“My feet are too big”

I regret to inform you that Josh Gordon is at it again.

Josh, you might remember, is the geographer from Simon Fraser University who disagrees with the idea that housing in Toronto and Vancouver is expensive because there’s not enough it. The last version of his argument tracked new housing supply against population growth and concluded that they were basically inline.

Of course, population growth is a dependent variable. If we don’t build enough new housing in Toronto, our population will grow at a lower rate than it otherwise would, and low income households will be the ones left (or priced) out.

In any case, Josh has now returned to the pages of the Globe & Mail with some new evidence demonstrating that the “supply narrative” is false. His four main points:

1. There have been no major land use rules enacted since 2010, yet housing is much more expensive today than it was then;
   
2. There is a lot of housing being built in Toronto and Vancouver;
   
3. Toronto and Vancouver’s suburbs are also seeing rising prices, despite fewer geographic or regulatory housing supply constraints; and
   
4. YIMBYs tend to point to detached housing zoning as an example of a land use rule that constrains housing supply, placing upward pressure on prices, yet Abbotsford-Mission, BC (plenty of detached housing) is much more affordable than Manhattan (no detached housing).

…yea.

He concludes: “The commonality between these expensive cities is very strong demand pressure, not housing form or zoning – and that’s the best indication of what’s driving prices up.”

This response is hard to write because Josh Gordon is not so much wrong (though he is very much that) as he is economically confused.

Prices are a function of supply and demand. They can be driven downward by increased supply or reduced demand. The question is: which leads to the most desirable outcome?

This week I told my 2-year old daughter that her shoes were too small and that we’d have to buy her a bigger pair. She replied, “my shoes aren’t too small; my feet are too big.”

Like Josh Gordon, she’s not exactly wrong. Her shoes could fit if I were to chop her toes off; that’s just… not a good idea.

Josh Gordon points to the following drivers of increased demand: “cheap credit, foreign ownership, speculation, and high rental demand emanating from a previously strong labour market.”

Three of these sound scary, maybe, but let’s focus on the fourth. Housing prices in Toronto and Vancouver could be lower if we worked to crush their local labour markets and swell the ranks of the unemployed; that’s just… not a good idea.