Should we blow up the housing sector?

I was listening to a Hub.ca podcast on the housing situation in Canada the other day while driving and journalist Amanda Lang informed us that the ‘financialization’ of the housing sector is the problem. I assumed she was talking about issues like credit default swaps and efforts to de-risk exposure to mortgages. Or maybe she was talking about foreign buyers scooping up houses to flip them or owners turning their homes into revenue generators through AirBnB. Or maybe even the financialization of the equity people have built up in their homes.

Then she said something like the REITs aren’t going to be happy when we take away their assets (or something like this, I can’t find the original statement).

The interviewer didn’t push back.

So, the solution is to get rid of investor-owned residential real estate? If so, who owns it? The government? A massive move to cooperative housing? She didn’t go into details and maybe I even misunderstood her but I can’t believe the solution is to blow up the housing sector as we know it.

I have written many times that there is a strong public interest in having a well-functioning housing sector that is providing housing options aligned with the income levels of households in specific communities. I want to see municipal housing plans with projections. I want to see policies designed to support ‘affordable’ housing and I want subsidized housing for those that need it. From what I can tell, cooperative housing models also look interesting.

I think governments should encourage a robust, competitive market in the housing sector. It should work to ensure there is a sufficient workforce to meet labour demand.

But I’m not sure I want to throw the baby out with the bathwater.

In many markets, we don’t care too much if there is dysfunction. If the luxury goods market is facing huge price increases, not that worried. I assume if Heinz puts up the price of its ketchup too high, other producers will swoop in. But there are a number of markets that are fundamental to daily living - energy, food, housing - where there must be a public interest standard. And by public interest, I am not talking about NIMBYs. It is in the public interest to have a well functioning housing sector that is providing housing options aligned with household formation and household income.

I don’t think that means getting rid of the REITs or other real estate investors but it does mean government and community stakeholders should have “well functioning housing sector” at the top of their in-box.

Don’t blow the housing sector up. Encourage competition. Ensure a workforce. Attract housing-related manufacturers. Did you know the GDP from furniture manufacturing in NB is down 40% from its peak 15 years ago or so?

My upcoming column in the TJ is going to cover the potential of attracting and growing housing-related manufacturing in our province and region.