Buying a house may remain out of reach for many Canadians for the foreseeable future, with mortgage costs unlikely to fall enough to offset lofty home prices and weak spending power, economists and real estate agents say.
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Even with expectations that Bank of Canada will keep cutting rates in the coming months, the issue of home affordability - which has strangled Prime Minister Justin Trudeau’s poll numbers - is unlikely to fade before the next election.
The mandate for the Liberal minority government ends at the end of October 2025, but an election could come well before then, with the Conservative opposition spoiling to end Trudeau’s nine-year run at the top.
“You won’t get back to an affordable range for housing on a sustained basis for a decade,” Tony Stillo, director at forecasting and analysis group Oxford Economics, said last week at a conference.
Exactly. This has nothing to do with MPs being landlords. Any government that crashes house values will never be reelected. That’s why all measures taken to date have avoided doing that — for example the reintroduction of 30-year mortgages, undoing a change that was introduced to prevent house prices from growing too high. The only long-term solution is of course for prices to come down (which can only be achieved by massively increasing supply) but most homeowners don’t want that and will vote against it.
Supply needs to increase, but it can literally never increase enough given its current structure of investors and profiteering.
As long as houses are bought by investors (anyone with two houses), then it means that normal people will be priced out as the investors push prices up higher than they should be. If house prices drop they’ll invest in building less housing. This is compounded by most new housing being multi-unit buildings that a single person cannot build on their own. When we had urban sprawl, you could still buy cheap land on the outskirts and build your own house if investors stopped building new developments, but with (very necessary) greenbelt policies, it eliminates that release valve, putting the housing market basically entirely in control of investors who’ll keep it inflated to profit themselves.
That release valve you speak of is unsustainable due to infrastructure and transportation costs. It only works up to some level of sprawl.
housing market basically entirely in control of investors who’ll keep it inflated to profit themselves
Correct, which is why it has to be public investment. We need massive multi unit buildouts funded by new public spending. All of it durable, cheap affordable housing. This will not only act on prices via increasing supply, it will also act by bidding prices down because the prices will not be maximizing profits. Whoever wants a place to live, should be able to afford one of thes units. Let the market sort out prices and availability of more premium options.
That release valve you speak of is unsustainable due to infrastructure and transportation costs. It only works up to some level of sprawl.
Completely agree. Greenbelt policies are necessary for environmental and infrastructure reasons, they just also cause problems from a housing affordability / market elasticity standpoint, which we haven’t addressed at all.
Correct, which is why it has to be public investment. We need massive multi unit buildouts funded by new public spending. All of it durable, cheap affordable housing. This will not only act on prices via increasing supply, it will also act by bidding prices down because the prices will not be maximizing profits. Whoever wants a place to live, should be able to afford one of thes units. Let the market sort out prices and availability of more premium options.
I do generally agree with this approach, though I think that a) as long as units are up for private ownership, it will make sense for investors to buy them up and hold them, you do also need to pair this with both vacant property taxes and ban investors from buying government built housing.
And b) it also won’t work if the government only builds out the bottom of the market. Like we’re seeing right now with the condo market, if you just build shitty units that people don’t actually want to live in, then people won’t really consider them part of the same market and any effects their supply has won’t spread widely. If the government actually builds out livable Habitat 67 style buildings and units that middle class people would want to live in then it will be most effective.
Oh yes units like this should be non-market or heavily insulated from the market / regulated, etc. Basically all the things you said.
As for the quality of units, when I say cheap I don’t mean shitty to live in. For example the current luxury condo units being built are expensive to build but shitty to live in. Money is spent on using flashy materials, trims, ceiling to floor windows that are difficult to insulate and last less. Not on larger units that are comfortable to live in. You get a luxury shoebox. If you look at some buildings from the last century, you can see much simpler construction cheaper materials but 1400 sq ft units that you can raise a family in. I live in one built in the 70s and it’s in perfect shape today. Many families with children live here. That’s what I mean by cheap and durable construction. I guess I should have added the family-sized qualifier. 😄
That urban sprawl mechanism getting nixed is one of the better things to occur. Since maintaining roads, electric and water lines, fire safety coverage and so on are government expenditures this densifing initiative they have going is actually pretty on point.
Problem is the government doesn’t want to upset the applecart for those who invested in the family home by cratering their portfolios so they are doing everything they can to mince around homeowners so the initiative to cool the market is the softest most delicate corrections they can manage. That sort of approach is gunna take a long time to work and is going to be vulnerable as hell to NIMBY counter initiatives. It’s good to see the government is getting more creative with time but until everyone recognizes that property investing was built on risks one signed on when you bought the sort of big actions needed aren’t going to serve up a fix unless the bubble bursts on it’s own.
Supply needs to increase, but it can literally never increase enough given its current structure of investors and profiteering. As long as houses are bought by investors (anyone with two houses), then it means that normal people will be priced out as the investors push prices up higher than they should be. If house prices drop they’ll invest in building less housing.
I’m not sure you’re familiar with the way the industry works. Builders and investors are very rarely the same people. Builders don’t care if the buyer is going to live there or rent the property. Your theory also doesn’t account for the ~80% of housing that is owner-occupied.
This is compounded by most new housing being multi-unit buildings that a single person cannot build on their own. When we had urban sprawl, you could still buy cheap land on the outskirts and build your own house if investors stopped building new developments, but with (very necessary) greenbelt policies, it eliminates that release valve, putting the housing market basically entirely in control of investors who’ll keep it inflated to profit themselves.
This is also quite the take — it’s very rare to see anyone advocate for more urban sprawl or suggest that building more housing units drives up prices. If you want to live in an urban area, density is good because it means there’s more housing supply. Land is the only finite resource in the equation, so making less efficient use of it in the hope that prices will come down is… Well, I’ll need you to explain how that math is supposed to work.
I’m not sure you’re familiar with the way the industry works. Builders and investors are very rarely the same people. Builders don’t care if the buyer is going to live there or rent the property.
The fact that the entire condo market is built with investor sized units would suggest otherwise (or suggest that builders build what the market demands and if the market is all investors they will build investor focused units).
This is also quite the take — it’s very rare to see anyone advocate for more urban sprawl or suggest that building more housing units drives up prices.
I agree, not sure where you saw that. Was it where I said that green belt policies are “very necessary”?
Land is the only finite resource in the equation, so making less efficient use of it in the hope that prices will come down is… Well, I’ll need you to explain how that math is supposed to work.
The point is that policies that combat urban sprawl have also increased financialization of the housing market, both my making housing a more limited commodity (which incentivizes investors to buy), and by making it impossible to build a house unless you’re a large corporation that can afford to build a multi-tenant building.
We unquestionably need to combat urban sprawl, but we should also be addressing the effects that those corrections are having on the housing market by de-incentivizing investors and profiteering.
The fact that the entire condo market is built with investor sized units would suggest otherwise (or suggest that builders build what the market demands and if the market is all investors they will build investor focused units).
That’s still fundamentally a supply (and by extension pricing) issue. Prices are high, therefore small units are the only thing people can realistically afford, therefore that’s what developers build.
I agree, not sure where you saw that. Was it where I said that green belt policies are “very necessary”?
Here: “When we had urban sprawl, you could still buy cheap land on the outskirts and build your own house if investors stopped building new developments, but with (very necessary) greenbelt policies, it eliminates that release valve, putting the housing market basically entirely in control of investors who’ll keep it inflated to profit themselves.”
The point is that policies that combat urban sprawl have also increased financialization of the housing market
How do you define “financialization” here, especially in the context of non-rental units? If we’re talking about REITs, sure, but rentals are only a small part of the picture.
both my making housing a more limited commodity (which incentivizes investors to buy)
It also incentivizes builders to build, so as long as that isn’t impeded, prices should stabilize. Unfortunately building is severely impeded, which is what I mentioned in my earlier post.
and by making it impossible to build a house unless you’re a large corporation that can afford to build a multi-tenant building.
Again, this is a land value issue, not one of construction costs. Of course land is going to be expensive in an urban centre, as it should be! It’s a very limited resource. it makes much more sense to have two hundred people living on a building lot rather than four. Hence my confusion about your desire to reduce supply even further in order to reduce the price of housing.
Not OP, but you keep hinging on the supply reduction that OP supposedly said (which he did not). He just explained the context of today vs the period of urban sprawl where land was cheap.
He is right that reducing urban sprawl and setting limits on what can be build where put upwards pressure on the existing land price, and that only corpos can afford to buy land to build multi-units.
The policies that densify urban region are good and necessary, but we have to make sure that the pressure it creates on land price is somewhat controlled.
You’d be amazed how many people don’t understand that causation. For example, most people I talk to IRL about this don’t know that most homeless drug users started using after they became homeless. Instead, they think the homeless became addicts first and spent their rent money on drugs. Once they’re made aware of that and the fact that a housing-first approach is actually less expensive than the costs of homelessness (shelters, law enforcement, etc.) almost everybody I’ve discussed this with agrees that ensuring everybody has housing is the best approach. Mind you, they will rarely agree that everybody’s house value needs to come down, but it’s a start.
That’s a relatively small problem (in terms of how many housed people are acutely impacted or even aware) in large sprawled cysts like the GTA. The unhoused population is visible in small localized spots. The vast remainder wouldn’t even hear about it if they didn’t read the news or don’t have to go to those spots. The very large city of Mississauga for example hasn’t heard or seen a peep about unhoused people. It’s only stories by the few that work specifically downtown. The backyards are as clean as ever and the birds are singing. I wish everyone was acutely aware.
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Exactly. This has nothing to do with MPs being landlords. Any government that crashes house values will never be reelected. That’s why all measures taken to date have avoided doing that — for example the reintroduction of 30-year mortgages, undoing a change that was introduced to prevent house prices from growing too high. The only long-term solution is of course for prices to come down (which can only be achieved by massively increasing supply) but most homeowners don’t want that and will vote against it.
Supply needs to increase, but it can literally never increase enough given its current structure of investors and profiteering.
As long as houses are bought by investors (anyone with two houses), then it means that normal people will be priced out as the investors push prices up higher than they should be. If house prices drop they’ll invest in building less housing. This is compounded by most new housing being multi-unit buildings that a single person cannot build on their own. When we had urban sprawl, you could still buy cheap land on the outskirts and build your own house if investors stopped building new developments, but with (very necessary) greenbelt policies, it eliminates that release valve, putting the housing market basically entirely in control of investors who’ll keep it inflated to profit themselves.
That release valve you speak of is unsustainable due to infrastructure and transportation costs. It only works up to some level of sprawl.
Correct, which is why it has to be public investment. We need massive multi unit buildouts funded by new public spending. All of it durable, cheap affordable housing. This will not only act on prices via increasing supply, it will also act by bidding prices down because the prices will not be maximizing profits. Whoever wants a place to live, should be able to afford one of thes units. Let the market sort out prices and availability of more premium options.
Completely agree. Greenbelt policies are necessary for environmental and infrastructure reasons, they just also cause problems from a housing affordability / market elasticity standpoint, which we haven’t addressed at all.
I do generally agree with this approach, though I think that a) as long as units are up for private ownership, it will make sense for investors to buy them up and hold them, you do also need to pair this with both vacant property taxes and ban investors from buying government built housing.
And b) it also won’t work if the government only builds out the bottom of the market. Like we’re seeing right now with the condo market, if you just build shitty units that people don’t actually want to live in, then people won’t really consider them part of the same market and any effects their supply has won’t spread widely. If the government actually builds out livable Habitat 67 style buildings and units that middle class people would want to live in then it will be most effective.
Oh yes units like this should be non-market or heavily insulated from the market / regulated, etc. Basically all the things you said.
As for the quality of units, when I say cheap I don’t mean shitty to live in. For example the current luxury condo units being built are expensive to build but shitty to live in. Money is spent on using flashy materials, trims, ceiling to floor windows that are difficult to insulate and last less. Not on larger units that are comfortable to live in. You get a luxury shoebox. If you look at some buildings from the last century, you can see much simpler construction cheaper materials but 1400 sq ft units that you can raise a family in. I live in one built in the 70s and it’s in perfect shape today. Many families with children live here. That’s what I mean by cheap and durable construction. I guess I should have added the family-sized qualifier. 😄
That urban sprawl mechanism getting nixed is one of the better things to occur. Since maintaining roads, electric and water lines, fire safety coverage and so on are government expenditures this densifing initiative they have going is actually pretty on point.
Problem is the government doesn’t want to upset the applecart for those who invested in the family home by cratering their portfolios so they are doing everything they can to mince around homeowners so the initiative to cool the market is the softest most delicate corrections they can manage. That sort of approach is gunna take a long time to work and is going to be vulnerable as hell to NIMBY counter initiatives. It’s good to see the government is getting more creative with time but until everyone recognizes that property investing was built on risks one signed on when you bought the sort of big actions needed aren’t going to serve up a fix unless the bubble bursts on it’s own.
I’m not sure you’re familiar with the way the industry works. Builders and investors are very rarely the same people. Builders don’t care if the buyer is going to live there or rent the property. Your theory also doesn’t account for the ~80% of housing that is owner-occupied.
This is also quite the take — it’s very rare to see anyone advocate for more urban sprawl or suggest that building more housing units drives up prices. If you want to live in an urban area, density is good because it means there’s more housing supply. Land is the only finite resource in the equation, so making less efficient use of it in the hope that prices will come down is… Well, I’ll need you to explain how that math is supposed to work.
The fact that the entire condo market is built with investor sized units would suggest otherwise (or suggest that builders build what the market demands and if the market is all investors they will build investor focused units).
I agree, not sure where you saw that. Was it where I said that green belt policies are “very necessary”?
The point is that policies that combat urban sprawl have also increased financialization of the housing market, both my making housing a more limited commodity (which incentivizes investors to buy), and by making it impossible to build a house unless you’re a large corporation that can afford to build a multi-tenant building.
We unquestionably need to combat urban sprawl, but we should also be addressing the effects that those corrections are having on the housing market by de-incentivizing investors and profiteering.
That’s still fundamentally a supply (and by extension pricing) issue. Prices are high, therefore small units are the only thing people can realistically afford, therefore that’s what developers build.
Here: “When we had urban sprawl, you could still buy cheap land on the outskirts and build your own house if investors stopped building new developments, but with (very necessary) greenbelt policies, it eliminates that release valve, putting the housing market basically entirely in control of investors who’ll keep it inflated to profit themselves.”
How do you define “financialization” here, especially in the context of non-rental units? If we’re talking about REITs, sure, but rentals are only a small part of the picture.
It also incentivizes builders to build, so as long as that isn’t impeded, prices should stabilize. Unfortunately building is severely impeded, which is what I mentioned in my earlier post.
Again, this is a land value issue, not one of construction costs. Of course land is going to be expensive in an urban centre, as it should be! It’s a very limited resource. it makes much more sense to have two hundred people living on a building lot rather than four. Hence my confusion about your desire to reduce supply even further in order to reduce the price of housing.
Not OP, but you keep hinging on the supply reduction that OP supposedly said (which he did not). He just explained the context of today vs the period of urban sprawl where land was cheap.
He is right that reducing urban sprawl and setting limits on what can be build where put upwards pressure on the existing land price, and that only corpos can afford to buy land to build multi-units.
The policies that densify urban region are good and necessary, but we have to make sure that the pressure it creates on land price is somewhat controlled.
… preferring instead to bitch and complain about the unhoused population making a mess of their cities.
You’d be amazed how many people don’t understand that causation. For example, most people I talk to IRL about this don’t know that most homeless drug users started using after they became homeless. Instead, they think the homeless became addicts first and spent their rent money on drugs. Once they’re made aware of that and the fact that a housing-first approach is actually less expensive than the costs of homelessness (shelters, law enforcement, etc.) almost everybody I’ve discussed this with agrees that ensuring everybody has housing is the best approach. Mind you, they will rarely agree that everybody’s house value needs to come down, but it’s a start.
That’s a relatively small problem (in terms of how many housed people are acutely impacted or even aware) in large sprawled cysts like the GTA. The unhoused population is visible in small localized spots. The vast remainder wouldn’t even hear about it if they didn’t read the news or don’t have to go to those spots. The very large city of Mississauga for example hasn’t heard or seen a peep about unhoused people. It’s only stories by the few that work specifically downtown. The backyards are as clean as ever and the birds are singing. I wish everyone was acutely aware.