For over a year the media has reported on the housing crisis. The ongoing challenges facing people in their ability to find affordable housing. The challenges are being experienced by both renters and buyers.
The two most common reasons being touted for the housing crisis are rising interest rates and the age old issue of supply and demand. While these are definitely true, I believe there’s an added reason.
As outlined in a previous Blog on this site, Affordable Housing Crisis, there is definitely an issue of wages not keeping pace with the rising pace of home prices. But, that’s not what I’m referring to here. I’m referring to the increasing size of the houses being built.
I live in a municipality of just over 100,000 people here in Canada. Driving around different areas of the city, there’s a definite difference in the sizes of houses being built over time. Most houses built after World War 2 (or even earlier), average around 800 square feet on the main floor. Many of those houses are one and a half storey with bedrooms on the upper floor. Then around the 1970’s or so, most houses started increasing in size to be around 1000 square feet on the main level. Property taxes on these homes built in older areas of the city generally average around $3,000.00 per year (based on current real estate listings).
Then driving in newer areas that have had homes built around 2000 or so, it’s common to see houses built around 1500 square feet or larger. Also annual property taxes are usually double the amount (based on current real estate listings). In one example, a 4 bedroom, 2 storey house built in 2005 is 3303 square feet with annual property taxes listed at $10,213.00.
Based on what I’ve listed there are a few takeaways. These larger houses obviously cost more and take longer to build. Developers are likely more interested in building these larger homes in order to get the greatest profit possible. In addition, municipalities are likely to favour the larger builds as they are collecting two to three times the amount of property taxes from that single property.
One can not forget the various utility companies. They also would likely favour larger builds as a larger house would require more energy to heat and cool. The more bathrooms these larger homes have, the more water they use. Most homes that I’m aware of that were built prior to the 1980’s only had one bathroom. The aforementioned house built in 2005 and 3303 square feet, has 4 bathrooms.
I’ve seen some videos online where some builders have commented on supply chain issues as the reason why housing costs are going up. There will be supply chain issues if these houses are approximately twice as big as what used to be built, requiring twice the amount of materials. Then of course using our example of the house having 4 bathrooms.
There are many advocates of what is often referred to as the Tiny House movement as a solution to the housing crisis. While that might benefit someone who is single or a couple with no children. However, for a family of four, a Tiny House would likely not be practical.
Families of 4 have functioned quite well in houses that are around 800 to 1000 square feet for decades. Growing up, my mom, sister and I lived in a house that was around 750 square feet on the main level and was a one and a half storey with two bedrooms upstairs and one bathroom.
Our current family of 4 live in a bi level house that is just under 900 square feet on the main level, with a finished bedroom on the lower level. We later put in a second bathroom on the lower level. Our annual property taxes are just over $3,200.00 per year. We couldn’t even imagine having to pay $10,000.00 a year in property taxes.
There are many other people who think the same way, as we have seen houses that are up for sale in our area of town that are quickly sold. These people are quite content with a house that is roughly 1000 square feet and property taxes that are more reasonable.
One also has to ask, what is the potential negative impact to the overall economy with the continuation of these larger (more expensive) homes being built? If more and more families are left with no choice but to purchase a larger (more expensive) home, they are having to spend a lot more of their disposable income on their mortgage, taxes, insurance and utilities, in comparison to a smaller home. That means a lot less disposable income that they can spend elsewhere in the economy. The same holds true if people are having to pay such a high monthly rent. It’s far less that they otherwise would spend elsewhere. In a recent CTV News article, the average rental unit in Canada hit a record high of over $2,000.00 per month.
According to Statistics Canada, Canada’s population grew by more than a million people in 2022. This was the largest growth rate since 1957. So, if Canada is experiencing the same population growth rate as in 1957, would it not make more sense to build smaller homes like the ones built during that period, in order to build as many as possible to house everyone?
It’s also important to note that back in 1957 that population growth was primarily fueled by the birthrate. Those children were still living at home as they were growing up in the following years. Those children obviously didn’t need housing until they moved out on their own, approximately 18 years later. The current population growth that is fueled by immigration, these people need housing now.
Until next time, stay safe, healthy and strong.
If you found the content of this blog beneficial, considerbuying us a coffee. It would be much appreciated. Thank You.