E24: Construction Consolidation Contributes to Canadian Crisis?
We're going to take a break from the Price Spreads Report in this episode. Instead I want to talk housing, construction and consolidation. I come from the Construction/Real Estate Industry, and have lots to say on this issue. It's fair to say we have a housing affordability crisis in Canada, and in this episode I dive into how I see consolidation in the building supply industry has contributed to this problem.
I first wrote about this in December 2021 in my newsletter, and I want to revisit this because St Gobain, the parent company of Certainteed, has reached an agreement to buy Building Products of Canada (BP). Certainteed and BP manufacture two of the readily available lines of asphalt shingles in Canada. We're looking at less competition in this industry, which can lead to higher prices for new construction, renovations and repairs. Ultimately this makes the housing more expensive.
This ties into the fundamental issue I have with the current plan to solve our problem by increasing the supply of housing significantly. We don't talk about the cost of the new supply, we just assume more supply will lower the price. BUT, if the average cost of a house in Canada is $500,000, how many $600,000 houses do we need to build to lower the average price? Mathematically this can never work. We need to build below average cost housing to lower the price of housing.
If we allow consoldiation in the building supply industry, at both the retail and wholesale levels, and this raises the cost to build new housing, how can we solve the crisis?
Links from today's episode:
I first wrote about this in December 2021 in my newsletter, and I want to revisit this because St Gobain, the parent company of Certainteed, has reached an agreement to buy Building Products of Canada (BP). Certainteed and BP manufacture two of the readily available lines of asphalt shingles in Canada. We're looking at less competition in this industry, which can lead to higher prices for new construction, renovations and repairs. Ultimately this makes the housing more expensive.
This ties into the fundamental issue I have with the current plan to solve our problem by increasing the supply of housing significantly. We don't talk about the cost of the new supply, we just assume more supply will lower the price. BUT, if the average cost of a house in Canada is $500,000, how many $600,000 houses do we need to build to lower the average price? Mathematically this can never work. We need to build below average cost housing to lower the price of housing.
If we allow consoldiation in the building supply industry, at both the retail and wholesale levels, and this raises the cost to build new housing, how can we solve the crisis?
Links from today's episode:
- About Affordable Housing in Canada - CMHC
- St Gobain buys Kaycan
- Canada needs 5.8 million new homes by 2030 to tackle affordability crisis, CMHC warns
- Insights into Housing Supply in Canada's largest Cities
- Non-profit scoops up 5 apartment buildings in HRM for affordable housing
- IKO was founded by the Koschitzky Family
