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Housing costs are high because there are not enough homes. We must do everything in our power to add as many residences to the nation’s stockpile as quickly as possible. In the words of newly elected Prime Minister Mark Carney, the best solution to the housing crisis is to “build big, build bold and build now.”

Parliamentarians and policy wonks across the political spectrum have endorsed various homebuilding schemes designed to pave the way to affordability. Proposals on zoning deregulation, ‘missing middle’ housing, innovative construction techniques, and training programs designed to address gaps in the labour market all revolve around the conviction that more housing equals lower prices. After all, common sense says the core of this crisis is a basic supply and demand equation.

But is common sense right?

Will tearing down greenbelts to build expensive suburban developments really bring prices down? How many purpose-built rentals will real estate investment trusts have to develop before their AI tools decide to lower the rent? Will the construction of hundreds of thousands of affordable homes get the under-40s into homeownership when mom-and-pop landlords dominate the market? Is it true that more houses bring housing costs down?

When researchers think about these questions their first task is to work out how to measure supply and demand dynamics. One of the proxies they use is vacancy rates. If vacancy rates are high that means there are a lot of empty homes in a given region and we can assume that housing is relatively plentiful. If, on the other hand, vacancy rates are low that means that most of the buildings are full and housing may be becoming scarce. We can use vacancy rates to test our common sense. If supply and demand is in fact determinative of housing prices, then relative price changes should be similar in cities with comparable vacancy rates.

A 2025

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