British Columbia’s Ministry of Finance recently divulged that 10 per cent of residential property transactions during a 34-day period in June and July, 2016 were sold to foreign nationals, prompting the province to introduce an additional 15 per cent property transfer tax on purchases by foreign nationals.

While this might seem like a quick fix for decreasing housing affordability, it misses the point. Constraints on the development of new homes should be at the heart of the affordability discussion.

Indeed, the Urban Development Institute recently revealed that supply constraints are so severe in Metro Vancouver that permitting rules are holding up nearly 70,000 housing units in a half-dozen Metro Vancouver cities at the moment—roughly equivalent to the number of dwellings in Richmond last census. Similarly, the CBC recently reported the significant backlog of new housing waiting for building permits at Vancouver city hall.

These findings corroborate the conclusions of a recent Fraser Institute study, which found that long and uncertain approval timelines for building permits, as well as onerous fees and local opposition to new homes, slow the growth of housing stock, resulting in fewer new homes for a growing pool of buyers and inevitably leading to rising prices.

For instance, the study found that the stock of new housing in Vancouver’s West Side grew at a slower rate than it would have had Vancouver’s regulations been as welcoming to development as those in some of its neighbouring municipalities.

While price appreciations in Vancouver are often blamed on foreign buyers, these supply constraints likely swamp the effect of foreign demand. Even if 10 per cent of sales are to foreign buyers (935 units in Metro Vancouver were reported sold to foreign nationals during the 34-day analysis issued by the province), that still means 90 per cent are to domestic buyers. With or without foreign buyers, there’s strong demand for housing in Metro Vancouver. While natural barriers such as mountains and the ocean impose constraints on development, there’s still ample room for new housing in Greater Vancouver, and both the province and municipalities hold levers that could encourage timely construction of new housing.

The best way to ensure demand is met is for city councils and the province to ensure that housing and land-use regulations don’t unduly impede the supply of new homes. Supply needs to meet demand if we want a more affordable Metro Vancouver.