Flyers

Being in a political debate is no treat. Especially when you have a ton to lose. I know.

At the end of my first term as a member of Parliament (I was a Tory then – the good kind, a PC) the election featured a wild event one night in my riding. There were thirteen candidates. Yes, 13. The lefties had at least three to choose from. A couple of indies showed up. The right-wingers could choose Conservative or Reform. My fav (besides me) was the Rhino guy. And then there were the loonies, led by some levitating grifter from the Natural Law Party.

If you’re old enough you might remember the yogic flyers, led in Canada by magician and hair machine Doug Henning. They believed government should run like the cosmos, chlorophyll, osmosis or the tides. Think Elizabeth May in the Sky with Diamonds.

Anyway, it’s hard to keep your gravitas when surrounded by people who’ll never win but have a very good chance of making you look like a lumpen dork. This maybe the issue tonight as Justin Trudeau and Andrew Scheer – the only two who could be prime minister on October 22nd – share a stage with May, Singh, that Bloc guy and Mad Max. All Jagmeet will do is bleed Lib support. All Max can hope for is to steal 2% from Scheer. And given the tightness of recent polling, the fringes may dictate the middle.

In any case, it’s been a sad little campaign all about buying off special interest groups. One of those is wannabe homeowners, and both the Libs and Cons have rolled out multi-pronged plans to ‘make houses more affordable.’ But this isn’t going to happen. The opposite will.

So says the International Monetary Fund: “Well-meaning policies that aim to improve housing affordability by increasing households’ capacity to borrow may unintentionally raise house prices—ultimately resulting in homebuyers having to borrow more and leading to higher household debt.” According to these guys there are two major causes of ridiculously, deliriously absurd real estate prices. First, increased demand which flows from stupid political policies. Like you will hear tonight.

The second is interest rates artificially depressed by central banks to stimulate economic activity. Simply put: “Lower mortgage rates increase the price-to-income ratio, increasing the time required to save for the down payment. Thus, declining interest rates worsen housing affordability.” No argument there. The negative correlation between the price of a house in East Van and the prevailing mortgage rate is crystal. The cheaper money gets the more people borrow and spend. Similarly, the more incentives provided by government to buy, the more people will dive in. We kicked that around here yesterday.

The price of real estate will remain unaffordable until (a) demand is squished by requiring 20% down payments or (b) the supply of housing explodes – both if which will never happen. Politicians should stop diddling around the edges, pretending they have solutions and making things substantially worse. Better to leave Mr. Market to his eternal cosmic forces of natural selection. Hey, wait…