Through TAS, I’m involved in an affordable homeownership seminar at Ryerson University. The goal of the semester is to develop a comprehensive policy document for how best to deliver affordable homeownership units in Ontario. 

The students are still working on their final report, but I wanted share one thought that came to mind as I was reviewing the draft.

As a first step, I think the question of affordability needs to begin with a broader look at the market rate housing market. Have we optimized for the delivery of new housing or are we operating in a state of perpetual supply deficits?

The reason for this question is that—as I’ve written before—I subscribe to Edward Glaeser’s argument that easing housing regulation and increasing supply can go a long way to broadly improving housing affordability. It won’t make New York as affordable as suburban Houston (Glaeser says), but it will help to avoid some of the outrageous pricing that can occur in severely supply constrained markets like San Francisco.

Once this has been addressed, it then comes down to deciding how you want to make up the shortfall. If you want to provide housing below its costs (the market rate), somebody is going to have to pay for the difference. However, if you’ve optimized around the market rate, it means that the required subsidies should be less than they otherwise would have been. This makes it more cost effective for governments, or whoever else is providing the subsidy.

So my point is to not take the market conditions as a given when looking at affordability. Are there structural changes that could be made to improve affordability more broadly?

There’s certainly no easy answer, but it’s an important discussion to be having. Let me know your thoughts in the comments below.