I wrote up a post a while ago: Housing scarcity in Vancouver pushes up prices and rents in Surrey. When we don’t build enough housing in Vancouver, it’s like pushing down on a balloon: the people who would have lived there don’t disappear, they move further out.
When Covid hit, the greater availability of remote work meant that people don’t even have to stay in the Lower Mainland. Vancouver’s housing scarcity spilled over to other parts of BC, and to Alberta as well.
To quote someone I talked to on Sunday, who moved to Nanaimo during Covid: “We could pay $3000 in monthly rent in East Van, or we could buy a house on a lake.” They said that a surprisingly large number of people have been moving there from Vancouver.
I expect it’s the same story in places like Nelson, Campbell River, Calgary, and Edmonton: compared to Metro Vancouver, prices and rents in all of those places were much more affordable. Not having to pay sky-high housing costs in Metro Vancouver is a giant boost to your real income.
Jen Gerson, January 2021:
COVID-19 is driving young people away from major urban centres, and work is now less tied to geography than at any point in history. Calgary's downtown office vacancy rate is a record-high of 30 per cent. There is a clear opportunity for a city like Calgary here. To submit to despair would represent a catastrophic failure of imagination.
When I speak to my friends who are trying to raise families in cities like Vancouver and Toronto, I am ceaselessly baffled by the kinds of financial and material compromises they make every day. I want to scream at them: "Hey, guys, you can live in a decent house with a nice yard near a charming shopping area for a fraction of the price of your current one-bedroom condo!"
Pressure on housing supply in smaller centres
For long-time residents, the post-Covid surge in remote work and the increase in demand means more competition, lower vacancies, and higher prices and rents. Salmaan Farooqui, Globe and Mail, December 2020: Small towns in interior B.C. and Alberta face intense housing crunch.
Amy Makortoff says it’s hard not to take the rejections personally after spending nine months looking for a rental home in Nelson, B.C.
She said she rarely got to even hear a landlord’s voice on the phone before their property was snapped up in interior B.C.’s competitive market. The lifelong Nelson local and one of her daughters slept for months on a mattress on a floor while they were housesitting and searching for a rental home of their own. All of their essentials were packed in a plastic tub, and Ms. Makortoff’s optimism was almost gone.
This week, she finally moves in to a new home, although the house comes with the caveat of being more than a 30-minute drive from town.
Ms. Makortoff said there were stark differences in her search for a home this time compared with a couple years ago. The two-bedroom house she left in 2019 cost $1,450 a month. She’s had to adjust her budget to $1,800 a month, but many of the listings she found were as high as $2,600.
The increase in demand due to Covid and remote work isn’t going to reverse itself. It sounds like Nelson doesn’t have much additional buildable land, so it would make sense to allow more height and density for infill housing.
Nelson Mayor John Dooley said the city faces a slew of challenges when it comes to expanding affordable housing, including a shortage of available land, the high cost of delivering building material, and the complicated task of laying foundation on a mountainside town with many waterways.
But Mr. Dooley says people who work in Nelson can look to surrounding communities that are a half hour drive away, as Ms. Makortoff did.
“It’s very reasonable to live in this area within 30 minutes of Nelson,” Mr. Dooley said. “But if you want to live in the core of our city, there hasn’t been a lot of [single-family dwellings] built in the last 20 years.”
Unfortunately this puts further pressure on towns outside Nelson. Ultimately, what we need is to build more housing. If Nelson doesn’t allow more infill housing (e.g. by allowing four-plexes), then once again it’s like pushing down on a balloon:
Trevor Jenkinson, president of the West Kootenay Landlord Society and a property manager in Nelson, said rental markets in smaller communities are also facing pressure.
“The way I describe it is Nelson is the peak of the tentpole,” said Mr. Jenkinson, who manages nearly 100 properties in the area. “When the prices in Nelson go up, it pulls up the other areas.”
He says apartment listings in Nelson will often receive 40 or 50 responses, and smaller markets such as Castlegar or Trail are becoming competitive markets as a result.
Note that all of this was happening in late 2020, when the borders were closed and few people were travelling. The population was the same, but total demand was up.
What happened in Ontario
Matt Gurney interview with Mike Moffatt, August 2021. The quick fix, Part 1: How Ontario can improve its housing situation — now.
On the pre-pandemic situation:
... let’s start in, say, mid 2015. The market was pretty hot across southern Ontario; prices had been going up about 8 per cent to 10 per cent a year. It was very uneven. We had a big spike in the GTA in 2017 and then a small correction.
But, now, 10 per cent a year seems fairly modest next to the 40 per cent we had last year. But when inflation is only going up 2 per cent, to have that 10 per cent appreciation in housing was obviously a big challenge.
It all started around the Toronto area, and that actually goes back earlier than 2015. What essentially kept happening was, as Toronto had housing shortages, you had this sort of exodus of families, first going out to Peel Region, then Halton and Milton, or Oshawa in the east, and so on. And what happened is those places started to have housing shortages and price escalation. Those price escalations and housing shortages then propagated throughout the province.
So, by 2017, Kitchener-Waterloo is getting really, really hot and having housing shortages. Then, by late 2017, it’s happening in Brantford. It’s happening in Woodstock. By about 2018, Tillsonburg is seeing price increases, and not much had happened in the Tillsonburg market in about 20 years or so. So we’re seeing this sort of propagation, this sort of what I call musical-chairs effect of people bouncing from one city to another to another. And now we’re getting places like London, like Sarnia, like St. Thomas, going back to 2017-18 or so, getting big population increases and big home-price increases. Looking east from Toronto, we’re seeing it all the way to Kingston. The Ottawa market’s a little bit different — it’s more sort of made-in-Ottawa factors — but then even going north or northwest of Toronto into the Owen Sound and Bruce Peninsula area, you’re seeing home prices increase there, and that was all happening before the pandemic.
But when it’s 8 per cent to 10 per cent a year, you can kind of somewhat ignore it. It’s a slow boil. Whereas, since a pandemic started, we’re up about 40 per cent, and things have just exploded, and it’s all anyone wants to talk about — and rightfully so.
What happened during the pandemic: people moved but kept their old home, because they thought they might move back.
I think what happened was a lot of situations like your neighbour’s, where you get people who are like, “You know, I don’t want to, and I don’t need to, be in downtown Toronto or Ottawa. Nothing’s open, and I want more space. So I’m going to move out to the country.” A lot of the places are still sort of close by, in an exurb. Torontonians are going to Innisfil or someplace like that. But often they wouldn’t sell their primary home, because they thought, “Okay, well, we might be going back at some point.” So you had this situation where you had a lot of people buying but not selling.
Usually in the housing market, you’re buying and selling a house at the same time, so the market supply nets out, right? Whereas here, you had a lot of people buying a second home. My sister did that. She lives in Woodstock but bought a place in cottage country and kept the place in Woodstock. So that was happening.
Plus higher savings went into real estate (along with other markets):
And then couple that with just incredibly low interest rates, which allow you to make these much, much bigger bids. I would say the roughly top 30 per cent of the population, income-wise, did well financially during the pandemic. Think of all the things that you couldn’t spend money on. You can’t go on vacation, you’re not commuting to work, so that’s $60 to $80 a week that’s not going into the gas tank. That starts to add up. Savings rates shot up.
Because of this, we saw that 30 per cent of the population put their money in all kinds of things. So real estate was a big one, but Bitcoin went up. All these “meme stocks” from GameStop to AMC went up. Old hockey cards absolutely escalated in value. Because you have all these people with essentially too much money and too much free time on their hands, and they’re kind of bored, they need to park that money somewhere. And a whole bunch of them decided, “Hey, you know what, I’m gonna buy a place in cottage country” or “I’m gonna buy this second house; I’m gonna get into the real-estate market.” So that drove a lot of this — there were more people buying and selling. And they could make much bigger offers because of savings rates and low interest rates.
New housing is getting built where regulatory barriers are lower:
This was happening before the pandemic. We had so much excess demand in the system, and municipalities had some understanding of what was going on. There was this need to build. If you really wanted to expand your community, it was like “build it and they will come.” I’m thinking of the Field of Dreams game last week. [laughs] So that was happening. You’re absolutely right. The fastest-growing places in Ontario are small communities, usually exurbs.
Think of Lucan, just north of London. It’s really growing quickly. Ingersoll, near Woodstock, is booming. Thorold, which is just a little city in the Niagara Region, by St. Catharines, is growing quickly. And a lot of the reason for that is we’re building wherever it’s fastest to build. And where it’s fast, in the end, the big issue is all zoning and regulatory hurdles. If you’re trying to build in Toronto or Kitchener-Waterloo, any sort of city, you’ve got these big city councils, and they’re debating everything, and you’ve got neighbours who are trying to NIMBY all these things — whereas, if you’re some community of, like, 1,500 people, you might have a local reeve, and that’s about it. If somebody comes in and says, “Hey, I’d like to build 200 homes, and it’s going to triple your tax base,” that’s a really quick decision. And nobody’s protesting that, because nobody lives there in the first place. So it’s kind of created this perverse system where we’re not building homes where it necessarily makes the most sense to build those homes. We’re building homes where the regulatory barriers are the lowest.
What would it take to solve the housing shortage quickly?
That’s going to be incredibly tough to do. You can build an apartment building faster than a hospital, but not a lot faster. But there are, on the supply side, things that we can do. I think the first thing we need to do is take the Dr. Phil approach: we have to admit that we have a problem. And nothing’s going to get solved until that. We have a growth plan in Ontario. We need to revise that and have new targets for all sorts of municipalities. And those targets are supposed to be lower bounds, but they’re kind of often treated as a maximum. So we need the province to come in and say, okay, Toronto, these are your new targets, and Mississauga and whoever else, here are your new targets. And hopefully that starts to disperse some change, whether it be zoning changes, regulatory changes, you name it. There are smart zoning things that we can do.
... And an underrated thing I think we could do is this: a lot of our population growth is coming from international students, or just students in general. And we don’t have that much student housing. We’re not building residences that quickly. One thing that we could do really quickly is build more college and university residences, particularly college residences, because that’s where a lot of the growth is happening.
We could figure out a model — a third federal, a third provincial, a third to the schools — and fund these projects and build them very quickly. And that would take a fair bit of the demand out of there, because what’s happening now is, a lot of times, students are buying, or their parents are buying, single-detached homes, and the kid lives in one bedroom, and they rent out the other two or three bedrooms. That’s taking family supply off the market.
So that’s one thing you could do. And I think we’re going to have to look at these solutions where we’re trying to take away the demand that’s soaking up a lot of family housing that’s not actually being lived in by families. It’s being lived in by students or being rented out, or housing that was purchased and sometimes left vacant, because people are owning multiple homes.
Interprovincial spillover
Mike Moffatt on Twitter, March 2024:
Thanks to the exodus out of Ontario, we're seeing rents starting to converge across the country. Ontario's housing crisis is being exported to the rest of the country.
We often hear "If Toronto or Vancouver is too expensive for young people, they should just move to some place cheaper." They are. And now those cheaper places are getting a whole lot more expensive.
More
Op-ed in the Daily Hive on BC’s housing policies
You nailed it. Several years ago I made the transition from Vancouver to Victoria full time. The price of our dream property here is 1/2 that of Vancouver - not to mention many other benefits. It allowed us to step off the hamster wheel and take in all of life's beauty. The ability to work remotely has helped a lot with this transition.