Picturing Basic Housing Economics

Originally posted on Housing Matters.

A lot of people have a hard time figuring out how new “luxury condos” actually make housing more affordable for everyone. So I drew some pictures to clarify.

 


Continue reading “Picturing Basic Housing Economics”

Toronto city councillors want to make housing even less affordable. Ontario’s stopping them

Originally published in the Financial Post. 


Building more homes just became easier in two of the most densely populated areas in Ontario: Toronto’s downtown core and its “midtown,” a small strip of land centred at Yonge St. and Eglinton Ave. For anyone interested in finding a place to live in those areas, this is great news. Continue reading “Toronto city councillors want to make housing even less affordable. Ontario’s stopping them”

Response to Ryerson CBI on Bill 10

Originally posted on Housing Matters.


Earlier in May, the Ontario Government tabled new legislation as part of its long-anticipated Housing Supply Action Plan. Known as Bill 108, it proposes numerous changes to several existing laws and regulations.

The preamble of the Bill makes it very clear: the Government of Ontario “believes that increasing the supply of housing will help every person in Ontario by making housing more affordable.” We at Housing Matters share in that belief. We’ve come to this belief through careful analysis of economic theory and data. And after careful study of the contents of this Bill, we believe that it will do as promised: increase the supply of housing, and, consequently, make housing more affordable.

However, the researchers at the Ryerson City Building Institute (CBI) have reached a different conclusion from their analysis of the same Bill. Indeed, CBI begins their analysis by predicting:

it is unlikely that the Housing Supply Action Plan and Bill 108 will improve housing affordability while also targeting the lack of housing options, including missing middle and family sized multi-unit housing. What is proposed may, in fact, reduce livability and affordability throughout the province — particularly in areas facing intense growth pressure…. (p. 1)

We disagree with these statements. To be clear, we believe that Bill 108 — while not a perfect panacea — will (1) increase the availability of housing options, (2) increase livability, (3) increase affordability, (4) and this will be especially true in areas facing intense growth pressures. The following post will analyze the changes to Bill 108 with respect to these areas, and we will compare our findings to that of the CBI.

Table of Contents

— The Economics of Supply and Demand
— On Development Charges
— On the LPAT and OMB
— On Heritage Protection
— On Community Benefits, Public and Private
— On Inclusionary Zoning
— Changes to the Building Code
— Conclusion

Continue reading “Response to Ryerson CBI on Bill 10”

Statement on the Decision to Partially Eliminate Rent Control

Originally posted on Housing Matters


The Government of Ontario announced in its fall economic outlook this past week that they were removing some restrictions on rent control. While rent control remains unchanged for existing tenants, new rental units will not be subject to any price controls whatsoever.

This policy change is a response to the previous government’s “Fair Housing Plan”, introduced in 2017. Prior to the Fair Housing Plan, only homes built before 1991 were subject to rent control. In 2017, rent control was extended to all rentals regardless of the year of construction.

Following the introduction of the “Fair Housing Plan”, 1,000 units originally slated to be purpose-built apartments were converted to condos. That, in a city with a rental vacancy rate of 0.7% — a sixteen year low for the city, and one of the lowest rates in the world.

As a partial reversal of a one-year-old policy, the short-term impact of the new government’s change will likely be small.

However, as we will explain below, this policy has long term impacts that affect the quantity, quality, and price of rental housing, as well as the kind of individuals likely to be affected. In particular, this new policy averted a future of extreme rental shortages, declining rental housing quality, rapidly increasing rents, and discrimination against low-income renters. Continue reading “Statement on the Decision to Partially Eliminate Rent Control”

Nudge of the Week: Design Matters

Last week, there was tragedy on Southwest flight 1380, when an engine explosion led to a broken window in the fuselage and the death of a passenger.

While the pilot, Captain Tammie Jo Shultz, was able to land quickly to prevent further injuries, the sudden depressurization could have led to many more injuries. Especially as photo evidence shows that, despite clear instructions at the beginning of the flight, many passengers were not covering both their nose and mouth with the oxygen mask

The problem, in my view, is that there is nothing obvious about the design of the mask that indicates it should go over both the nose and mouth. Its circular opening reassembles a cup.

In order to prevent misuse, misuse has to be more difficult to achieve that proper use. In this case, perhaps a more triangular shape would better indicate an orientation that would cover the nose as well.

Emergency situations, especially when life and death are involved, are very stressful. Stress makes people more likely to lose focus and make mistakes. Designing in a way that actively prevents error can save lives.

Nudge of the Week: Praise what you want to get more of

There are three ways you can give someone a compliment:

1. The compliments criticism-compliment sandwich: your compliments have an ulterior motive, which is really to criticize someone. The person you’re giving the compliment to will realize this, and will not take your compliments seriously.

2. Complimenting something someone was born with: you tell someone that they’re smart, or they have beautiful eyes, or tall. This might brighten up their day. But it will also promote complacency.

3. Compliment a behavior: praise their good work ethic, attention to detail, their willingness to try something new in the face of adversity, or something else that requires thought and action. This is called positive reinforcement. It will encourage more of that behavior.

So if you want encourage people to get better, praise the behavior that makes them better!

Nudge of the Week: How to Avoid the “Too Good to be True” Bias

If you’re selling something that’s cheaper than what your competitors are offering, consumers are going to assume that it’s not going to be as good. People are used to thinking that if they want a good product, you have to pay a more money for it.

But as we know from the computer industry, it’s possible for something to get better and also cheaper. So what’s the lesson? Detail exactly what your specifications are. Computers list all their components, so that making comparisons between models is easy.

If you’re offering something cheaper and better, make sure to detail what it is that’s allowing you to sell for less than your competitors.

Nudge of the Week: Dark Patterns

There is definitely an ethical component to nudging. A good and ethical nudge is designed to help someone make a decision they want to make themselves. A bad and unethical nudge makes it harder for a person to do what they want.

Unethical nudges used to be called “shoves”, but the term gaining more steam is “dark patterns“. Examples abound, from tiny companies you’ve never heard of to places like LinkedIn and Amazon.

The rule of thumb for determining whether a nudge is “dark”, is by simply thinking whether you would be happy if your local supermarket made you do the same thing. Would you be happy if whenever you went grocery shopping, the manager put items she thinks you might like in your basket when—you weren’t looking? What if they made you walk through a tedious and deceptive maze every time you tried to leave?

Don’t nudge anyone with methods you don’t want to be nudged with yourself.

Nudge of the Week: How to fix Indecision

Indecision is a problem everyone faces. Recently, some have taken to call it “choice paralysis,” with the explanation being that it’s “too much choice” that leaves us paralyzed and afraid to make a mistake.

My explanation is that choice paralysis has two separate causes: first, a lack of information about the products; and second, a lack of information about our own preferences.

For an example of the first case, think of the familiar situation of deciding what to get at a Chinese restaurant. A thick menu, written in a foreign language, leaving you unsure what anything actually is. You know you want something that isn’t spicy and doesn’t have fish guts in it. But the menu is not helping you decipher this information.

A high-end coffeeshop might face the same problem. While experienced customers might confidently ask for a tall-blonde-mocha-chai-latte-with-two-pumps-of-vanilla, someone new to the experience might try to individually decipher all 85,000 different combinations of roasts, toppings, and sizes.

The telltale sign of this sort of indecision is that the decision-maker is asking a lot of questions. Questions that are not answered simply by looking at the menu. The solution here is simply to design a more informative menu. The key here is to break up the decision making process into a series of steps (“first, choose a size. Second, choose a roast. Third, choose how much foam,” or “first, choose your meat. Second, choose your veggies. Third, choose how spicy,” etc.).

The second type of indecision, which is caused by the decision-maker not knowing what they want, can be witnessed in fast food restaurants when someone is struggling between the Coke or the Cherry Coke. They know what both are, but they can’t decide which one they want at this moment. The reason for this is because they actually value both things equally. 

Think about it. If the choice was between Coke and cyanide, would they struggle as much with the decision? No, because a thirsty person would get a lot more out of life with the Coke than the cyanide. So the only logical reason a person would struggle with such a decision is because both choices are equivalent.

Thus in this situation, any choice will do. So if you recognize someone in this situation, you can try to create some dichotomy between the two options. For example, if you know the person likes to change things up, you can remind them of what they picked last time so they choose the opposite thing this time.

Nudge of the Week: Mitigate bad news with good news

When you give people good news in spite of bad news, this lessens the impact of the bad news.

One example from Rory Sutherland: when a plane doesn’t pull up to the gate, this is generally considered to be bad news because you now have to take a bus, and who wants to sit in a bus after hours of being in a train?

Back to Sutherland’s story: a plane he was riding stopped of the gate. Instead of simply directing people to get on the bus, the pilot added new information: that the bus will take the passengers directly to passport control, so that now they don’t have to walk all that way while carrying their luggage.

But it’s always been true that the bus takes you to passport control directly. The pilot simply reminded the passengers of the story, and this way of framing the situation really helped the passengers feel better.