Evgueni Yakovlev Tulip Festival Photo 2014

Writer Susan Huebert draws parallels between the tulip market crash in the 1600s and today's housing market. (Evgueni Yakovlev)

I recently read an article about the housing market, one of many such articles that either triumphantly proclaim the essential health of the Canadian housing market or warn of the possible dire consequences of flagging sales.

As usual, the article made me wonder if the current get-rich-quick scheme will go the way of the tulip market.

Centuries ago in Europe, a new flower called the tulip entered the botanical scene for the first time, provoking great excitement and speculation.

Prices soon rose steeply as people began to see the flowers as a good investment opportunity, to the point that some people would trade almost everything they had to obtain a single bulb.

The bulb burst

Inevitably, the tulip market crashed when people’s excitement over the new flower diminished, taking many fortunes with it. The tulip was, after all, only a plant, and it was not in itself worth much more than what people were willing to pay for it.

Hundreds of years later and with the benefit of education and experience, financial experts found a new investment that could not possibly fail: housing. After all, everyone needed a place to live, and even the lowliest homeowner was likely to jump at the chance of eventually making a large profit.  

At first, the new money-making scheme worked relatively well, especially with new financing options that allowed even low-income people to buy houses. Jobs were plentiful if not always high-paid, and most families could supplement their incomes if necessary by sending both parents out to work or by training for higher-paying jobs. 

Housing market may fade like the flower 

Then came three major societal and economic shifts that even now threaten to bring down the entire housing sector.

Home equity line of credit

Realtors' signs hang outside a recently sold property in a Vancouver neighbourhood where houses regularly sell for C$3-C$4 million. Vancouver ranks as North America's least affordable urban market. (Julie Gordon/Reuters)

First, the job market began to stagnate due to factors such as globalization and the delayed retirement of many high-paid workers, and many people have now found themselves unable to afford a house without taking on a large amount of debt.

Second was the skyrocketing cost of housing in many cities and towns, going far beyond the basic rate of inflation and the growth of most people’s wages. With many salaries often barely keeping up with increased costs, home ownership has increasingly become a two-income phenomenon. 

Third was a major demographic change which somehow managed to escape to the fringes of most people’s consciousness: the growth of singleness and of people living alone. 

By 2011, the number of one-person households had surpassed the numbers of two-parent families, according to Statistics Canada, meaning that many more people than ever before are trying to manage with a single income. 

The next hot investment: Cars? Gold? 

Investment in housing has still continued despite the issues surrounding it, but too many people are now spending an excessive proportion of their income on their homes. Meanwhile, the cost of rental housing has also been rising, leaving few options for people who were struggling to manage.  

One of the problems with the situation is the entirely speculative nature of the whole housing market, which seems to depend heavily on factors beyond anyone’s control. What will happen to all of the great real estate investment schemes if the next generation decides to put money into cars or gold bullion instead of into houses?

Furthermore, speculation in housing is not like the tulip market, especially in a cold country like Canada.

Hot housing market has high cost 

No one will die from a lack of tulips, but people die every year from a lack of shelter. The implications of unaffordable housing are difficult to reconcile with any society that wants to be compassionate.

The problem, in my opinion, is that the market has separated housing from its original and most essential purpose of providing shelter.

Massive homes in the suburbs have become status symbols, while investment in affordable housing has been erratic at best, leaving low-income people to scramble for the few available homes that they can afford.

Like the tulips of the seventeenth century, housing has taken on a meaning beyond its actual function. At one time, housing was primarily about finding homes for people at a price that they could reasonably afford to pay, but all of that has changed now. 

Perhaps the time has come to return to that radically simple idea.       

Susan Huebert is a Winnipeg writer and editor who writes for both children and adults.