Condo towers in Vancouver. Photo by W&J/Flickr.

Last week, Prime Minister Mark Carney and British Columbia Premier David Eby announced a plan to “leverage innovative financing tools to convert more than 2,200 vacant condo units in priority growth areas into affordable homes.” This condo conversion plan is one part of a broader industry-friendly policy package that will feature $3.2 billion in spending over 10 years. While the purchasing terms remain unknown, developers could be looking at a $2.2 billion windfall if their units are bought at peak prices.

At a press conference last week, Carney described why the state should buy condos at prices nobody else will. “With higher interest rates, weaker investment demand, developers are stuck,” he said. “They don’t want to sell at a loss. They can’t afford to hold those empty units indefinitely.”

The plan has been described as a “bailout” for developers who gambled on Vancouver’s overheated housing market and now refuse to accept the consequences of their bad bet.

Right-wing critics have chastised Carney for, in the words of former BC Conservative leader and MLA, John Rustad, “subsidizing incompetence.” Instead, he argues, the government should leave well enough alone and let “the market fix their mess.”

Federal Conservative Party leader Pierre Poilievre echoed Rustad’s position, observing that “Normally, the innovative financial tool to turn an overpriced empty condo into an affordable home is for the price to drop.”

It’s a nice thought, especially with Canada Mortgage and Housing Corporation data showing that 4,376 completed condos were empty in Metro Vancouver last month, a 76 percent increase from the same period a year ago. But even with the glut of unsold units, condo prices are unlikely to fall much further than the 10 percent they already have.

Empty units, it turns out, do not guarantee falling prices.

Carney described these counter-intuitive market dynamics, where an oversupply of unsold homes can end up restricting future housing........

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