Bob Ransford
Sun
Vancouver isn’t the only place where house prices have soared in recent years. The revival of the B.C. economy is resulting in new levels of in-migration and job creation in population centres and rural areas throughout the province, pushing house prices up almost everywhere.
Despite this upward trend, our little corner of the world, where we like to think we live in a special Lotus Land, is neither the world’s highest priced real estate market nor a price-curve leader. Soaring housing costs are a reality in most western world population centres today.
Someone suggested to me the other day that the answer to housing affordability in the Vancouver area is simple. Stop the supply — bring a halt to growth. I reminded them the next step would be shutting down our airports and border crossings if they wanted to avoid the highest home prices in the world.
People will continue to migrate to this part of the world and other quality urban centres because of the quality of life they believe they will enjoy. Stopping growth only means increasing the cost of housing, not lowering it.
Smart growth, more compact communities, smaller houses–these are a few of the answers to lower housing costs.
There are others ways to lower the cost of housing as well.
My prediction is that, as housing prices continue to increase in North America, we will see a new consumer activism begin to develop. This activism will begin to get to the root cause of increasing housing costs — or at least suggest ways of mitigating housing costs.
Let me point to a few of the obvious areas where the economic costs of housing — the real, physical costs of producing the home as a product — could be lowered.
Construction labour costs can be mitigated through the contribution of sweat equity. In the 1960s, many starter homes were sold with unfinished basements or partially finished space in the upper floors. Homeowners invested their own human capital in finishing the home.
This not only lowers the labour component in the cost of new housing, it also reduces the over-all finance charges by lowering the original amount financed.
I predict you will soon see builders construct more partially finished homes where homeowners have the opportunity of buying at a lower price and then investing their own human capital in finishing the home.
Another way of lowering the cost of housing is designing and building more durable housing with a longer expected lifecycle. It is difficult to envisage a home more than 100 years old in our part of the world, but in Eastern Canada and throughout most other parts of the world it is not uncommon to be living in a home more than a century and a half old.
The longer a building lasts, the smaller the economic costs per generation of homeowner. Today in this part of the world, we’re tearing down homes built less than 40 years ago, replacing them with buildings that probably won’t last even that long.
Imagine using more durable materials than wood to construct a home.
For example, a slate roof might last 50 years instead of the 20 years a cedar roof lasts. Initial costs might be higher but long-term costs would be lower by increasing the lifecycle extension and lowering the replacement costs for owners through the generations.
Another idea that has been floated as a trial balloon in the past is lowering the cost of selling a home by replacing the real estate industry’s multiple listing service with a non-profit cooperative housing exchange.
An exchange certainly wouldn’t replace the services offered by a professional realtor and this concept needs some serious evaluation before I would advocate it.
Lowering the selling cost is certainly worthy of serious study though, considering that an average home is bought and sold every eight years and the average homeowner pays a realtor a percentage commission at least six times during their lifetime. If even a portion of those fees could be applied to reducing the mortgage on the home, it could result in substantial savings in interest charges.
As housing prices continue to climb the upward trend line, consumers will become more savvy, looking for innovative ways to cut the cost of housing. These are just a few ideas. Perhaps there are others.
© The Vancouver Sun 2005