Incentivizing more supply will be one part of the solution, but ultimately, we need a comprehensive, multitargeted approach
The guy who runs Generation Squeeze says building more homes isn’t enough to lower prices, because most people buying houses are already property owners. Property owners can either sell their current house to get a load of cash, or borrow against it to get a load of cash. Either way, they can pay a lot for their next property.
As evidence, he mentions that Alberta has less supply per capita than the rest of the country, but house prices are half those of Ontario and BC.
Here are the good bits:
While building more supply is absolutely important, setting ambitious targets does little good if property values continue to rise. Unless they are deeply subsidized by tax dollars, new market units will price in today’s high land values – which have soared well beyond what most can afford with local earnings whether the new homes are intended for renters or owners.
Plus all the focus on “Build! Build! Build” ignores that lack of supply isn’t the only, or even primary, factor influencing the price of rent and ownership. You could be forgiven for thinking otherwise, since undersupply has become the dominant narrative shared by Canada Mortgage and Housing Corp. and a variety of financial institutions.
The Bank of Nova Scotia, for instance, published reports lamenting that Canada has a smaller number of private dwellings per capita than the G7 average, blaming this ranking for much of our unaffordability problem. This leap in logic begs questions, since the same Scotiabank data also show that Alberta has lower levels of housing supply per capita than most other provinces, yet home prices in Alberta are about half as expensive as those in Ontario and B.C.
…
Mr. Pomeroy [who published a study about this stuff] encourages us all to widen our focus to include the vicious cycle by which rising home prices drive rising home prices.
First-time homebuyers are a minority of purchasers. They compete with many Canadian buyers who have already owned in the market. Bolstered by the equity they’ve gained from surging home values, existing homeowners bid up the price of housing to levels that are disconnected from earnings paid by local jobs. This was especially true prior to recent interest-rate hikes, because historically low interest rates made it cheap for homeowners to liquefy wealth windfalls created by skyrocketing home values.
Some homeowners bid up the price of housing simply to relocate. Others do so to purchase an investment property in search of additional wealth windfalls.
The latter are among the one in six Canadian homeowners who own multiple properties. Most are over the age of 55. To pay the mortgages on their investment properties, they increasingly collect rent from younger residents with dashed dreams that a good home should be in reach for what hard work can earn.
This reveals that the vicious cycle by which those enriched by high home values bid housing costs ever higher isn’t just ruining the market for aspiring owners. It is also breaking the rental market, as confirmed by the record-high rents reported this summer.
To disrupt this vicious cycle, political leaders must help break Canada’s cultural addiction to rising home prices by endorsing the plan that governments will use all available policy tools to stall home prices for the foreseeable future.
Implement the Ontario HATF recommendations in every province. These are various recommendations on how to remove powers from municipal and provincial governments to block housing development. They’re a massive project of upzoning. No more “tearing down a home to build a million-dollar mcmansion” when that lot could support a low-rise building of like 6 $400k homes.
Adjust processes for colleges, apprenticeships, and for immigration to get more home-building contractors like electricians, plumbers, etc.
Open the greenbelt, but only for transit-serviced ultra-high-density construction. You can build on farmland if you’re going to build Manhattan. We have enough sprawl.
Create a crown building corporation that funds rental construction with a specific mandate to keep vacancies above some fixed percent in every major market, like how the BoC has a mandate to keep interest below X%. Rent is skyrocketing because there is no vacancy - every unit with a reasonable price gets dozens, even hundreds of applicants. This org would be particularly important in moments of high-interest rates when it’s not as profitable for the private sector to build homes.
Read your Henry George. The housing analog to the carbon tax is the Land Value Tax. The idea is that people should be taxed for what the land they own is worth, not for the property they own is on it, because the land is provided by Canada itself. So if you’ve a vacant lot or a parking lot or a single-family-detached home in a hyper dense urban space with transit access, you’ve got a hard cash incentive to find the best use for the land instead of leaving it fallow. Of course, the downside is this would mean throwing Grandma out of the house she’s lived in for her whole life, which is political suicide, so only make it apply to investors as an alternate to property taxes (use whichever is higher), with it calibrated that it’s only a tax on investors if their land is underused. If you own a high-rise in the core or a rural house? Well, that’s realistically all that area could support, pay normal property tax.
I can get behind all of those. This one is optimistic though:
No more “tearing down a home to build a million-dollar mcmansion” when that lot could support a low-rise building of like 6 $400k homes.
In Ottawa’s downtown I’ve repeatedly seen modest 600k homes sold to developers who put two duplexes on the same land and sell each for 800k. So four units, each with less floor space, less outdoor play area for kids, going for more than the original.
The improved density is good for land use, but the increased cost makes the units unaffordable to many.
That has more to do with the rapid rate of climb. I’ve seen so many cases where the housing market moves so fast that absurdities like that happen. Like, various flavours of “OMG this new building won’t have any affordable units in it, they’re starting at $300k” as the building gets blocked from construction… and by the time the building was slated to be completed, $300k for a unit is a goddamned dream. I would assume that any SFH torn down for multi-units would be still worth more than the units if it still stood, just because of how fast prices go up and how long a teardown and construction takes…
find the best use for the land instead of leaving it fallow.
Leaving it fallow is the best use of the land. Development is a drain on society, using up massive resources and offering absolutely nothing to society in return. If you think you have a better use for the land to your individual benefit, we will reluctantly let you proceed (usually), but you had better be ready to compensate society for the externalities they are to endure. That is what the property tax is for.
Define a speculator. Is the company that owns an old purpose-built rental highrise downtown a speculator? What if a building like that gets renovated into condos, but somebody buys up like a quarter of the units? How about the student houses in my neighborhood? Without those student houses, those students would not have a place to live - they are not in the market to buy housing.
There’s no reason why buying or selling a house needs to be any harder than renting a house. The default should be owning your home and paying it off. Just like the default is owning your car. Sure, you rent a car on holidays or if you need something very short term, but you buy a car if you need it more than that.
So there are two things we need to do:
Through taxation make multiple dwelling ownership a thing of the past. Plus ban all corporate ownership of residential houses. The only exception to this rule is new builds until they are sold to a private buyer.
Transferability- if you need to move and buy a new house, your old property goes into a no reserve auction pool run by the government. This same pool is probably where you get that new house you are looking for.
Together these should bring the market down to sane levels and also create greater variability in house values - really prestigious properties will continue to sell for more, but bog standard suburban sprawl would be affordable and we would no longer need rentals.
Ironically, that was my exact experience in the current system. The landlord student lived upstairs, demanded rent, and kicked people out on a whim. I like the other person’s suggestion about a co-op
I really like the idea of multi person dwelling being owned by a co-op. Everyone there is part owner until they sell their share to the next person in line.
I like it, at first I thought “hmm. This breaks the rules of the no corporate ownership” but then realised that so long as there is transparency / a special co-op structure where they can be sure you only own the one property it’s totally workable.
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Here’s my proposal on what to do:
Implement the Ontario HATF recommendations in every province. These are various recommendations on how to remove powers from municipal and provincial governments to block housing development. They’re a massive project of upzoning. No more “tearing down a home to build a million-dollar mcmansion” when that lot could support a low-rise building of like 6 $400k homes.
Adjust processes for colleges, apprenticeships, and for immigration to get more home-building contractors like electricians, plumbers, etc.
Open the greenbelt, but only for transit-serviced ultra-high-density construction. You can build on farmland if you’re going to build Manhattan. We have enough sprawl.
Create a crown building corporation that funds rental construction with a specific mandate to keep vacancies above some fixed percent in every major market, like how the BoC has a mandate to keep interest below X%. Rent is skyrocketing because there is no vacancy - every unit with a reasonable price gets dozens, even hundreds of applicants. This org would be particularly important in moments of high-interest rates when it’s not as profitable for the private sector to build homes.
Read your Henry George. The housing analog to the carbon tax is the Land Value Tax. The idea is that people should be taxed for what the land they own is worth, not for the property they own is on it, because the land is provided by Canada itself. So if you’ve a vacant lot or a parking lot or a single-family-detached home in a hyper dense urban space with transit access, you’ve got a hard cash incentive to find the best use for the land instead of leaving it fallow. Of course, the downside is this would mean throwing Grandma out of the house she’s lived in for her whole life, which is political suicide, so only make it apply to investors as an alternate to property taxes (use whichever is higher), with it calibrated that it’s only a tax on investors if their land is underused. If you own a high-rise in the core or a rural house? Well, that’s realistically all that area could support, pay normal property tax.
I can get behind all of those. This one is optimistic though:
In Ottawa’s downtown I’ve repeatedly seen modest 600k homes sold to developers who put two duplexes on the same land and sell each for 800k. So four units, each with less floor space, less outdoor play area for kids, going for more than the original.
The improved density is good for land use, but the increased cost makes the units unaffordable to many.
That has more to do with the rapid rate of climb. I’ve seen so many cases where the housing market moves so fast that absurdities like that happen. Like, various flavours of “OMG this new building won’t have any affordable units in it, they’re starting at $300k” as the building gets blocked from construction… and by the time the building was slated to be completed, $300k for a unit is a goddamned dream. I would assume that any SFH torn down for multi-units would be still worth more than the units if it still stood, just because of how fast prices go up and how long a teardown and construction takes…
Leaving it fallow is the best use of the land. Development is a drain on society, using up massive resources and offering absolutely nothing to society in return. If you think you have a better use for the land to your individual benefit, we will reluctantly let you proceed (usually), but you had better be ready to compensate society for the externalities they are to endure. That is what the property tax is for.
Or just tax speculators. 30% of Canadians are hoarding properties. Force them to sell. It’s not complicated.
Define a speculator. Is the company that owns an old purpose-built rental highrise downtown a speculator? What if a building like that gets renovated into condos, but somebody buys up like a quarter of the units? How about the student houses in my neighborhood? Without those student houses, those students would not have a place to live - they are not in the market to buy housing.
There’s no reason why buying or selling a house needs to be any harder than renting a house. The default should be owning your home and paying it off. Just like the default is owning your car. Sure, you rent a car on holidays or if you need something very short term, but you buy a car if you need it more than that.
So there are two things we need to do:
Through taxation make multiple dwelling ownership a thing of the past. Plus ban all corporate ownership of residential houses. The only exception to this rule is new builds until they are sold to a private buyer.
Transferability- if you need to move and buy a new house, your old property goes into a no reserve auction pool run by the government. This same pool is probably where you get that new house you are looking for.
Together these should bring the market down to sane levels and also create greater variability in house values - really prestigious properties will continue to sell for more, but bog standard suburban sprawl would be affordable and we would no longer need rentals.
Wait so you want student houses where the kids are splitting the rent 6 ways to be owned by one of them who has a mortgage?
Ironically, that was my exact experience in the current system. The landlord student lived upstairs, demanded rent, and kicked people out on a whim. I like the other person’s suggestion about a co-op
I really like the idea of multi person dwelling being owned by a co-op. Everyone there is part owner until they sell their share to the next person in line.
I like it, at first I thought “hmm. This breaks the rules of the no corporate ownership” but then realised that so long as there is transparency / a special co-op structure where they can be sure you only own the one property it’s totally workable.