Have a rental crunch? Don’t be dense!


Scarce and increasingly expensive rental properties in Calgary have been making the news lately. Mayor Nenshi took advantage of the issue to ignore basic supply and demand principles while trying to label Calgary landlords as being greedy and gouging.

It is no secret that Naheed Nenshi is a very ideologically dedicated to increasing urban density within Calgary by any means possible such as Calgary’s virtual suburban development freeze. While hindering and freezing outward growth in a city will indeed lead to increased urban density it will also inevitably lead to a higher cost of living, particularly in the rental market. This makes it understandable as to why Nenshi wants to distract people from the consequences of his development policies with a baseless and divisive attack on landlords within Calgary. It would be rather difficult for Nenshi to sell his density mantra if more people realized just how hard those density policies end up impacting low and middle income Calgarians.

The vast majority of people simply do not want to live in crowded downtown situations. That is why when the market is allowed to develop naturally, cities will grow outward to fill demand and it will keep real-estate and rental properties within the bounds of proper market price. When outward growth is hindered by obstacles such as an ocean or ideological city council, higher urban density along with greatly inflated housing costs soon follow.

Don’t just take my word for it though. The numbers tell the tale and the very direct correlation between urban density and high rent is very easy to see.

Below I have listed American cities in order of declining density based on people per mile square and then have the average monthly rent for a one bedroom apartment in US dollars next to it.

New York City   27,778 people per sq. mile       Average rent: $2,933

San Francisco 17,867 people per sq. mile         Average rent: $3,413

Boston  13,340 people per sq. mile                    Average rent: $2,080

Chicago 11,864 people per sq. mile                   Average rent: $1,628

Miami    11,765 people per sq. mile                    Average rent: $2,049

Seattle  7,774 people per sq. mile                      Average rent: $1,402

Cleveland 5,107 people per sq. mile                  Average rent: $635

Portland Oregon 4,375 people per sq. mile       Average rent: $1,106

Houston 3,662 people per sq. mile                    Average rent: $1,191

Dallas 3,645 people per sq. mile                        Average rent: $1,090

Phoenix 2,797 people per sq. mile                     Average rent: $776

Las Vegas 1,659 people per sq. mile                 Average rent $766

The pattern is pretty stark. While variables such as local economy, taxes and desirable real-estate have an effect, it is clear that the higher the urban density you have, the higher the rent.

Even with a strong economy and an incredible landscape, the hipster’s Mecca of Portland Oregon keeps rents reasonable through outward growth and low urban density.

Houston and Dallas are commonly demonized by density proponents for their evil “sprawl” but they clearly offer a great standard of living as they both have strong economies and low rents. Phoenix and Vegas have all sorts of space to grow outwards and it shows with their very low density and their associated low rents. Calgary has plenty of room to grow outward too if we would just allow it.

Keep these numbers in mind as Mayor Nenshi continues to promote high urban density and constant tax increases. While Nenshi may indeed create his high-density utopia but it will come at a very heavy price for people with low or fixed incomes as rents inevitably continue to rise quickly. High density and low rent simply does not happen in the developed world.




Oil companies are not doing themselves any favors.



Having rallied to the defense of energy companies in the past when ill-informed people go into attack mode against them, I simply can’t see any defense or justification in the recent gouge we have seen in gasoline prices at the pump.  Speculation that hurricane Ike would damage US refineries caused the hike in prices. OK fair enough. I find it hard to believe that the pricing process can move so quickly as to change the price of the gasoline that was sitting in the tanks of gas stations overnight like that.

 Whenever wholesale prices for gasoline come down, we as consumers are forced to patiently wait for weeks to see that drop in price reflected at the retail pump. It is explained to us that the current inventories were purchased at the previous high price and need to be sold at the high price until the cheaper gas comes on stream. When speculation causes wholesale prices to rise however, somehow the value of existing inventories immediately rises.

 Lets face it, the consumers are simply being gouged.

 While I have an opinion on everything and a proposed solution for damn near everything, I am not sure how this gouging can be addressed. Government imposed price controls inevitably fail and the concept of nationalization is always a disaster. In most markets, simple competition and the rules of supply and demand keep products at reasonable prices for consumers. In the case of fuel though, we see all suppliers moving in lock-step with pricing. Competition is not coming into play and consumers are losing. Monopoly situations always cost the consumer greatly whether it is a government monopoly or a private one. While there is not a monopoly in gasoline sales, when all of the suppliers act together as they have been we essentially are living under one.

 People see the prices of crude dropping and they see the price at the pump rising. Most people at large do not see that the reason for the disparity is a lack of refining capacity. As we regulate, tax and cancel domestic production and refining projects, our consumption is rising. The prices in general simply must rise.


 Lets face it, the majority of voters in Canada do not look deeply enough into this issue to see the correlation between refinery capacity and pump prices. What the electorate sees is the raw commodity price and the price at the pump. Flagrant gouging as we saw this week leaves the energy companies very vulnerable to knee-jerk proposals such as nationalization or price regulation. There could be no more idiotic time for such a shock to consumers as in the middle of a federal election where incensed voters can be drawn to policies that punish energy companies.

 One would have thought that Alberta companies learned last year that the public at large is not terribly fond of them as they embraced Stelmach’s royalty gouge. Public support is vital for companies that want to avoid government incursion into their industries.

 Currently our energy seems more determined to alienate the public than ever. I understand that the prices still reflect what the market will bear and that energy companies are rightly in business to make a profit. Will the short term profits from this recent price spike be worth the potential punishing legislation that could be earned by this? Are those folks in the boardrooms even considering this? I know that many companies run advertising trying to humanize themselves and they are massive contributors to local economies and charities. All of that is quickly forgotten by the public when it appears that the consumers are being screwed.

 I hope that some of the tall foreheads in the boardrooms figure this out soon. If we end up with price controls or nationalization, we all will lose.