Induced Demand in Housing Development
A photo of the Telegraph building being constructed on Canterbury Street. So far in 2021, We have heard a fair bit of attention being given to the issue of housing. With protests happening and a growing population, we are starting into new territory for New Brunswick and Saint John which we have not had to explore in some time; how to keep up with demand! Usually, we hear it said, “in NB we don’t get the booms and we don’t get the busts!” referring to the economic cycle that places like Alberta and Ontario face. Instead, NB sort of trudges along with minimal growth in GDP, population, and range of other metrics. But now, with a hot housing market in SJ and other areas of the province reporting significant growth, we need to think differently.
In the affordable housing debate, some put all their faith in new construction and development at all costs. Some are “anti-development” citing gentrification and other negative realities. Still, others are not sure what to think. To be fair, both sides have valid points. In the last blog, I spoke openly about the problem we face around dilapidated housing, rising costs of building materials, and the strain that exists financially in building new. In this blog, I’m going to talk about another factor that should cause us to radically revisit how we view our existing housing stock and how we build municipal policy around its redevelopment.
New development is important, there is no question there, but who we build it for, where we build, how we incentivize, and what our expectations are from it are up for debate. In economics, there is a term known as “induced demand” which is mostly used when talking about roads. The idea is that even though we may add more lanes to our highways that demand for those roads grows as people are “signaled” to live further away from the core of the city. Eventually, the new capacity of the roads is reached once again, and we start over. Toronto has 18 lanes in some places, and it has not helped traffic congestion.
The same goes for the housing discussion. Although roads are free and suffer from a more obvious induced demand effect, housing seems to suffer a similar fate. Just a quick look at cities like Calgary, Toronto, Vancouver, and Montreal are proof that more available housing does not make for more affordable living. More availability around housing often signals the world (with some obvious exceptions around lack of job availability or other negative detractors) that the community is improving and would be a good place to move to. With all the development uptown right now (The Telegraph, Gothic Arches development, The Wellington, the potential Landmark development, The Fundy Quay, and the South End Learning Commons) it is unlikely that housing prices will stay close to what is affordable for our median income earners.
Saint John went through a period when we were so desperate for development, that we took every opportunity there was to get it. It is too late now to go back and revisit this, but its apparent to me that we need thoughtful engagement that considers this if we are to resist the pitfalls of induced demand and runaway gentrification. Uptown and possibly the south end will likely be unaffordable for many of those that currently live there in the next 5 years. This will cause those who live and find support here to move further away from where services and supports are offered which will cause further hardship on the poorest of us.
We may have been desperate for growth in the past, but now that investment and growth are here, we do not need to be desperate, we can be daring in how we approach development, so we build a city that works for everyone. This means crafting unique incentives and policies that help to focus on development in key areas around the entire city. In doing so we can ensure that all Saint John’ers can have access to safe and affordable housing. This is what I am passionate about; this is what I’m committed to.