Evidence of Canada’s housing crisis continues to mount. Rising interest rates and more stringent mortgage regulations have seemingly done little thus far to slow down the market. Sale prices and rental costs continue to reach historic highs in major cities and increasingly outside of them.

The Trudeau government has gradually come to recognize the issue’s urgency. The appointment of Sean Fraser as the new federal housing minister reflects an effort to better address it through a combination of incremental policy and stronger communications.

The main problem however may be how the government and adjacent experts and scholars have come to conceptualize the problem. So much of their attention is focused on increasing the supply of affordable housing rather addressing housing affordability in the market-based share of the housing market. Yet the distinction is key to developing policies that actually respond to growing public concerns.

The housing market can be understood as a spectrum or continuum across which all forms of housing “stock” is accounted for: shelters, social housing, rental, and every shape and size of single-family homes (e.g. townhouse, duplex, single detached, and so forth). This spectrum of housing types has corresponding prices, ownership and rental models, and demographics. 

As part of this spectrum, there’s non-market housing which includes public housing, non-profit housing and non-profit co-operatives and market-based housing which refers to homes that are sold or rented according to market forces. The former represents about 6 percent or so of the overall housing market. The vast majority of Canadians live in the latter.

Both, of course, are important and inter-related in some broad ways. But the government has failed to explain how its focus on expanding affordable housing (which may be a good idea in and of itself) will manifest itself in the market-based sharing of the housing market. There’s evidence that it may help those on the margins of market-based housing but it’s far from obvious that it will improve housing affordability for most Canadians.

It’s important therefore that the Trudeau government and its provincial counterparts turn their collective attention more fully to the entire housing market, including the more ambitious construction of market-based housing.

New home construction sets the economic, or market, baseline for housing in any given area. After all, “affordable housing” is pegged to new home construction, hence why it’s often referred to as “below market value housing.” There’s a case in fact that the causal relationship between affordable housing and market-based housing goes the opposite way than one would think based on the government’s disproportionate focus on the former. Slowing the growth in market-based prices (or even reducing them) through more building would actually help to stabilize prices for affordable housing.

But, more fundamentally, the best way to stabilize prices in the market-based share of the market is to bring supply and demand into greater equilibrium by expanding supply. Population growth exceeded 1 million in 2022. Yet we have historically built something like 285,000 homes per year. That gap will need to close or the country’s housing affordability challenges will continue to persist.

It speaks to the inherent problem with the federal focus on affordable housing over market-based housing. The longer that governments narrowly focus on affordable housing as the rest of the housing continuum continues to become less accessible to Canadians, the risk that more and more people fall out of market-based housing and overall demand for government-funded affordable housing will grow. The calls for more government funding from advocates will inevitably follow. Suffice it to say, it’s expensive to build affordable homes when the entire market is increasingly unaffordable. 

Recent data for Scotiabank Economics makes this point quite clearly: “While the National Housing Strategy has provided an important framework to anchor actions, its $78.5 bn funding pales in comparison to Canada’s housing stock at $3.8 tn (or 2 percent which doesn’t even keep pace with annual depreciation).”

The government simply cannot spend its way to affordability when it only focuses on one end of the spectrum—particularly the one that touches on a relatively small share of the overall market.

Thus far, however, Minister Fraser hasn’t signaled a major policy departure from his predecessors. He recently doubled down on the government’s emphasis on affordable housing while at the same time proclaiming that, “Our goal is not to decrease the value of [a homeowner’s] home.”

The Conservatives, by contrast, seem to understand the magnitude and nature of the problem. They’re focused primarily on the market-based share of the housing market and are prepared to use public policy to “build, build, build.” It’s no surprise therefore that their housing policy seems to be connecting better with Canadians.

It’s bigger than politics though. This “whole-of-market” approach is a useful framework for actually addressing housing affordability. It’s up to the Trudeau government for a proper reset on the housing file and match the Conservatives with its own whole-of-market approach to Canada’s housing crisis. 

The post-COVID economy has been a little nuts. After two years of mostly sitting at home trying not to die, people are living it up. And the global economy is running hot. Central banks around the world have sharply increased interest rates in part to cool off consumer demand. Consumers aren’t having it. 

With everyone with any disposable income trying to make up for two years of lost experiences, the cost of leisure has skyrocketed. Hotel rooms in mid-sized American cities are running around three hundred American dollars. Flights have tapered off a bit from last year, but they’re still not cheap. But if you really want to see the excesses, look no further than Taylor Swift’s Eras tour. 

I’m not exactly up to speed on pop music. Frankly, it’s been a decade since I’ve paid attention to new music. So I didn’t really grasp the magnitude of the Taylor Swift phenomenon until I was booking a hotel room in Cincinnati a few weeks ago. Reasonably normal-looking hotels had suspiciously negative reviews. So I decided to dig into it. 

It turned out the Eras tour had blown through town two days before, leaving behind a trail of negative hotel reviews. Since everyone in Southwestern Ohio and Northern Kentucky with a pulse wanted to go to the concert, hotel prices ballooned. Swifties were not happy. Prices doubled, and normally abundant but temporarily scarce parking spaces went for fifty bucks. Reviews for the hotel I booked took such a temporary beating that I was able to lock in a room for about twenty percent below the current weekday rate. Thanks, Swifties!

Of course, hotel prices aren’t the whole deal. Usually getting and staying somewhere is the most expensive part of a vacation. Not if you’re going to see the hottest show in the world. Even in Cincinnati—hardly the biggest concert market—ticket prices climbed to over a thousand dollars, with last-minute tickets dipping to the eight hundred dollar range. 

Fans are understandably frustrated. After all, not everyone can shell out a thousand dollars for a concert ticket. The trouble is, there’s not enough Taylor Swift to go around. Someone is going to miss out, no matter the price. 

To illustrate this, let’s consider the recently announced Toronto leg of the tour, set to take place in 2024. The tour will include six shows at the Rogers Centre, which has a capacity of just over 50,000 people. In other words, there will be around 300,000 seats available. In other words, fewer than one seat for every ten Torontonians, or enough for around one percent of Canadians. It’s not a surprise that tickets are going for thousands of dollars on the resale market. 

No matter how you distribute tickets, some people are going to be left out. Who gets left out will be determined either by prices or by some form of arbitrary rationing. We can argue about whether it’s better that some people are able to profiteer by reselling tickets for several times face value, or whether it’s better that people are excluded by some arbitrary, non-monetary means (say, by picking people at random and preventing resales). But there isn’t really a third option—we can’t make more Taylor Swift. At least not with current technology. 

Sadly, Taylor Swift won’t be young forever. One day the stadium lights will go out. Some people are going to miss out. That sucks. But there’s no way around it. We can’t all be there for the big moment. Not always, anyways. 

What interests me about the Eras tour isn’t the tour itself or even the entertainment business. It’s about how people think about scarcity. We see it in everything from concert tickets to housing. When there are more potential buyers than sellers, prices tend to go up. People often conclude that it’s simply a matter of greed. Building one more “luxury” condo I can’t afford won’t solve this! And that can very well be true when there’s a severe shortage. 

Unlike unique, unrepeatable events, most things aren’t inherently that scarce. We can actually build our way out of housing shortages—if we choose to. There’s a reason why housing prices are much lower in fast-growing cities like Phoenix and Dallas than they are in prestige cities like San Fransisco and New York. They build way more houses!

On the other hand, Taylor Swift could probably double the number of shows and tickets would still be expensive. There are just so many people who want to see the tour, and who would be willing to go several times. By contrast, there are only so many houses anyone will buy. Even speculators. 

I worry that we learn lessons from these edge cases that aren’t really applicable to normal situations. The fact that there isn’t enough Taylor Swift to go around should tell us precisely nothing about public policy. Most things aren’t as scarce as concert tickets for the biggest musician of a generation at the height of her popularity in the wake of a global pandemic. 

Supply and demand usually works just fine, when governments stay out of the way. There’s no lesson here, as tempting as it is to search for one. 

Hopefully, as the COVID hangover wears off, things will continue to normalize. Travel and leisure have become rather expensive. Hopefully, the era of $300 Radisons is over. But the hottest concert tickets in town will probably always be expensive. There’s just no way around that. Not until we figure out how to clone Taylor Swift.