According to a recent announcement from Queen’s Park, 4.7% of properties purchased in Ontario’s Greater Golden Horseshoe area between April 24 and May 26 were acquired by foreign individuals or corporations.

This in the wake of the raft of housing measures Premier Kathleen Wynne’s government announced in April, including a 15% “Non-Resident Speculation Tax”, ostensibly aimed at improving housing affordability.

It’s difficult to say how foreign buyers ultimately impact on the cost of buying or renting a home in Canada’s biggest urban region, and it’s too soon to estimate the effects of the myriad of policy changes introduced.

But what we know is that the laws of supply and demand apply to housing, and it’s hard to believe a small percentage of buyers are responsible for the massive appreciation of housing prices in the GTA over the past decade.

Rather than focus on a small group of buyers, we should focus on ensuring government regulations don’t prevent the supply of new housing from meeting demand.

For generations, the Greater Golden Horseshoe area, which stretches from Oshawa in the east to Niagara Falls in the west, has drawn newcomers from across Ontario, Canada and the world, motivated by many factors (jobs, stability, high standard of living, etc.).

To serve a growing population, developers and homebuilders (who must project several years into the future when conceiving new housing projects) respond by building thousands of new units annually.

If they can’t keep up with demand from potential buyers and renters, prices likely rise.

Let’s illustrate this with a real-world example.

In Texas, the Houston metropolitan area is roughly as populous as the Greater Toronto Area (about 6.5 million people), and has grown substantially in recent years.

Cities in the Houston area issued building permits for almost 64,000 housing units in 2014, compared to 36,000 units in the Toronto and Oshawa census metropolitan areas.

In 2016, the average home in metropolitan Houston was valued at approximately US $250,000 despite the region accommodating almost twice as many newcomers as the GTA did between 2011 and 2016.

So what’s preventing cities in the Greater Golden Horseshoe from issuing more building permits?

In short, red tape at city hall. Between 2014 and 2016, Fraser Institute researchers surveyed hundreds of homebuilders across Canada to better understand how government regulation affects their ability to obtain permits.

In the Greater Golden Horseshoe, it typically takes one-and-a-half years to obtain a permit. Per-unit costs to comply with regulations are almost $50,000.

Approval timelines can also be affected by the need to rezone property. Approximately two-thirds of new homes in the region require this procedure, which adds 4.3 months, on average, before builders can obtain permits.

Another deterrent to more supply is local opposition to new homes.

Survey results show council and community groups in Toronto, King Township and Oakville are more likely to resist the addition of new units in their neighbourhoods, effectively preventing newcomers from moving in.

Only one of the 16 measures proposed by Queen’s Park in April even mentions these barriers to housing construction.

Buried near the end of the Fair Housing Plan is a reference to a “Housing Supply Team” that would “work with the development industry and municipalities to identify opportunities to streamline the development approvals process.”

Let’s hope that results in meaningful action on reducing barriers to housing construction, though the lack of emphasis in the government’s announcement is not encouraging.

A tight housing supply hurts everyone, from first-time buyers to renters looking to get a toe hold in Toronto’s job market.

It hurts longtime homeowners, whose children can no longer afford to live nearby.

Governments have the tools to tackle this problem by allowing Canada’s biggest, most dynamic, urban region to thrive as a place to live, work and play.

That should be their focus, rather than trying to deter foreign buyers.

Lafleur and Filipowicz are analysts at the Fraser Institute