The numbers don’t lie: The housing crisis is not caused by a supply shortage | CCPA
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Financialization, not demographics or supply, caused the cost of housing to explode in Canada.

the housing crisis has been created by banking practices that have directed excessive amounts of credit into the property market, and especially residential mortgages. As a result, buyers can bid prices up to ever-higher levels, resulting in a market where people must pay more for the same type of housing. Hence financialization can be defined as an inflationary tendency in the housing market that is induced jointly by banks’ desire to expand mortgage lending and buyers’ confidence that the value of their properties will rise.

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However, the image of a bubble bursting and prices returning to a more rational “equilibrium” level does not seem to apply to the housing market. Because housing is a necessity, people are willing to pay high prices for it. Bidding wars can therefore persist even when relative supply grows, so long as credit markets enable them.

  • Victor Villas@lemmy.ca
    44·
    17 hours ago

    The “supply-shortage argument” is encapsulated by the CMHC’s claim that “increasing housing supply is the key to restoring affordability.” If the argument is correct, then we should expect to see evidence that increases in dwellings per capita lower prices over time.

    A great straw man argument 👍

    It is difficult to find clear evidence that increased supply pushes price down, because in private markets, new supply only emerges when prices rise and developers feel reassured they can earn a profit on their investment. Price and supply both move up together over time, with increased supply not necessarily pushing prices down.

    But when setting out to demonstrate supply’s downward impact on price, they instead use abstract models that presume what they are trying to explain.

    Oh the irony. These economists with shady premises… btw you will never find evidence that supply pushes prices down, because in private markets that’s impossible.

    It’s kind of funny that the same group that eats this kind of narrative like hot cake is also the group of people with a tendency to blame demand (as in immigration), like if by magic the supply vs demand relationship only works one way. Even though the last paragraph of the article tries to state this exact point (if supply is not the solution, demand is not the problem) - the only thing that this kind of article accomplishes is to undermine the efforts to build housing.

    • Soup@lemmy.world
      3·
      16 hours ago

      Your first quote conveniently leaves out the last sentence which says “historical data shows otherwise.”

      Now, a strawman argument is where you create a fake thing to attack. I’m explaining this to you because there are so many people who genuinely believe that demand is growing higher than supply is.

      You seem to be on the side which knows that supply is not the problem, rather it’s greed. The article agrees with you at every turn, but you fight it? Did you actually read it?

      • Victor Villas@lemmy.ca
        1·
        29 minutes ago

        Your first quote conveniently leaves out the last sentence which says “historical data shows otherwise.”

        What difference does it make? It’s still a straw man. Historical data will showing otherwise is what makes it a great straw man.

        Now, a strawman argument is where you create a fake thing to attack.

        Yes, I know but thank you. It’s exactly what the “If the argument is correct, then we should expect to see…” line is doing.

        You seem to be on the side which knows that supply is not the problem, rather it’s greed.

        No, I’m not. I don’t think there’s a single cause that can easily summarize the housing affordability problem. Specially not a vague one such as “greed”. Saying that greed is the problem is the kind of thing that people who confuse BlackRock with Blackstone say.

    • atcorebcor@sh.itjust.works
      1·
      14 hours ago

      House prices are soaring because supply is being suppressed while demand is being stimulated while all locations have unique locational supply of land that creates small location monopolies.