental housing. On the demand side, a policy to nearly double international immigration is a major factor behind the recent housing price surge in large cities.
Policies aimed at reducing construction costs can backfire. The proposed 100 per cent GST rebate on new rental apartment and student housing is a band-aid solution: any construction it encourages will push up land prices more. Nor will it help in the owner-occupied market that so many young people are being shut out of.
Then there are ineffective policies that ultimately discourage new construction. The “empty-home taxes” that new Mayor Olivia Chow wants to triple in Toronto are a case in point. Defining “vacancy” as using a secondary home for less than six months a year is a problem: it could apply to vacation homes, to land held in inventory for development or to properties owned by long-distance commuters.