On January 1, in response to rapidly rising housing costs, it became illegal for most foreigners to purchase a home in Canada. Last year, Prime Minister Justin Trudeau’s website proclaimed that “homes are for people, not investors.” According to Trudeau, investors are nothing more than greedy individuals who put profits before people.
Not surprisingly, nothing was said about how new housing would be built if investors are not involved. The housing crisis in Canada, as in the United States, is the result of a supply shortage. There are only two effective remedies to a supply shortage: 1. Increase the supply, or 2. Decrease the demand. Since the demand for housing is very unlikely to decrease, increasing the supply is the only viable solution.
Building or rehabilitating housing is not a cheap endeavor, and it certainly comes with no guarantee of success. Investing in housing is a risky undertaking, and the people who do so expect a reasonable return on their investment. In return for taking the risks to build and operate an essential value—housing—investors rightfully desire to profit.
But to Trudeau and his ilk, this puts profits before people. People have a need, and Trudeau wants housing producers to satisfy that need without any personal benefit. This ignores the fact that investors earn a profit only when they create values that others need. Profits are earned by serving people and satisfying their needs in a non-sacrificial manner.
A housing shortage is not resolved by limiting investment in housing. To increase the housing supply, governments should be encouraging investment by removing the controls and regulations that shackle housing producers. Governments should be encouraging investors to put profits before people.