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.
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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.
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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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.