Want more housing? List homebuilders on the stock exchange

“Housing and Immigration” are the two hot topics for most Toronto Star readers, so this week’s Star column is meant to offer up a new perspective on what might help turbocharge Canada’s weak housing starts. Something that, say, a guy from Bay Street might be thinking about.

For all of my i-Banking friends out there: get at it! Take some of these larger, privately-held home building firms public. Try and imagine BMO, Brookfield or Shopify being as successful as they are today had they continued as private companies throughout the course of their corporate history.

If “the market” won’t give Canada’s home builders value for their undeveloped land, which is likely the key hurdle for some, they can continue to hold those land parcels on the books of their Family Offices. But there’s no denying that NYSE-listed D.R Horton (DHI:NYSE) has made investors scads of money over the past decade; and think of the fees from stock sales and bond issuances.

More importantly, they closed on almost 100,000 new homes for the twelve months ending June.

Don’t make me dust off my PDO licence and get back into the industry. ;-)

I’ve posted the first half of this week’s column below. If you want to see how the column ends, buy a print copy, use your Apple News, or subscribe to the Star online via my special discount code: www.thestar.com/informed.

Politicians can make all the promises they want, but there’s no quick fix to Canada’s housing crisis. Our only hope may be for the private sector to switch into a higher gear.

According to Canada Mortgage and Housing Corporation (CMHC), total annual housing starts are trending around 242,000. While that’s about 20 per cent higher than 2010, our annual immigration intake exploded by 100 per cent — to 500,000 new permanent residents — over the same period. We also need accommodation for the additional 800,000 individuals the Liberals recently started bringing in each year as international students, refugees or Temporary Foreign Workers.

As long as our population outgrows new construction, Canada’s self-induced housing deficit will only get worse.

Private sector players tell me that the key barrier is too much “Red Tape.” From a builder’s first meeting with local bureaucrats, it’ll take, on average, 11 years to build a new home community. 

Parochial local officials can be maddening. And I respect the financial risk Canada’s builders take every time they launch a new development. But I have to wonder if the structure of our privately owned homebuilding sector isn’t ripe for transformation.

What if bigger firms, with the pressure of outside investors and quarterly reporting cycles, led to more supply?

Pick an important Canadian industry: railways, auto parts, airlines, software, telecom, financial services, infrastructure, mining, oil and gas. Even self-storage and garbage trucks. Each vertical is represented on the Toronto Stock Exchange (TSX). These publicly listed national champions have ready access to capital, employee ownership, transparent governance, greater brand awareness, and the opportunity to grow through acquisition using their publicly traded shares.

What’s missing from that list? Canada’s larger homebuilders.

Hit the link to read the rest of the column.

MRM

(note: this column is an Opinion Piece)