Canadians and real estate experts agree that housing has become increasingly expensive over the years, but what causes prices or rents to rise and how to address shelter cost inflation lacks consensus.
Two poles of divergent views have emerged. One side believes that housing demand is being fuelled by low interest rates, foreign home ownership, money laundering and speculation. The other side argues the increased pressure on housing prices is because there isn’t enough of the right type of construction to shelter the growing population.
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Since there’s no agreement about what ails housing markets, there’s also no agreement about what measures are needed to fix them. Those who blame unsatiated demand want stricter measures on credit supply and higher transfer taxes. Others advocate regulatory reforms to facilitate more housing construction.
Supply skepticism can be addressed by highlighting research from the Housing Policy Debate journal that reviewed 100 studies to conclude that an increase in housing construction moderates housing price increases and improves affordability.