The United States and Canada share more than a border and a culture of neighborliness, we also share some of the same problems: such as a housing crisis. Housing affordability is a major story across the whole of North America, with the US coming up short by 4 to 7 million units and Canada needing 3.5 million more homes by 2030 to restore affordability to 2003-04 levels (according to the Canadian Mortgage and Housing Corp). What’s causing this housing crisis in North America and what can both the US and Canada do to overcome it?
ZONING AND LAND-USE REFORMS
According to the latest data from the National Association of Realtors, U.S. median rent in July 2024 has dropped steadily over the last 12 months, continuing a decline since inflation peaked at 9.1% in June 2022. This reduction tells us something about not just inflation, but the impact of a resurgence in housing construction after the pandemic shut everything down. Rental prices have notably decreased in cities like Austin, Nashville, and Phoenix, at the same time these metros have increased the supply of rental properties. A 2024 report from Harvard’s Joint Center for Housing Studies identified restrictive zoning laws and slow construction as key factors in the housing shortage. During the pandemic, rising construction costs and zoning restrictions slowed development. In response, many state and local governments have reduced regulations and fast-tracked building permits to accelerate housing construction and alleviate high rents, offering concrete solutions at the local level. The American left and right are both coming to a singular realization, which is that zoning policy has created a series of arbitrary lines on city maps that base the development needs of today on a precedent set decades prior. When the libertarian Cato Institute and progressive Center for American Progress share the same view on zoning regulations, you know there’s a big problem. It’s time to go fully YIMBY.
Canada is no different than the US in this regard. Zoning regulations often prevent the conversion of abandoned commercial offices—now vacant due to remote work policies—into residential spaces. In Toronto, for example, rezoning applications can take at least nine months just to process, as highlighted by David Clement of the Consumer Choice Center in 2020. According to Clement, applicants must submit a vast array of documentation, including “an archaeological assessment, environmental impact study, transportation impact study, energy strategy, and public consultation report,” among others. The sheer complexity of this process deters many developers from even attempting it. The red tape amounts to a tax on production and erodes the profitability of any venture. So builders opt out.
Toronto has since made progress by eliminating exclusionary zoning rules that previously restricted how many and what types of homes could be built on a single lot. This change is crucial, as the housing shortage is partly due to overly burdensome regulations that hinder new housing development. Hopefully, other cities will follow Toronto’s lead, as places like Hamilton, Vancouver, and Ottawa continue to struggle with extreme housing affordability.
SUPPLIES AND TRADE WAR
Lumber just got a lot more expensive in North America, and it may get even worse. The U.S. Department of Commerce just recently doubled tariffs on Canadian softwood lumber imports from 8.05% to 14.54%. The tariff hike is part of a “routine process” meant to protect American industries from unfair trade practices, but consumers are left holding the bag in the form of sky-high costs and fewer places to live. Tariffs go both ways between the US and Canada depending on which national industry is being “protected”, but in the end, it amounts to a tax on U.S. builders and consumers.
In the US, a strike has begun from the International Longshoremen’s Association, and the problem of housing stock and affordability will be worsened in the short and long term. Every day of new construction counts. According to the Wall Street Journal, key ports affected by the strike are major entry points for construction materials, heavy machinery, food, vehicles, and chemicals, which could lead to delivery delays across the country. Bill Flemming of Cumming Group warned that the strike’s effects on the construction industry will be immediate, and if it lasts longer than a week, delays could extend for weeks or even months due to backlogged ships and distribution issues. Steel imports and tools will come to a halt, freezing major projects that impact consumers by making construction more expensive for developers.
The US and Canada both need to end the tit-for-tat on tariffs and let markets and competition shape the price of goods and services. When this is allowed to happen, consumers win.
