New data show that simply throwing more supply at Vancouver's affordability problem will not solve the housing crisis. Instead, we need supply that is directly targeting the needs of residents – and not wealthy buyers who aren't earning incomes locally.

Too often, the argument for supply focuses on a shortage of housing units as a response to increased demand. But if we are to look at the number of housing units being created and the net population growth that is occurring in the region, supply in itself is not the issue. There is an average of 35,842 newcomers into Metro Vancouver every year and 16,332 housing starts.

That means for every unit of housing started each year – purpose-built rentals included – there is an average of 2.4 people arriving in Metro Vancouver. That's a lower ratio than Toronto (2.9) or Calgary (2.6).

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And that average ratio for Metro Vancouver spans the past 25 years, according to data supplied by planner Andy Yan, acting director of Simon Fraser University's City Program. Mr. Yan was in Ottawa this week to take part in a round-table discussion on real estate data as part of the federal government's Let's Talk Housing conference, which is doing the early groundwork for a new national housing strategy. Mr. Yan's data are also part of an upcoming book to be released by the University of British Columbia's School of Community and Regional Planning.

"The supply argument would be that population is outstripping housing development," Mr. Yan says. "What we are saying here is that no, it hasn't. Housing development has reached a certain production level that's been pretty consistent over the last 10 years, with the exception of 2009."

The problem then is not a question of production, but the type of housing that is being supplied – and the wealthy demographic that is being targeted. Mr. Yan uses a car analogy.

"I enter a car dealership and there are 10 Ferraris, and I have a Honda budget. We aren't producing enough Hondas."

The West End of Vancouver, for example, has long been considered a worldwide success in terms of being a walkable, highly livable neighbourhood, rich in affordable rental and condo stock. However, demand from wealthy buyers threatens to change that status because the supply that is coming onto the market is out of reach for the average-income resident. Redevelopment is pushing the Honda budgets out to make way for the Ferrari buyers. Existing low-income housing stock is also under pressure because demand has made the land so much more expensive.

"The presale is definitely not geared towards locals," says realtor Ian Watt, who specializes in downtown condo sales. "It's geared towards people bringing money in from offshore."

Trump Tower developer Holborn Group set a precedent in the spring, when it averaged sales of $1,615 a square foot. Bosa Properties' luxury Cardero project in Coal Harbour sold more than 100 units in a month for an average of $1,700 per square foot. That means a three-bedroom unit sells for close to $3-million. And supply can't keep up with the demand for luxury downtown condo units.

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"Pretty much everything that comes on the market sells," says Jon Bennest, analyst at Urban Analytics, which works on behalf of the development community.

Mr. Bennest says developers are forced to ask the high prices because the land costs are so high.

"In order to make any money based on what people are asking for in terms of the land price you'd have to pay for the site, you'd need to have prices like that to purchase today, based on expectations of land owners."

The only way to address affordability, then, is by looking at the demand that is driving those prices. But the focus from governments and the development industry is too often squarely on boosting supply, without addressing demand.

"Something else is happening," Mr. Yan says. "That's why we need to talk about global capital, the professionalization of Airbnb and condo units being used as holding investments.

"We need to ask, 'What kind of demand is being met by the supply?' The problem is when housing becomes investment stock, as opposed to full-time homes."

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Josh Gordon, assistant professor at Simon Fraser University's School of Public Policy, says he's never seen convincing evidence to suggest there isn't enough development. And the argument for more supply as a panacea has been around for several years, to no avail.

Supply is necessary because it lowers prices, he says, as long as it's in line with demographic demand and growth. In order to curtail outside demand, he and several other academics have proposed a property surtax that could be deductible against income taxes paid, while broadly exempting seniors. Foreign owners that own expensive houses left empty as investments, declaring little or no income, would be hardest hit. The 15-per-cent foreign-buyers tax is also addressing demand.

"We have already been building at a healthy or rapid rate relative to population growth, as Andy Yan's data show, so the idea that supply alone can solve this is implausible," he says. "That doesn't mean that we don't need to keep on building and, in some cases, rezone some areas.

"The point is simply that the main cause of the affordability crisis, the decoupling of incomes and housing prices that we've seen, is foreign capital.

"Bob Rennie sort of recognized this back in a 2010 [Globe and Mail] article you wrote, where he agreed that an emerging wave of foreign money would cause affordability issues. His solution then, as now, was to increase supply. But as we've seen, even sharply increasing supply hasn't been sufficient to counteract the affordability effects of foreign capital. So it makes little sense to think that it will now after having failed for five years or more. That's why we need to address the demand side, as the recent foreign-buyer tax does."

He argues that municipalities need to address the foreign money piece before attempting to rezone entire communities. He believes city officials might be finally getting the message.

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"I will say the city has been very open to rapid redevelopment and rezoning, and yet prices have gone up," Dr. Gordon says. "For a long, long time, that was the strategy: Let's build as much as we can and this will address affordability. And that never really paid off, which seems to have prompted a rethink on the part of municipal government. For a long time, they did think that the path to affordability was rapid supply expansion and that would solve the problem, but I think they are now seeing that in absence of tackling foreign demand, you might not get that.

"That's where policy levers come into play, like the progressive surtax, because then you are making sure the demand is local. You are reattaching, or recoupling, the housing market to the local labour market. Developers … are going to build to what the clientele is, and if that makes more money than other projects, that's what they will tailor their projects to. So if you shift the demand in a sense by taxing foreign demand and elite demand, you better create the buildings that are going to house the local population, for more affordable prices."

UBC associate professor and economist Tom Davidoff believes Vancouver is vastly lacking in supply, but he agrees the data show the need for more answers.

"I actually think there is a significant role for supply, but to deny the demand side is crazy," he says.

Dr. Davidoff wonders if Mr. Yan's findings indicate a lower population growth because of a lack of housing.

Mr. Yan used Canada Mortgage and Housing Corp. data. He says the data have their limitations, but he believes they offer an accurate snapshot of the housing landscape.

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As for the 15-per-cent foreign-buyers tax chasing away demand, Dr. Davidoff has a few reservations, but over all says it's a good idea.

"Moving the tax system around so that if you are working here means you do better – and if you are buying a house here just as [an] investment means you do worse – is unquestionably good policy. It's not the exact step I would have taken, but I have not heard any economist say, 'This sucks.'"