Big news for development in Downtown Windsor. This is certainly exciting, it will bring people and density to the downtown core but as I posed on twitter will it lower housing prices?
Short answer is probably not.
At the time of the 2016 Census the City of Windsor had 91,630 inhabited dwellings. In a typical year between 300 and 500 new units come online in the City. When talking about 1,401 unit likely spread over several years we aren’t actually talking about a significant supply increase to pushback against overall market pressure. The chart below shows quarter by quarter housing starts in the City of Windsor.
This weeks announcements were not housing starts, we could be a couple of years away from that, as housing starts to CMHC come from building permits being issued.
Although recent housing construction has picked up post 2017. There are a couple of items that need to be explored related to whether or not this will positively impact housing prices.
First not all of the units will start or enter the market at the same time. The various projects will likely be developed and even sold in waves with the price point adjusting to the demand or market conditions. In theory, being a later to build could mean a higher price point, potentially creating inverse incentives to announce to build, but then not.
The vacancy rate is another important factor to consider, even if these condos were to be kept for rental purposes (whether by the individual owner or a whole building) the most recent rental vacancy rate around 3%. For context during 2008-10 recession I recall the vacancy rate was north of 12%+ but I can’t find the link.
This low vacancy rate are driving up rental unit prices – supply and demand
Even if all of the announced units in Windsor at the time of the last Census of 91,630 inhabited units, 31,410 were rental units. An additional 1,400 units will likely not negatively impact the overall market saturation or drive down prices
Just due to the newness of these buildings their market rate prices will be a higher price point than existing stock. If as some suggest people move from existing units to new units. Existing landlords can raise their rents with new tenants outside of provincial rent controls as a new lease is a fresh start.
Due to profit maximizing behaviour, the new units could actually shift market rates and expectations up in the City. This could engagement existing landlords to raise their prices while allow vacancy rate puts a floor preventing them from being lowered.
The argument that these builds will free up lower end stock and help people on that end of the spectrum (Trickle down housingnomics) but this misses a fundamental element of demand.
The above illustrates the growth in international students from just the University of Windsor. St Clair College (couldn’t find the data) has seen similar growth as has the City as a whole based on municipal population estimates from Stat Canada. Yes, COVID will impact international students but when “normal” returns in 2022-23, I would expect enrollment from those students to recover and then begin to rise again due to the revenue they generate and the immigration pathways they access. The flawed assumption that new units are built and they are just filled people who are already living hear is laughable at best but pushed surprisingly often.
This demand side shock is interesting as the growth in international students has not been captured in any local planning process.
Why this won’t drive down housing prices is a question around what kind of units are going to be in these developed. I talked about that issue on RCP with the late Mark Boscariol the last time there was a series of big development announcements. The question we have to ask is who do we want living downtown. Ideally it would be for everyone, meaning you get a robust and mixed type of stock in the core.
If we are looking bring families downtown to be long term residents, these condos need to 3+ bedroom plus units, not one bedroom singles. Sure you could put a senior in that 1 bedroom unit, but they are going to have to outbid the kid from Toronto going to law school, so how do we make sure there is room for both?
I think the broader challenge is if these units become vertical student ghettos, the conversation about mixed communities in the core quickly shatters. Condo units being bought up by investors and rented to students don’t drive down housing prices.
If students don’t end up in those buildings, then it doesn’t free up the existing rental stock, which in turn keeps housing prices and rental rates high. That I would argue that the potential make up of these new communities are a bigger challenge that isn’t necessarily being explored.
To sum up, a glut of planned construction in the City Core is amazing news, but doesn’t make up for it not happening for 20 years and it doesn’t fundamentally help the affordable housing issues in the City.
Tuesday night the Public Board will have their first Trustee meeting since back to school.
This week our local Ontario Health Team submitted their proposal to the Province. Congratulations to those involved! This is arguably the biggest shift in health care for our region regardless of where the hospital goes.
The death of RBG is a landscape changing event for the US. Fivethirtyeight had a pretty good rapid reaction podcast breaking down the politics and implications of her passing.
This post has some harsh reality for those expecting shift after November but maybe I am feeling cynical.