Many in the real estate industry now believe the housing crisis “will need to be rebranded as housing emergency, because so severe is the challenge that the delivery of new housing is not meeting the demand requirement,” according to Simon Chinn, vice president of research and advisory services at the Urban Land Institute.
Speaking on an episode of the Investment Monitor podcast, Chinn detailed the complicated set of circumstances that have led to the crisis, including “land use restrictions, zoning, building regulations, the monetary environment” and other issues such as rising inflation.
Go deeper with GlobalData
Joining Chinn on the episode, Reza Esmaeili, CEO of UrbanateAI, a fintech platform connecting investors and land developers with opportunities worldwide, told Investment Monitor that an undersupply of housing was at the core of the issue.
“When it comes to housing problems and housing affordability, it is the basics of the economy and economics: supply, demand,” he said. “The builders have to build more homes so that the buyers have different options. Cities like Toronto, London, San Francisco are all facing the same issue: demand is outpacing supply.”
Foreign investment in the housing market has been on the rise.
“The share of total global real estate investment volumes that were in residential-related sectors was around 12% in 2007,” Chinn explained. “That’s now risen to 27% in 2024. This equates to $1.2trn of global investment in living-related real estate sectors globally. The main driver for this is that investors see that sector as providing long-term returns, and it’s also in response to that fundamental demand-supply imbalance.”
Worries that foreign investment exacerbates the housing crisis have led some places to restrict or outright ban it from their residential real estate sectors. This has been the case in many Canadian cities.
Esmaeili said: “The [Canadian] government put a ban on foreign investments and we see it has caused the market to be cool and, you know, it has also tried to help some improving their affordability.
“The key message is the door isn’t fully closed. It is just being redirected toward more productive investments […] Instead of focusing on the downstream of the market, [foreign investors] are focusing on the upstream of the market, which is production, constructions, and real estate development in general.”
In Chinn’s opinion, this backlash should not be taken too far.
“We do need a kind of balancing act between the regulatory component in response to the demand supply imbalance, but then also not hindering it so much that it defers international investment,” he said. “Particularly as a city’s infrastructure links to a city’s global competitiveness.”
In terms of solutions, Chinn believes that an area in which investors are keen to explore is retrofitting other infrastructure to meet housing requirements.
“A lot of the cities around the world now are looking at how existing property can actually be repurposed and retrofitted into new housing stock, recognising that we have a lot of buildings in our cities that may be now vacant,” he said, noting that this is particularly the case with office workers having shifted towards hybrid working models following the pandemic.
For Esmaeili, the need for governments to cut through red tape to attract both investors and home buyers back to the market is key.
“All the stakeholders have to work hand in hand to ensure that the housing crisis would be tackled,” he said. “But if I submit my application to the municipality and I wait for a couple of years until I get my approval, it is money down the drain, right? So we need to deal with the red tape, we need to deal with the bureaucracies.”
Chinn added that regulations are important to tackle issues such as urban sprawl and environmental implications, but that the key is for governments to “facilitate and work closer in partnership with the private sector to help them go through these regulations and deliver new housing in as quick a way and as effectively as possible.”
