Canada's housing market has become our national obsession, and with good reason. Years of skyrocketing prices are now meeting surging mortgage rates, and the result is some of the least affordable housing in the world. What's driving that affordability crisis, and what comes next?

On this episode of Free Lunch by The Peak, we speak with Mike Moffatt, a Senior Director at the Smart Prosperity Institute and Assistant Professor at Ivey Business School. Mike argues that a lack of supply is the key driver of expensive housing in Canada—we get into the details of why that is and some of the ways our dysfunctional housing market warps our economy.
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Taylor Scollon: Hello, and welcome to another episode of Free Lunch by The Peak. I'm Taylor Scollon.

Sarah Bartnicka: And I'm Sarah Bartnicka.

Taylor Scollon: And we're back with the first episode of 2023, kicking off the new year with an issue that we know is at the top of a lot of people's minds pretty much all the time, which is housing. And we've got a fantastic guest with us today to unpack what's going on in Canada's housing market as we head into 2023, what's driving the growing affordability crisis in the market and what needs to be done to turn that around. Mike Moffatt is an Assistant Professor in the Business, Economics and Public Policy group at Ivey Business School, and the Senior Director of Policy and Innovation at the Smart Prosperity Institute. Mike, thanks for joining us today.

Mike Moffatt: No, thank you for having me.

Taylor Scollon: I think a good place to start here would just be to take a high level overview of where the housing market is today, because I think it's changed a lot since the start of the pandemic. So maybe you can just walk us through that period from 2019, 2020 until today and describe what's happened and where we're at right now.

Mike Moffatt: Okay. So if we go back to before the pandemic, and I know this is hard to remember the before times, but in those before times, we had a really hot housing market in Southern Ontario. Starting in about 2016, Ontario had a population boom. Southern Ontario had a population boom, and it caused not just housing shortages in the GTA, but this phenomenon called drive until you qualify, where families, you can imagine a couple living in downtown Toronto and a baby arrives or baby comes along the way and they're like, this just ain't going to work. So they basically hop in the car and they drive as far as they need to go in order to find a house. So what that caused was huge price increases in secondary markets like Kitchener, Waterloo and Brantford and Woodstock and London and so on.

So that was a context before the pandemic. Once the pandemic hits, we saw that accelerate. We saw that there was less of a need to be in the GTA, and furthermore with rock bottom interest rates and people getting a variety of cash through sub and other mechanisms. We saw this massive price spike. And as well, we saw out migration into other markets, particularly Atlantic Canada, where we started to see prices spike in places like Monkton and places like that, that historically hadn't seen much in the way of price increases. That's what we saw during the pandemic. The prices went up everywhere, but particularly in secondary markets in Southern Ontario along with Atlantic Canada. Other markets like say Regina went up but not nearly to the same extent.

Now in the last year with booming interest rates, interest rates going up from basically nothing up to four and a quarter percent on the overnight rate, that's caused the housing market to essentially dry up in a lot of these historically hot markets, where not only are prices down, but transactions have fallen to levels that we haven't seen since the financial crisis, because basically nobody wants to buy a house when interest rates are this high. But as well, because the sticker price of houses has gone down, sellers are going to be like, well, I don't really want to sell a house for 250,000 less than I could have got six months ago. Even though that that's not particularly relevant because none of us have a time machine and can go back to those prices, there's still this loss aversion that happens.

So in Southern Ontario we're seeing big price declines, though not necessarily any increase in affordability, because any changes in the prices are more than offset by interest rates. But what we're still seeing is increases in prices in some of these non Ontario secondary markets. So Calgary and Edmonton are seeing price increases, Alberta is seeing price increases. And again, a lot of that's just due to out migration of young people going, I can't afford to live in a Toronto or Oshawa or Oakville, but I can still afford to get a place in a Calgary or an Edmonton or a St. John, New Brunswick or St. John's, Newfoundland. That's where we're seeing these really uneven markets with price crashes in Southern Ontario and prices holding steady if not increasing somewhat in some of these non Ontario, non BC markets.

Taylor Scollon:

And just to give us a sense of what we're talking about when we're talking about prices and affordability, how does the price to income ratio, or are people in Alberta able to afford houses with their incomes whereas people in Ontario aren't? Or how has that affordability metric changed I guess over the past couple years?

Mike Moffatt:

Historically speaking, the thinking had always been three to one, that you want to get a house that's three times your combined family income. That's essentially dried up almost everywhere. But in markets, again, like a Calgary, Edmonton or a Regina or Saskatoon, you're still seeing fours and fives, still fairly reasonable amounts at interest rates that are higher obviously than we saw a year ago, but not that much different than say 20 years ago. So you still have a number of markets across the country that are quite affordable. Quebec is a whole different story that particularly outside of Montreal, Quebec is incredibly affordable relative to the rest of Canada.

Unfortunately in markets like Southern Ontario and Lower Mainland BC, you're getting into that 12 to 15 times income ratio, which has made it incredibly, it's mind-blowing that we're in double digits here, which has made it essentially unaffordable unless you you're getting help with a down payment from parents or you bought meme stocks at the right time or that kind of thing. So for young people in these markets, it feels like they've had to win some form of lottery that either that's buying some investment at the right time or a genetic lottery where they chose to have the right parents. So it is a huge, huge problem. And then also what we're seeing in those markets is because the ownership side is so difficult, that's put a lot of pressure on the rentals market.

So because young people can't afford to buy a home to live in, they're renting places, and now we're seeing across Southern Ontario, rents go up 20 to 30% over last year. So what happens in one end of the market affects the other. Young people, I'm 45, so I basically define young people as anybody younger than I am, are feeling squeezed. It's a moving target every day. They're feeling squeezed because it's like they can't get into the ownership market, but at the same time they're paying over two grand a month for a small two bedroom apartment. And when you're doing that, it's hard to save up for a down payment. It's made it very, very difficult.

Sarah Bartnicka: You also just feel a bit silly, but it's interesting that you bring up the rental market. I want to get into the regional variations that you mentioned. You call out Quebec, the prairies are another good example. Can you help us understand why certain provinces have been able to, I guess, cushion that price growth a bit more? We haven't seen the spikes or they're able to maintain that affordability relative to income. What provinces are or regions are doing it well and what are the reasons behind that?

Mike Moffatt: Ultimately it comes down to whether or not housing completions are keeping up with population growth, right? Essentially it's not the entire story, but that gets you about 70 to 80% of the way there. So you have some markets like most of Quebec, that just haven't been growing all that fast, that their populations are pretty steady. So they haven't had that much trouble keeping, building up with population growth. That would've applied to most of Atlantic Canada prior to about a year ago or two years ago when all the Ontarians started moving in. It was the same thing where they weren't growing all that fast and that put a lid on rents. So that's one side of the market that's been able to retain affordability.

The other side I would call the fast-growing population, but fast-growing housing as well, that they've been able to keep a lid on things. So that would be your Calgary, your Edmonton's, to a lesser extent Montreal, Saskatchewan as well. And there's basically two models that you can use to get there. One called the Saskatchewan model, where it's just like we've got a lot of land and if we want to build out, we can build out, and there's not that many constraints. It's a very sprawl centric model that they're able to do in a way that say Toronto can't, because either if you're Toronto and you're trying to build out, you're either hitting Mississauga or you're hitting Lake Ontario, there's just nowhere you can go.

And you get that a little bit in Calgary as well. But you also have this secondary way like a Montreal, or to a lesser extent, Edmonton, that's been more on building other forms of housing. So missing middle things, where in Montreal, and it just jumps out in the data, how many families live in two to four bedroom apartments in mid-rise type apartments, and it's a housing farm that doesn't really exist in much of the rest of the country. In Edmonton, there's less of that, but they've also focused more on building infills done things like removing minimum parking requirements and that kind of thing. Those are the two models for affordability. Either be somewhere that's not growing their population a lot or somewhere that's able to keep their housing stats high.

Where in Lower Mainland BC and Southern Ontario, those haven't really been options. Partly for regulatory reasons and partly just for geography. In Vancouver you're hitting the mountains in the ocean. In Toronto you're hitting other communities or Lake Ontario. So that really limits your ability to build outward.

Taylor Scollon: So the geography, I guess we can't really do much about. But the other side of it, the regulatory side, I want to get into that a little bit. What is the role of the municipal government, the provincial government, I suppose the federal government in setting these regulations that seem to limit new home completions in Southern Ontario and Lower Mainland BC? What policy is going on there that is preventing that supply from being billed?

Mike Moffatt: It's a number of things. So again, we talk about parking minimum. We have these rules in places where we're trying to build a mid-rise apartment near an LRT or subway line. And the government says, okay, well you have to put in so many parking spaces. Developers are like, well, we don't have the room to do that. And secondly, that defeats the purpose of building these along transit lines and trying to incent people to use transit and then all of a sudden say, okay, you need to have at least one parking spot or if not two per unit. So regulations like that play a role. Zoning issues play a role. If you look at most of our cities in Southern Ontario, they're zoned for single family homes, and that's the only form you're allowed to build, which isn't a particularly efficient use of land.

So you have all of these constraints and we're starting to see cities deal with those kinds of things. So the city of Toronto, for instance, Mayor Tory has pushed through a number of reforms that have been somewhat controversial on zoning reform, on legalizing rooming houses and all of these alternate forms, which I think will make a difference. There is a provincial role as well, because one of the challenges, let's say you're Brantford or one of these secondary markets in Southern Ontario or Woodstock or something like that. You can do all the right things on housing. You can have the perfect regulatory system, you can have a council that is pro-development and pro-development in the right way, not a sprawl development, but pro infill, the most urbanist city council you can imagine. And all you're going to get is more people moving in from the GTA.

You're never going to be able to solve your local housing shortages. That requires provincial leadership, that the province can set minimum standards that would apply to the province as a whole. And they've done some of that with Bill 23, the new housing bill, some of which is good, some of which is problematic. They have a housing affordability task force that came out with a report back in February, that has a number of recommendations. The province does play an important role here simply because there are 444 different municipalities and if one or two big ones aren't doing their job, it messes up the other 400 and some odd.

The federal government has less of a role to play, but they do have a $4 billion housing accelerator, which they can use to buy reforms at the provincial and municipal level. So they're less directly involved on the regulatory side, but they could absolutely play a role.

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Sarah Bartnicka: So take a step back here from I guess a perspective of all levels of government working together to make a certain area affordable. How does everyone work together? What is the best case scenario for a region like Woodstock to be able to sustain population growth that they're seeing with an adequate amount of housing? What are all the pieces that need to click for a region to respond well to an influx of new people?

Mike Moffatt: It's a great question and there is a lack of coordination and a lack of planning that goes on. Because again, ultimately it's allowing housing completions to keep up with population growth. So ideally we should be aligning our housing policies with the policies that affect population growth, which are things like international student rules and immigration and so on. And right now those aren't particularly aligned, where you get the federal government just announcing an immigration target with not a whole lot of notice, which makes it difficult for municipalities and provinces to plan out if they don't know, we going to be five years from now, is our target going to be 400,000 or 600,000? They really don't know. And then on the international student side, which actually drives a whole lot of housing demand in Ontario, there's almost no planning what whatsoever where the colleges and universities ultimately are the ones who decide how much enrollment is.

And they basically at some point just tell the cities, by the way, we are adding 5,000 students, you figure out how to deal with this. I think ultimately we need to have that coordination between all three levels of government and the higher education sector and come up with these plans because otherwise municipalities are just guessing how much housing they need and how that affects their regulatory reform. And it's a classic Canadian problem that we're seeing right now in healthcare and other areas as well where different levels of government are responsible for different things and they don't always play nice with each other.

Sarah Bartnicka: Well, I'm happy that you mentioned immigration because it's the question that's on seemingly everyone's mind right now, is can Canada support the influx of over a million immigrants over the next three years, which is the ambitious target of the federal government has set out. And it's interesting that you mentioned too that this level of government makes this big promise but isn't on the ground as much as the other two levels of government. So what is your take on what the answer is to that big promise and how it's going to play out?

Mike Moffatt: Well, I certainly think it requires more planning. The way that the federal government has gone about it is problematic of just announcing targets and going, okay, you guys figure out what to do with this. I think it is highly, highly problematic. I think we can if we're smart. Somewhat ironically if we get the immigration system right, it can actually help with the housing crisis because one of the biggest barriers to getting the houses built is the lack of skilled trades. And part of that is we need to change how we do immigration in this country. I always like to use this as an example. I'm a white collar university professor who has this, what would the immigration system would be considered a high skilled job. And someone with my profile who wanted to move in from the United States or China or India would do very, very well in our immigration system.

My dad is a retired sheet metal worker who built back in the 1970s, did heating and cooling and duct work on apartment buildings and things like that. Guys like him don't do very well in our immigration system. Those skills aren't considered particularly important. I think we need to tweak our immigration system to be more favorable to people like my dad and less favorable to people like me. I think if we do that, then immigration can actually be the solution to our housing woes and not be considered adding to the problem.

Taylor Scollon: On the topic of federal housing policy, I noticed that certain people who were in charge of federal housing policy spend a lot of time on Twitter disputing the claims that you've made about the supply issue and pitching this as more an issue of speculative investment and people buying up properties that they're not necessarily living in, basically a demand side problem. Is there validity to that? I guess, do they accept the premise that there is a supply problem in our housing market?

Mike Moffatt: There are some that outright deny it and I cannot for the life of me understand that just from a strict logic point of view, where it's like, okay, we're increasing immigration targets by 60%, but that shouldn't change the rate at which we build housing. It is not even an economic thing, it's just a math thing where it's like, okay, the population's growing faster than our housing needs should. But I don't dispute that there's a lot of speculation going on and I actually don't see those as competing explanations, but rather they go hand in hand, that if we create, think about any time there's a shortage or perceived shortage, it attracts speculation. When we thought at the beginning of COVID we were going to run out of toilet paper, everyone went out and bought toilet paper.

And you just name it, any time where there's a perceived shortage, that attracts speculators. And that's why we see this difference around the country, right? Because I go, okay, well if this is all about greed, then why is it that prices in Woodstock are going through the roof and prices in Regina aren't? Are people in Woodstock just inherently more greedy? Are these overseas investors, they love Woodstock but they hate Regina. What is going on here? Well the answer is one's a speculative asset and one isn't right, that one has a supply shortage and one doesn't. I don't see that as being these competing explanations, in fact I see them going hand in hand. I'm fine with things that reduce speculation. There's talk about cracking down on overseas investments and having a beneficial registry ownership system and things like that.

I think all of those are beneficial things, but I think ultimately we have to realize that those are fighting the symptom, they're not fighting the underlying cause.

Taylor Scollon: How bad is the shortage right now, if we're trying to quantify it, how many more houses do we have to build in BC and Ontario and other places where there's a deficit to get back to some balance in the market?

Mike Moffatt: There's a few different studies on this. And I'll look at the Ontario example. The CMHC says that we need to build over two million over 10 years, which in order to hit the affordability levels of 20 years ago, which was a golden era for affordability. Which may be true, and I think that's quite a lot. The housing affordability task force said that we need 1.5 million in Ontario. We at SPI, we decided to road test that. Because actually we went into this project thinking that 1.5 million was an overestimate. We thought it was bad, but we didn't think it was quite that bad. And much to our surprise, we were able to generate a similar estimate. What we did was basically say, okay, how many houses would we need over the next 10 years to get Ontario's supply level up to where the rest of the country is?

Or both Ontario and BC supply level up to the rest of the country, taking into account that you've got differences in population size but also population age that an eight-year-old needs has a different housing needs than a 48-year-old. So you have to take these demographic things into account. And sure enough, we found the answer was 1.5 million. And we basically one point million of that is going to come from anticipated population growth and about 400,000 comes from existing shortages. Now that's just a rough estimate and obviously we have to understand that a unit is not a unit, that if you've got a small studio apartment that's not going to fit as many people as a 2000 square foot home. But overall that's what we're looking at.

And to put that challenge into context, this 1.5 million number, which has been adopted by the province, we have not in this province built even half that many homes, 750,000 homes in any 10 year period since 1973 to 82. So basically what we have to do is something we haven't done in 40 years and then double it. So this is a massive, massive challenge and I'm not sure how we get there. So identifying the problem is the first step, now we got to figure out how to solve it.

Sarah Bartnicka: So what comes out of this, because you look at that $2,000 a month renter that you mentioned at the beginning of this conversation, how does this shake out for people? Are we going to see mass interprovincial migration? Is there going to be a big shakeup? Are people going to move across the country to get to markets where housing is more affordable? What are some of the shifts that we're going to see at a population level?

Mike Moffatt: I think there's a couple things that could happen, that could not solve so much, but basically be unintended consequences of this. I do think at some point international enrollments are going to tail off in Ontario and British Columbia, simply because those markets have gotten too expensive. And I think colleges and universities in other provinces are going to say, hey, you can move to Toronto but it's going to cost you this much to live. But you can do the same thing in Saskatchewan for half the price. I do think we're going to see the shift in international enrollments where they're going to go into less expensive markets. The second one is that I do expect to see more young Ontarians move to other provinces.

And the last quarter we have data for is the second quarter of 2022. We had record number amount of out migration from Ontario to other provinces, particularly Atlantic Canada and Alberta. And it is simply because of that housing, that with the advent of work from home, it's a lot easier now to keep your job in Toronto but do it from Glace Bay or wherever you want to be. I think that's going to continue. And we're seeing the Alberta government put ads on the TTC trying to attract people to come to Alberta. Now there was a Toronto life story about somebody who moved from Edmonton and didn't care for it so much and that's gone viral on social media and I feel bad for this poor woman because she's dealing with all kinds of abuse out of that.

Taylor Scollon: Totally. Totally.

Mike Moffatt: But I do think that that is going to be a thing, but it is going to be challenging for people. I remember during the pandemic there were these memes videos on TikTok about somebody moving out to rural New Brunswick and asking their neighbor where the nearest Whole Foods is. And they're like, I think it's in Montreal. And it's like, why can't I get same day delivery from Amazon here? It's like, well, because you moved out in the middle of nowhere. I think there are going to be young people who are going to do it, some will like it and for others there will be a bit of a cultural shock.

Taylor Scollon: Do you think for those of us who are on the sidelines of the housing market, that higher interest rates have any promise of restoring some affordability? I know you mentioned earlier that really prices have fallen a bit, but the higher cost of borrowing basically offsets any advantage there. Is there any chance that the prices will fall significantly enough just on the back of tighter monetary policy, higher borrowing costs, to make houses affordable again? Or is that basically impossible with the shortage?

Mike Moffatt: I don't know if it's impossible. I think we could have a period where interest rates stop going up, but prices continue to fall. It is certainly possible. And even right now that although the monthly payments have stayed the same or risen a bit, because the sticker price is lower, it does mean that the down payment that you need to make is lower, which does have some benefits. There is a possibility that over the next six to 18 months, that we go into a recession that overall some of these investor speculators who bought up multiple properties are feeling a little bit over leveraged, not enabled to make those payments and start dumping homes. I think there is the possibility in the short term for an increase in affordability.

My concern is more the longer, the five to 10 years out, that the long run outlook looks to be less affordability unless something big changes either on the international student side or we just get really good at building homes. But I do think there is a very real possibility of some short term instability in the housing market, which will create affordability for first time home buyers.

Sarah Bartnicka: Is there a level of risk that you'd assign to the possibility of an 08 in America style foreclosures or things of that nature? Or does that scenario feel a little bit extreme at this time?

Mike Moffatt: It's possible, though the dynamics in Canada are a little bit different than the United States, you can essentially walk away from your, you basically just hand your keys back to the bank and say, look, I'm underwater, you take that back. Here outside of I believe Alberta, that's not possible, right? That you're still on the hook for these things. I do think, unless there's a personal bankruptcy and then there's a whole adjustment process that goes on. But it is certainly possible that investors find themselves so underwater that they are starting to declare bankruptcy and some of these homes are going on the market. I do think that's possible.

Where I think it would be different than US in the 08, is I don't think it creates the same level of systemic risk. I don't think the big five banks at that point start to find themselves in trouble. So on the individual level, I could see something like that happening on more of a systemic risk level. We're not going to have a wave of things where one day it's just like we wake up and Washington Mutual doesn't exist anymore like it did in 08. It's going to be a very different dynamic.

Sarah Bartnicka: I think it's interesting to talk about this in that context of seeing these stories come out about so many mortgage holders hitting their trigger rates, where most of their payments are going towards interest and not the principal loan amount or seeing that a lot of people have their variable rates up for adjustment pretty soon. Are those percentages which seem quite scary a real risk as well or do you think that there's a chance that homeowners are going to come out of this, I guess relatively unscathed compared to the amount of stories that we're seeing that would ring alarm bells around those topics?

Mike Moffatt: I think it's a real risk both on the variable rate market and as well you had a lot of people back in say 2020 or 2021, lock in on a two or three year fixed and those are starting to roll over. I have the worst of all worlds because mine rolls over next summer, but it was a five-year fix from 2018, so I never got any of the savings. But it is certainly something that I'm thinking about is, okay, what's this market going to look like next summer? I do think it is a real risk for people and it'll be interesting to see how this plays out. Are they going to try and sell? Is this going to cause a wave of personal bankruptcies? Are they going to go, okay, well I can't really get out of this place, so could I rent out a room or rent out part of the house given that the rental market is going through the roof in these places?

I'm not exactly sure how this is going to play out, but I do know that there are going to be a lot of families and a lot of investors who are in a very uncomfortable position next year and are going to have to make a number of tough decisions. I think as well that this has macroeconomic impact because even if they're finding ways to keep their homes and paying at least massive stream of interest, well that's money that they're not pumping into the rest of the economy, which is what the Bank of Canada is expecting with these rate hikes in the first place. They're seeing that as the mechanism to cool down the economy, going, okay, well one way we can ratchet down consumer spending is to raise interest rates and that's going to cause households to cut back on their spending.

Taylor Scollon: I'm interested in this dynamic of housing specifically in Canada's economy and how it seems to dominate such a large share of our economy and personal economic choices that people make, including where to live, which obviously impacts your job prospects and all these things. And I saw on Twitter this morning someone talking about maybe it was you, Mike, talking about how young people moved into crypto perhaps instead of saving for a down payment because it seems like the only way you're ever going to be able to afford a home is if you win some lottery in crypto as a place to maybe roll the dice. What are the secondary economic effects of a housing market like this that we don't talk about as much?

Mike Moffatt: I think there are a few of them. So one of them is it does increase the type of investments that young people with a bit of income make. There's a term I can never remember exactly what they say, but they're called HENRYs, high earners, but not-

Sarah Bartnicka: Not rich yet.

Mike Moffatt: ... not rich yet. So the HENRYs.

Taylor Scollon: Not rich yet.

Mike Moffatt: High earners, not rich yet. HENRYs. And there's research, so I was quoting some research out of the United States that it does cause HENRYs to make riskier investments than they otherwise would. Because they're going, okay, at the current rate that I'm saving, it's going to be 15, 20 years before I'm able to have a down payment and I'd like to own a home before I'm 45 or whatever. So absolutely it causes the HENRYs to act in riskier ways. That's the first one I see. Second one is it does cause frictions where it does force people out of really dynamic economic markets into secondary markets where their job opportunities are more limited. So it's like, okay, if I'm not in the GTA and I'm not physically there every day and I'm not going to events and meeting people and building that social network, it does make it harder for me to climb a career ladder. So that would be the second one.

The third one, I've got a piece coming up with Ken Boessenkool about this soon, as soon as I can finish editing it. Poor Ken's been waiting on me for this forever. But one of the big things it causes is it causes people to get married and have children later. And you actually see that in the birth rate, that places with high rising real estate prices, people have their first child later in life, they have fewer children and a higher proportion of the population ends up just not having children at all. It has effects on the birth rate, it affects the ability of young people to form those families. And that has consequences 20 to 30 years down the road where you worry about that aging population because you essentially almost get this perverse form of a one child policy, but it's happening through the housing market. So that is another consequence that I don't think gets nearly enough attention.

Sarah Bartnicka: There's a few things too, we've seen, I think there's numbers that have come out the UK and the US about people moving home at record rates as well. And I don't know if there's numbers on this as well, but I'd assume that there's also that reliance on maybe a dual income component as well when it comes to housing. So interesting how this plays out in people's day-to-day lives. I guess on that point too, I wanted to understand a little bit in the context of rising interest rates and talking about housing and maybe people offloading homes at the point at which at they can't afford it anymore. Rents are, as you mentioned above, they're at record rates, they're sitting at above $2,000 right now nationwide. Are there any immediate effects that we're going to see play out in the rental market in the short term?

Mike Moffatt: I'm not seeing much in the way of relief on the rental side that we may see rental stock go up a little bit again because people are selling these homes and they're getting turned into rental properties. But unless something strange happens again on the international student side or you get this mass exodus out of Lower Mainland BC in Southern Ontario to other provinces, I don't see a lot of rent relief happening. And I do think one of the things that might shake out of this, again with people putting their homes up for sale because they find themselves underwater, is I think a lot of those homes will get bought up by REITs and other investors who, unlike the mom and pop investors, are a little less sensitive to month to month and year to year variations in prices.

I think that is one of the potential risks here, is that a growing portion of our housing stock ends up getting bought by institutional investors because they're sensing an opportunity, they have entire teams that do that same demographic work that I am. They're seeing the same long run potential. For them, a small recession that drives down the housing market is a massive buying opportunity. And I wouldn't be surprised to see those institutional numbers go up significantly should we have a recession.

Taylor Scollon: This problem seems fairly intractable in the sense that it requires coordination of so many levels of government, like we've talked about, it requires existing homeowners to lose some of the value of their homes if there're going to be cheaper for other people to buy. Is there any precedent for other jurisdictions digging themselves out of a hole like this and what would that look like? Has anyone done this successfully?

Mike Moffatt: Well, not in a while though. We are seeing some country, like New Zealand for instance, historically had a housing market that was even scarier than ours and they've spent a lot of time on reform and things are getting better there. We're saying California makes some big reform. So it is possible. I think the model for us where we were able to deal with this was after World War II, where we had this massive population growth of all the soldiers coming back and the baby boom and things like that and built massive, massive home fairly quickly. Some of that was on the private side, some of it was financed by the federal government through the CMHC. It's certainly possible, and we have seen this historically before, but it's going to take a few things.

It's going to take politicians who understand the magnitude of the problem, and it's one thing to just say, we need 1.5 million homes, but then go, okay, well what does that actually mean? So big reforms on the zoning side, big reforms on the labor side to get more people in the skilled trades. We need to be more productive in the way that we build homes. That the way that we build most homes really isn't that much different than when my dad was doing it back in the 1970s, but we don't build cars the same way we did in the 70s or anything else. There's some interesting designs areas out there to look at through 3D printed homes to the use of mass timber for mid-rises. So there's a lot of interesting technologies there that we could scale up using government policies.

I think it is possible. I don't want to sound too much like a defeatist, I do think there is a pathway to success here, but it's going to, we are going to have to make some tough decisions in a way that we historically haven't really wanted to in this country or this province.

Taylor Scollon: Okay, well I'll take it. That sounds like a little bit of optimism for us that Sarah, maybe someday we'll be able to buy a house.

Sarah Bartnicka: Someday maybe. I think this is a great place to leave it. Thank you so much, Mike.