Why is housing so scarce and expensive?

Slides from a presentation to high school students

I did a presentation to a small group of high school students last November. It was a good opportunity to walk through the basics in a relatively short time.

An illustration of the problem. Land in Vancouver is scarce, and we don’t use it efficiently.

Most of the land in the city cannot be used for apartment buildings. In the yellow areas, it’s illegal to build anything other than a single-detached house or duplex.

Sometimes you’ll hear older people say that housing in Vancouver has always been expensive. You can see that it’s gotten much worse since Covid. Suddenly there were a lot more people working from home and needing more space.

When new housing is blocked, the people who would have lived there don’t vanish into thin air. They move down the ladder and we get trickle-down evictions.

Within a region, you have more people who want to live in a geographically central location, where there’s easy access to lots of jobs. So land prices are higher, meaning that you should have more height and density, so that households living there can economize on expensive land.

When you don’t allow height and density, it’s like pushing down on a balloon. Again, people don’t vanish into thin air, they’re just forced to move further out.

A couple interesting questions that people asked:

• To make housing more affordable, don’t we need a lot more non-market housing? (Non-market housing definitely helps, but to really scale up, we need a lot of housing. If it costs $500K to build an apartment, then even a billion dollars - which is a lot - is only enough to build about 2000 apartments. So to fix the problem, we need a lot of market housing.)

• Don’t restrictions on short-term rentals hurt the local tourism industry? (It’s a tradeoff. It reduces the supply of accommodation for visitors, meaning that they’ll end up paying more, but it helps long-term renters. It’s like a one-time boost to the rental supply.)