Navigating the Housing Affordability Crisis

Housing policy , which is arguably one of the big foci of governments , has seemed to have yielded a world where nobody can afford to live . And to help us talk about that , we have got three of the world's foremost housing policy analysts with us today . Ross Elliott is with us . He's director of suburban futures at Queensland University in Australia .

Peter Hawley , who is CEO of the Frontier Center for Public Policy in Winnipeg , manitoba . And our dear friend Wendell Cox , who's senior fellow here at the Chapman University Center for Demographics and Policy and principal in Demographia . Demographia is the firm that tracks housing prices around the world . Gentlemen , welcome .

The middle class can no longer afford middle class housing . If you go back anywhere from 30 to 50 years , what you find is that in virtually every market in each of these three countries had a price to income ratio or a median multiple of about three or a little bit less than that . At this point we have Sydney at about 14 .

That is three times up relative costs , relative incomes . The US top market's about 12 . The Canadian top market's about 13 . And people can't afford the housing . And the problem with housing is that it really drives the cost of living . I mean , you think about the inflation two and three times inflation that's occurred in housing relative to incomes .

There is no other part of the economy where you can find numbers like that . So that's it and the sort of the related things of people , young people , not being able to get decent housing and even , to some extent , the terrible homeless problem that is really centered on the American West and is growing , I think , in a lot of places .

But Suburban Futures , just for the record , is a fully independent , not-for-profit research group . So what went wrong ? Well , look , I think there's just been generations now of misapplied public policy , a lot of which and , wendell , you know this is your theme is built around objections to sprawl . Look , a lot of those are legitimate .

But in trying to control and direct the market , we've added layer upon layer upon layer of regulation and micro-regulation . That has done nothing but add to cost , and at the same time , as we've made supply more difficult and costly to deliver , we've accelerated demand , particularly in this country .

It's based on immigration , because our natural rate of births over deaths is almost zero , but we've had record levels of immigration , and that has led to chronic housing shortages . And I think , peter , that's probably the same story as Canada .

And of course , the Toronto area has a green belt and in spite of having a conservative government there , it looked like they were going to ease up on it , but no , they backed off Very powerful lobbies that of course , want to keep the status quo . And you know , I think there's a great statistic in the report comparing Winnipeg with Toronto and Vancouver .

The price of a house , the building costs , are relatively similar , but the price of land in Toronto and Vancouver is nine times higher in Toronto and 12 times higher in Vancouver . It is a land issue . Why are we restricting land ? It gets back to zoning and land use regulations and green belts .

What are the good things and what are the bad things about public policy that you think are either contributing to the problem and could potentially be fixed if we were to change policies ?

The planners , however , felt like we were using too much land , and so in Australia , with an urbanization rate of a quarter percent of its land , 99.75% of the land in Australia is not urban . In Canada , in the agricultural belt , 97% of the land is not urban , and in the United States , similar number . Planners wanted to stop this terrible thing called sprawl .

Well , that's fine and I wouldn't have any objection to that if they had managed to do it in a way that they didn't mess up housing affordability and the standard of living .

But the fact is they did that , and I'll tell you , I think very strongly that sprawl is a lot better than poverty , because what we have is a situation where people families cannot afford the housing their parents did and they're forced to live in apartments that are too small .

Some are even forced into public housing , where in some cities in the US and Canada , there are 10-year waits on the waiting list . We are increasing poverty here and it is a real shame .

But is there any political pushback in Canada or Australia or the US to this ?

Funnily enough , in some of the other regional cities I've just done a study over the last 17 years some of those cities have actually seen affordability relative to key worker incomes improve , and the reason for that is that , if you take one of those cities like Townsville , for example , there's more than adequate land supply .

There's zone-developable land that is not being developed because there's no market for it . So they've had weak demand and ample supply and therefore the affordability equation has actually improved .

The sad thing , I think , in Australia is that there's no general strategy of looking at how we can disperse population , make some of these regional cities more attractive , which means give them decent infrastructure , decent schools , decent hospitals and healthcare , decent public open space and employment , but instead we just seem to be continually reinvesting , particularly

into the inner parts of our major cities . That's where all the infrastructure money is being spent , so that's where people want to go , which is creating a hothouse problem . So I think if you look at what can be done to fix it .

I would suggest that putting all of the growth into three or four cities in a country the size of Australia is madness number one , and I'd be looking to start with that .

In Alberta , of course , the economy is on fire , but it was funny . We looked around Calgary and there's lots going on there .

But again , the issue is the big areas are losing people to the more affordable markets and I think the issue again , as Ross says , is the immigration in Canada is very high and it's coming into Toronto and Vancouver , which is again a part of the issue , vancouver , which is again a part of the issue .

But again I think we need to zero in on , you know , we talked about magic wanding solutions to this . It's really about land use regulation and I think immigration is a bit of an excuse here in Canada , wouldn't you agree , wendell ?

Three million people have moved out of California net since 2000 . And generally it is felt that it has to do with housing affordability and generally it is felt that it has to do with housing affordability .

Portland and Seattle , which were among the fastest growing metropolitan areas in the United States , are now losing domestic migrants , largely because of housing affordability . So the solution , unfortunately , is people are deciding that they don't want to live in these places anymore . They're not going to go away , but the migration levels are unbelievable at this point .

And what seems to be happening , especially as I read your work , Wendell , is that jobs , in fact , are being much further dispersed than ever before , and job growth in the suburban areas that have been historically less dense are growing much faster than those that are in the inner city .

And now , with the advent of remote work , that just exacerbates the situation .

Their vested interest is in being able to continue the growth , even though it's elusive or illusory , in those dense areas . And that seems to me to be the underlying assumption and the underlying myth that needs to be changed . What do you guys think of that ?

So they do all of the planning , the capital investment is all centred around this idea that everyone must work in the inner city because that's where all the tall buildings are . It's the Emerald City thing and so on . But what's been happening here and it's probably happening elsewhere ?

The great growth in jobs is being driven in a range of suburban areas , particularly around industries like education and health and allied health . The traditional office worker is a dying creature , right , because AI is a whole bunch of things that are changing the way that sort of work is done and the productivity that can happen .

So you don't have typing pools anymore , you don't have these legions of people commuting with their lunch into the CBD for their day at work and then commuting home . I mean , there are still people who do that .

But what I think we fail to understand is that the economy has changed and the way the economy is changing is changing the dispersion of jobs and the way we should be planning our cities .

In the UK , the opposition to any sort of serious expansion of urban areas goes back more than a century . I was just writing something to the effect , quoting Ken Jackson of Columbia University , who's noted that the central city of Philadelphia , the urban core , began losing population , excuse me , between 1800 and 1810 .

People don't like this , but what you've got , what has happened in urban planning , is almost like a theology Sprawl is bad , even though they don't know what sprawl is . By the way , they've never , ever really well defined it , and that's what we're dealing with . It's a real ideological battle , unfortunately .

We have Starlink high speed Internet and it's better than what I have in Winnipeg internet and it's better than what I have in Winnipeg . So the technology is towards dispersion , like so sorry we're not having to be downtown . Remember we that it was a walking city at one time , these sort of legacy downtown cores . There is no case for a downtown anymore .

That was actually the model that LA developed , which we tried to get away from , which was a big mistake . But but that , what ? What we're seeing and I'm working on this right now in many parts even of Southern California , we now have new mini downtowns closer to where people live . Are we seeing anything like that in in Australia or Canada ?

Quite often the growth is centred around a university campus as well .

And we in Brisbane we're actually actively trying to plan for new suburban business districts , particularly in areas where former industrial land for example with a Saw II shed where hundreds of people might have worked back in the day which now the legacy land use zoning says it's industrial but it can't be used for industry because industry has moved and doing

different things , so it's now storing boxes , which is an inefficient use of land . So we're now looking at how to repurpose that land and create a mix of uses .

But in the process , what's becoming evident to me is that this idea that density is a more efficient land use is really problematic because we've now chosen a preferred planning approach which is going up . But the difficulty there is that the cost of that is very expensive .

I don't know what it's like over there , but we've looked just recently at taking a hypothetical school model . So a school in a new suburban area which might only be two or three storeys high , for example the buildings , and then you've got a field , a football field , say , is the cheapest form of school you can deliver .

If you want to deliver an infill school for the same school population , it might be a 10 or 12 storey building that can be several times more expensive to build . And that's not even taking into account the land , which is very hard to find .

That's not taking into account the community objection , because no one wants a school in their neighborhood anymore , apparently because of all the cars and the traffic . So the infill idea and the density idea it sounds nice in theory , it's very it's , it's , it's the loose , it's , it's the loose .

You know it's , it's tempting , but when you look at it in practice , you realize that we've actually chosen the model that is more difficult to do , it takes longer and it costs more .

It's because of the infrastructure that you have to bring in , it's because of the style of construction and the construction standards that you have to have in tall commercial buildings and it is , as Ross says , several times , if not an order of magnitude , more expensive to do that . But it's true , it is true .

The thing that I think is fascinating is that the planners if you were to go back to the sprawl argument planners didn't want sprawl because it seemed bland and faceless .

If you think of the old , the original instances of sprawl Sunrise Highway in Long Island , ventura Boulevard in San Fernando Valley in Los Angeles these were areas that had no urban center associated with them . They just had retail stores and houses kind of adjacent .

That model has given way to much more of a village model and I think that's what you mean when you talk about cities or suburban center centroids .

Is that a model that we're seeing in Canada and Australia ?

So it's an issue . But again , yeah , no , calgary has lots of vibrant little sub communities and they're very attractive and they're actually very expensive , but very desirable . And they're very attractive and they're actually very expensive , but very desirable . People are moving there . And you know where my son lives , in Bridgeland .

Basically , a place is a million bucks just a , you know , a regular house .

But when people were sent home and we had in this country some of the most ridiculous lockdowns anywhere in the world , but people were sent home , they rediscovered the convenience of having stuff nearby , you know , a local small supermarket rather than a big one , the local coffee shop or bistro .

And if we can populate those villages with the other things that people need , which is , you know , access to work , access to education , access to healthcare , access to open space , you're going to see , I think , a real migration around these centres .

Well , I hope we will , because then you start to create the opportunity for shorter commutes , because the idea of setting up large outlying dormitory areas and then putting all the jobs somewhere else , that's insane . You know we're going to kill ourselves with congestion if that's what happens .

And I know Alan Berger , I said , is out here this week and he talks about mixed use , not in the way that we traditionally do it , by setting up blocks of uses around the place , but almost an atomisation of uses so that they're sprinkled around like salt and pepper , which I think is a really attractive idea .

But once again , these attractive ideas can be very difficult to do in practice .

Yeah , david Seymour , my old friend whose name slipped my mind anyway . Anyway , new Zealand really has put something together , and the key is going to be to deliver it in this period of three years that they have power the National Party and the coalition with the Association of Consumers and Taxpayers .

We hear and I don't know if there's anything to it , believe it or not out of the Labour government , the new Labour government that has just been elected in the UK . They're talking about major planning reforms .

I don't know how serious they are , though , because there , as we've seen , is a real opposition to any peripheral expansion , that you will not deal with the housing costs unless you allow peripheral expansion with the housing costs , unless you allow peripheral expansion , and there are a number of us have come up with ideas that are being suggested along the lines of

new towns . At Chapman , we've published a couple of reports that suggest taking the interior of California , where housing affordability is bad , but not so nearly so bad as it is on the coast , and basically reducing the regulations and trying to make it more attractive to people , and so on .

Nobody's gone for that yet , and the thing that really concerns me , and if this sounds resentful , I'm sorry , but the planners have had power for a long time . This didn't start yesterday . Where have they been ?

This is one big problem , in my own view , is the public policy goal of housing is to house people , is to house them well , and that doesn't show anywhere , except , you know , in the theories that are never implemented .

dead or soon to be dead , but the bottom line is we were able to get in before this regime really took power in . You know , I say I bought my first house in Hollywood in the 1980s for $150,000 . I tell my students they all fall on the floor . Like you know , it can't possibly be . You couldn't buy a closet in Hollywood for $150,000 .

So what I wonder about is are we also creating a class and , to some extent , race , given that the younger population tends to be more diverse ? And an age issue ?

I know in Australia there was even a proposal that you try to get rid of all the Australians who own homes after 67 , that you're all supposed to move someplace else to make way , which this way they can deal with the housing . Yeah . So what I'm wondering about is has anyone talked about the sort of class and age issue related to housing ?

Because that seems to me to be one of the reasons why , for instance , we've had a great growth both on the left , which talks about public housing , and a great growth on the right , which wants something else than what we have now . Has anyone talked about what the class and age generational implications are ?

So age is , but class is less so a political issue . I think it's there . I think key workers , nurses , firemen , police , you know aged care , childcare these are the people who now face the greatest barriers to entering the housing market . Even renting is becoming problematic , chewing up a lot of their income . But that hasn't emerged as a political issue yet .

I think you know , if things keep going the way they are , it's going to become one for sure .

That's what they're really concerned with . Is there any kind of movement that's beginning to express itself in sort of class or generational lines to move people , maybe right now , to the right ?

You know , when I bought my first house in the mid 80s , it was 43,000 Canadian and I did want to mention here we've been very lucky at Frontier to have been . We've worked with Wendell for what ? 18 years now .

Wendell and one of the original people who worked on the Housing Affordability Index with Wendell was David Seymour , who is now going to be the Deputy prime minister of New Zealand and his fingerprints are all over what is going on in New Zealand and it's directly related to you , wendell , so you know a big feather in your cap .

Here's the question , though , to get to your class issue Right , there's always been real estate , has always been a piece of the economy that has generated tremendous wealth and has defined the generational transfer of wealth to elites , right , right , and with our era of low interest rates , we saw a lot of shifting in the ownership of real estate , both residential

and commercial , and we saw , for instance , a lot of pension funds and a lot of very , very institutionalized money Investment banks . Getting into that business . So if we're witnessing a genuine falling apart of that centralization of real estate , doesn't that challenge the highest tier , the most elite tier of the economy first ?

Is that really , and is that the reason why we're seeing resistance to change , because of the fear that maybe it's all going to fall apart and institutionalized wealth is going to fall apart with it ?

And if it goes into housing , it will be pretty catastrophic for a lot of companies if housing values suddenly went down the other . But on the other hand , in some ways maybe that would be better , even though I would be a big loser .

It would be better if we got to a situation where the prices readjusted , like , for instance , in a relatively unregulated market like , let's say , in Texas , their prices are going down . I get these things . Oh , housing prices are down in Austin or Dallas , isn't that horrible ? I said no , that's what should be happening . Think of the situation .

And just to amplify your point , we're seeing a lot of bottom feeders in the commercial real estate business , seeing a lot of bottom feeders right in the commercial real estate business and with the with the uh institutionalization of single-family home ownership in large corporations , which I saw a statistic recently that said about 20 of the us housing stock is owned

by large entities through reits through , you know they don't own each individual property right , they own them in a collective , usually some kind of public entity . I wonder whether we're going to see some bottom feeding going on there if that market collapses .

The fact is that we have housing that is affordable in Indianapolis , in Cincinnati , in Texas , et cetera , et cetera , where planning has not come in and imposed a legal framework that basically erects these barriers that raise the cost of land and create , in those places , incentives on the part of homeowners to never support any of this out of fear that they'll

lose the money that they've got , and this is a very big problem , and so I don't see any likelihood ever that you're going to have a bust that's going to cause the problem . My big concern is in the two-thirds of the United States where there is still some hope , and the one-third of Canada where there's still some hope .

That those places places in eastern Canada and the prairies and the Midwest and the South here , that those places places in eastern Canada and the prairies and the Midwest and the south here , those places , if they go and follow Portland and Seattle and California , the middle class will be finished which is , by the way , what the OECD has expressed great concern

about , because the same thing has gone on in Europe as well as they followed the pied piper of the uh of the planners yeah , well , you know , pickety and others have been making the point for a while .

Uh , you want to live decently , you got to inherit money , you got to inherit houses that the people who are , who come in , who work hard traditionally , you know , made their own money are . It's almost impossible for them to buy a house .

So I mean , the question is , I think going to be over time is are we going to essentially take away or reduce the enormous profits that people like me have made on my housing in order to create a better situation for the next generation ?

And , of course , one of the things that bothers me a great deal is one solution is we're going to go into your neighborhood of single-family homes and we're going to densify it . I remember Ross visiting Curran Guy in Sydney and there was a lovely , lovely area and all of a sudden , in the middle of single-family homes are six-story apartment buildings .

I mean , is that going to be the proposed future ?

And the other problem with that theory is that we tax our new supply very heavily . We don't tax the existing stock . So if you trade a house here , we have a transfer duty it's called a stamp duty which is around about 3.5% of the price when you sell from one person to the next . That's for an established , pre-existing home .

You go to build a new home on a new titled piece of land . 30% of that price is taxes , charges and regulations , 30% , and one third of all of that 10% is a national GST . Goods and services tax only applies to new housing right .

And then we decide , ah , we're going to be clever here , let's improve the environmental performance of housing , we're going to introduce all these new building codes to make them more energy efficient , and so on . But that once again , only applies to new stock , only to new .

All of the pre-existing houses are immune from that regulation , so it adds more cost to delivery of new stock . So , building new stock , whether it's on the outlying fringe and Wendell , the problem we've now got is we could flood the market with land . It won't make a lot of difference anymore because it's the cost of the new supply .

We've got to untangle that regulation and if you bring in new supply , whether's apartment buildings or or smaller townhouse styles , that is all heavily taxed . So I really don't know how we're going to walk our way back out of this mess is the same situation in canada in canada .

And again , the issue is you know that government will be gone soon and again , I personally , I don't think the Fed should be in that space and you know it is a bit of a mess .

Where do you think government will take that ?

We can't have a sensible discussion about the perils of housing affordability and locking out an entire generation when even building a starter home on the outskirts is now beyond the reach of young families . Building a starter home on the outskirts is now beyond the reach of young families and at the same time . So we're really worried about that .

But we're also worried about saving the planet . So we're going to impose all these extra costs of regulation just on you guys , because the people who are living in the inner city , in the multi-million dollar houses , they're all exempt because they got in first . So there's a real policy imbalance here .

If you wanted , if you were really concerned about the energy efficiency of housing , you would introduce mandates that every homeowner had to comply with . But the risk there , of course , is that there's your political backlash , because existing homeowners would say oh no , I'm not voting for you , you're gone .

So you know we get away with it , because when you buy a new house or a new apartment , there's no separate ticket that says here's your tax and regulatory bill . It's all built into the price , so people don't even know how much extra cost is being added .

You can't have , as I understand it , no new housing with natural gas for cooking or heating or for hot water . It all now has to be electric and your cooktops are all now going to be induction . Now , that's a nice theory , but you've got all of your existing pots and pans and stuff .

You've got to chuck all that out because you've got to get special stuff for the induction . So it's another cost .

They're the ones who are pushing for these policies . The people who are suffering the most are the ones least able to afford them , and they probably don't even realize that this is what's making their new house or their new apartment so much more expensive than it needs to be .

Because it's almost as if we create a situation where we make it impossible for young people to get a house in which they want to raise their family , and so that our solution is to bring in huge numbers of immigrants who you know are coming from places where they're used to living in sort of bad conditions .

So we sort of leveling everything down , but the birth rates are dropping in Australia , in Canada , in the United States . Do you think this is something that is part of the policy agenda ? I remember doing a seminar in Berkeley , california , and a guy from the city of Oakland said well , we don't need single family homes because nobody has kids anymore .

So there's nothing new about Australia and immigration . But what has happened is that our rate of natural growth has declined and young people are certainly putting off , they're delaying having families or they're having fewer children . And we had , famously , a federal treasurer a few years ago .

Peter Costello said you know , have one for mum , have one for dad and one for your country . But that's fallen away . So the numbers are coming right back and we're reliant now entirely on immigration for population growth . And the challenge there is that not just the numbers that are coming in , but new arrivals are also more dependent on social services .

They don't have private health care , they don't send their kids to private education , they don't have the money to buy , you know , a battery , electric vehicle , a Tesla or something . So they're placing a greater strain in the early years of their arrival on the economy than might otherwise be the case .

I mean , they're talking about hollowing out Japan dramatically over the next 50 years and China could lose as much as half a billion people in the next 50 years . So you know that's the flip side of immigration . I guess net net from the world it looks like .

If housing prices are going up everywhere , uh , we're probably going to be in for a lot more of this .

We need to understand what's driving the cost of supply up needlessly and how it's an unfair , very uh distortion of tax system and the supply . But we've also got to understand on the demand side that through immigration , we've got to moderate that to a level we can cope with . You know , it's a bit like driving through a school zone at 100 .

You wouldn't do it , you're going too fast , but there's a sensible speed that you can do it . So you can't have a regulatory system like we've got , which is slow and cumbersome and unresponsive and expensive and at the same time accelerate your growth and we're seeing the collateral damage of that . Now what's going to happen ?

Well , I think the demand side , the pressure is going to come off . We're going to slow that down , I hope . And on the supply side , I just wish we'd get some common sense in the policy formation area , but I'm not hopeful .

The incoming prime minister , if it's going to be Pierre Pauliev . He keeps talking about getting rid of the gatekeepers , which sort of is hopeful , in the sense that gatekeepers is a signal of control , political control , too much regulation .

Densification , it is not the answer . People are moving away and I don't see any serious way that the markets that are out of control in the United States are going to be able to recover . That's why it's so crucial that we retain the ones we've got . But it is different .

One hopes that when they finally realize that the densification doesn't work , maybe we'll begin to do something that works . But that's decades away , I fear .

Thank you so much for being with us on the Feudal Future podcast , and we hope that you can join us again soon .