The Cost of Housing and Opportunity for Innovation
Across North America (and beyond), many cities have seen dramatic increases in the cost of housing in recent years. This has been the case for house purchases and rents in many major US cities, as well as rents and ownership in major Canadian cities. In an increasingly spiky world, this growth comes down to three things: location, location, location. While this has been a tremendous boon for home owners and landlords, it has caused great strain for renters and those looking to enter the housing market. In some of the most expensive city-regions, like Vancouver and San Francisco, the cost of housing is leading to considerable population churn. San Francisco is seeing more wealthy people moving to the city, while it’s working class is moving away. Meanwhile in Vancouver, Gen Xers and children are departing the city, while the appeal of the bright lights and big city continues to attract young people. On paper, these trends show that cities like San Francisco and Vancouver are getting richer and more skilled, which can increase the tax base and spending power of a city. But in reality, it means these places are becoming poorer in terms of population diversity. There a range of benefits associated with population diversity, and on a practical level, it is vital to the operation of a city. In response, we’ve seen a rise in YIMBY groups in some of the most expensive cities on the continent. But what else can be done? Well, for some, a move to more affordable cities in Canada and the US is an option. This is a particularly good choice for those who own real estate and are choosing to cash out. But for many, a move to a more affordable place means fewer job prospects and greater distance from family. Clearly other solutions are needed. Increasing supply will play a big role, but for global cities, the risk of building “too many Ferraris and not enough Hondas” remains. This leaves room to borrow ideas from places like Vienna and Singapore, but tailored to local settings. Other solutions include a revival and update of cooperative housing, housing tailored to specific groups such as seniors, and the development of high quality social housing that people want to call home. Land prices and consumer demand in desirable cities are unlikely to drop in the near future, but solutions are needed now. The time is ripe for innovation and viable solutions will be valuable to the market. The future of housing starts today.