More Supply Drives Down Prices, But The Government Wants You To Believe More PRICE CONTROLS Drive Down prices, Guelph, Ontario, Population 135K has 8th highest average rent in Canada – December 21, 2022,
Lovers of Big Government, whether it be labor unions or lovers of the welfare state, imagine that MORE MONEY solves SHORTAGE problems. So typically, if people imagine rent is too high or the price of labor is too low, the left-wing political types will run to the government to FIX PRICES.
This is where some politician rushes in to meet the DEMAND of the people; a lot of people like to blame the politician, but I prefer to blame the PEOPLE because a politician can’t win an election unless there’s a DEMAND for the policies he/she is advocating for.
More supply drives down prices, more competition drives down prices, and an abundance of things drives down prices; on the flipside to all of this is the government which drives up prices. Government REGULATIONS on economic activity drive up prices; government taxes drive up prices; government rhetoric drives up prices; government MONEY drives up prices.
The government also HATES efficiency from the private sector as it threatens its power. The more productive society is, the more wealthier society gets, and the more wealthier society gets, the more CRITICAL THINKERS you’ll get because efficient production produces a different type of mind. When I’m a profit-driven individual, the consumer is the beneficiary of my EFFICIENCY; because I’m trying to get more by doing less, I can drive DOWN prices to be competitive in the marketplace.
It would be smarter for me to build an apartment building that resembles living in a house and build an apartment that people DEMAND to be built. But you see, if the government threatens me with a PROPERTY with PRICE CONTROLS, I’m not going to build that in-DEMAND apartment building because I could end up in bankruptcy court if the government decides to slap me with regulations, price controls, fines, and other taxes because I don’t fit into the utopian direction the people and the politicians want to go in.
Ontario is not a small island; there is a lot of empty space in Canada, and there is also a lot of housing product being built that does NOT meet the demands of the people. Because housing DEMAND is not being met, prices are going up, and this gets worse the more involved the government gets in the process. Making matters worse is that rent controls have been ENFORCED in the past, and Ontario’s voting patterns lean to left.
The current Premier of Ontario, a “Progressive” Conservative, won in a landslide, but only because fewer people showed up to vote. If I’m a real estate investor, I interpret this landslide victory by Doug Ford as the Left Wingers in the province wanting Doug Ford to solve the housing problem so they can REDEFINE property rights in a few years.
People have short memories, and if more housing is being built and during that period of expansion, the voting public thinks that prices are still too high, the voting public will usually vote for the politician who will enact some sort of PRICE CONTROL legislation that caps earnings and earning potential for landlords and land developers.
Once the precedence has been set, it’s hard to break, so if you’re asking me what the solution to this problem is? I will say to FINANCIAL EDUCATION. Without financial education, these patterns will repeat and keep repeating because voters typically look for EASY answers, and because the government can use FORCE, most voters imagine this as a solution.
As a real estate developer or investor, you have to ANTICIPATE the inevitable and structure your business on the REALITY of the situation. The current reality in Ontario is that there are a lot Left Wing ideologues and independent voters who have ZERO financial education. My only tool is to write blog posts in hopes I can wake up the right people to EDUCATE the voting public about the importance of financial education.
These problems are solvable. However, a lot of people don’t want these problems to be solved because their manipulation and influence over others will become extinct. Never in my lifetime have I seen a greater push for CENSORSHIP; why are some people pushing for censorship? Because solutions to a lot of the world’s problems are out there, and these solutions THREATEN current power structures.
I’m personally not for abolishing democracy, but I am for RESTRUCTURING it. By restructuring democracy, I like to return to the era in which people argued that municipalities should have more POWER. In Canada especially, a lot of mayors LIE to their voters and then blame the PROVINCIAL government as to why they could not deliver on the promises they made to their voters.
This pattern repeats itself at the provincial level; the provinces then blame the Federal Government in Canada; currently, we have a Far Left Liberal Government, Justin Trudeau, who, to his credit, is trying to meet the DEMANDS of his supporters. So in Canada, we have an overbearing FEDERAL government in which most people look to for answers.
I like to write about the Canada Mortgage and Housing Corporation (CMHC), which is a FEDERAL Crown Corporation(State-owned enterprise) that “helps” individuals and business build property that OTHERWISE wouldn’t be in demand. As an example, there are a lot of condos being built in Ontario, which is odd because if rent prices are going up, why wouldn’t RENTAL housing be built?
Wouldn’t these greedy capitalists want to cash in on these sky-high rents? Well, no, many manufacturing jobs left Ontario and Canada because of price controls and government regulations. If I’m a widget manufacturer and then the government slaps me with a minimum wage law, then slaps me with fines for being in violation of the regulatory authorities, and then charges me a carbon tax because the VOTING public imagines the weather is changing too rapidly and wants the government to do something about it.
Why would open or expand my manufacturing business in Canada? The same rules apply for purposed-rental housing; too many MUNICIPAL, PROVINCIAL, and Federal price controls, regulations, and taxes make purposed-rental housing profitable or worthy of their time. Life is SHORT, after all, and building housing is time-consuming.
Why meet a demand if I’m going to be penalized and potentially DEMONIZED for it? In Switzerland, their democratic system is something to observe; they’ve so far managed to keep the influence of their federal government SMALL. Therefore bad political ideas have been confined to certain regions of the country, and these bad ideas typically do not spread to the whole country.
It’s not to say Swiss democracy is PERFECT, but it’s something you’ll want to observe if you’re financially educated and you’re looking to SOLVE the economic, financial, and political problems of the world.
Interesting times ahead!