Faced with increasing pressure to respond to widespread concerns about the cost of living and questions about his leadership, Prime Minister Justin Trudeau announced a series of new measures Thursday meant to deal with rising housing and grocery prices.
Nothing with teeth unfortunately. Putting taxes on the corporations will just raise prices. Not very helpful. Getting rid of the GST on new rental units will mean bigger profits for the builders. Nothing here helps the people.
The GST part is to incentivize new construction, and you are right it will increase profits but without increasing prices for the end consumer, on the contrary if more builders see this as an attractive opportunity, there will be more units built which increases the offer and when the offer goes up, the prices goes down.
If I can make a low-rise building and sell 12 units for $250k on the same property that I can build two detached houses to sell for a $million, I’ll do the former, right?
But city hall is going to make me drag out the approval process for the low-rise for 3 years and grind me down to 6 units. I’ll just save the ball-ache and build the mcmansions.
Zoning laws are definitely a big (probably the largest) part of it, but it’s not the only issue. Even when buildings with a higher number of units is approved, they tend to be more upscale. There’s not a lot of lower end housing being built in any capacity.
I mean yeah, they charge what the market will bear, and the market can bare a crapload right now. I mean, if you just upzoned and cut out the red tape, eventually the price would come down as supply ramped up to meet the demand… but I don’t think anybody can wait for “eventually”.
Taxing corporations does not just raise prices for consumers!! This is a hyper conservative worldview, and very convenient to corporations that don’t want their taxes raised. It is also contradicted by literally any first year economics textbook, so I don’t understand why it keeps getting repeated.
Tax changes to encourage rental construction have been advocated by urban economists for years. This particular measure was proposed by the NDP. An affordable rental market actually puts downward pressure on the overall real estate market.
That said, I agree the Liberals aren’t doing enough.
I general, I’d agree with that. On housing specifically, I wouldn’t.
Until recently, I would say Liberals were actively hurting housing affordability. Their signature housing proposal up to now is a tax cut for rich people who have maxed out their TFSA, which is the first time home buyers tax free savings account. That raises demand without addressing supply or disincentivizing investors. It sounds like a proposal written by the real estate investment community, and frankly, it probably was.
This recent proposal is full of good but minor stuff that should have been done a decade ago and will probably take another decade to have an effect. They’ve wasted a lot of time and I still doubt they’re taking it seriously.
Edit: I want to clarify that I think Conservatives would do an even worse job. Their voter base has even more home owners than the Liberals do and I seriously doubt they have any intention of shrinking real estate GDP growth, which is what is required.
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Nothing with teeth unfortunately. Putting taxes on the corporations will just raise prices. Not very helpful. Getting rid of the GST on new rental units will mean bigger profits for the builders. Nothing here helps the people.
The GST part is to incentivize new construction, and you are right it will increase profits but without increasing prices for the end consumer, on the contrary if more builders see this as an attractive opportunity, there will be more units built which increases the offer and when the offer goes up, the prices goes down.
Hopefully it somehow managed to avoid the trend of only building higher end housing to increase those profit margins.
That one is caused by zoning.
If I can make a low-rise building and sell 12 units for $250k on the same property that I can build two detached houses to sell for a $million, I’ll do the former, right?
But city hall is going to make me drag out the approval process for the low-rise for 3 years and grind me down to 6 units. I’ll just save the ball-ache and build the mcmansions.
Zoning laws are definitely a big (probably the largest) part of it, but it’s not the only issue. Even when buildings with a higher number of units is approved, they tend to be more upscale. There’s not a lot of lower end housing being built in any capacity.
I mean yeah, they charge what the market will bear, and the market can bare a crapload right now. I mean, if you just upzoned and cut out the red tape, eventually the price would come down as supply ramped up to meet the demand… but I don’t think anybody can wait for “eventually”.
Taxing corporations does not just raise prices for consumers!! This is a hyper conservative worldview, and very convenient to corporations that don’t want their taxes raised. It is also contradicted by literally any first year economics textbook, so I don’t understand why it keeps getting repeated.
Tax changes to encourage rental construction have been advocated by urban economists for years. This particular measure was proposed by the NDP. An affordable rental market actually puts downward pressure on the overall real estate market.
That said, I agree the Liberals aren’t doing enough.
Is this a situation similar to the US where the “progressive” party is not doing enough to help and the regressive party wont help at all?
I take the “something is better than nothing” view on this.
Liberals are socially progressive, but fiscally still quite conservative (but not as conservative as Conservatives).
Edit: Actually, I would say that Liberals are status quo conservative and Conservatives are regressive conservatives.
I general, I’d agree with that. On housing specifically, I wouldn’t.
Until recently, I would say Liberals were actively hurting housing affordability. Their signature housing proposal up to now is a tax cut for rich people who have maxed out their TFSA, which is the first time home buyers tax free savings account. That raises demand without addressing supply or disincentivizing investors. It sounds like a proposal written by the real estate investment community, and frankly, it probably was.
This recent proposal is full of good but minor stuff that should have been done a decade ago and will probably take another decade to have an effect. They’ve wasted a lot of time and I still doubt they’re taking it seriously.
Edit: I want to clarify that I think Conservatives would do an even worse job. Their voter base has even more home owners than the Liberals do and I seriously doubt they have any intention of shrinking real estate GDP growth, which is what is required.