A fun way to make houses cheap again
In major North American cities, housing prices are well beyond what most people can afford.
The average price for a detached home in Toronto (where I live) is now $1.6M, up one-third since this time last year.
There’s a combination of factors (including pure speculation) driving this, but lack of supply is probably the biggest.
The obvious way to fix a lack of supply is to build more houses. The trouble is there are all sorts of arcane zoning rules and regulations that limit where and when and how this can be done, plus all sorts of perverse incentives flow from these rules.
Rather than overcomplicate things, the simplest way to get more houses built would be to just build them ourselves. There is successful precedent for this. Wartime Housing Ltd., a state-owned corporation, built 32,000 homes for Canadians involved in the war effort between 1941 and 1947. They rented these homes at a reasonable rate to veterans, who eventually bought them outright. The Americans did something similar. I once lived in one of these houses, and it was nice.
One spin-off benefit of building all these houses is that it would employ a whole bunch of people, for a few years at least. This would get us a bit closer to full employment and tighten labour markets, which should put upward pressure on wages and help workers afford privately-built housing.
There’s a second accessory benefit here too, which is that this policy would have redistributive effects since it would be paid for through general revenues and disproportionately benefit low- and middle-income people who are priced out of the private housing market.
It would be important to package a bunch of other policy adjustments with this to ensure the houses didn’t turn into a place for rich people to stash their money, but this wouldn’t be hard to do. Ultimately, the simplest solution to a lack of housing is to build more houses, so why not have the government do it?