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.
Every article like this never had a coherent explanation why rents are so expensive.
Like yeah, people hoard investment properties. I get that. But investment properties get rented.
People don’t pay rent as an investment.
Investment properties get rented out. So the laws of supply and demand function much more directly here: if rental prices are going up, that means there are people willing to pay those prices to live there and they can’t find anything cheaper. That means there’s demand vastly outstripping supply.
I’ll believe we don’t have a housing shortage and the problem really is just speculators watching their assets grow if the price to buy is skyrocketing but the price to rent is low.
Otherwise: no, the landlords and gougers are able to exploit people because there isn’t enough to go around.
People don’t hoard food, and when they do it’s not really a problem, because there isn’t a food shortage.
Nobody scalps tickets to my kid’s violin recital because there were more seats than the crowd will ever fill.
Compare vs TP in 2020. And the chip shortage. And the baby formula shortage. I think the last few years have given us all a loud demonstration of how shortages impact pricing.
If you have a game of musical-chairs-for-cash and you have 4 chairs and 6 players, the price of the chairs will be defined by whatever the 5th player can’t afford.
People don’t hoard food, and when they do it’s not really a problem, because there isn’t a food shortage.
Dairy, poultry, and egg producers hoard food. They have a government-enabled system to ensure it. But you are right that it doesn’t turn into a shortage as it is done with the intent to raise prices, while a shortage occurs when price is unable to rise.
Absolutely, housing was relatively cheap in Alberta for close to a decade because demand was low. Now that we’ve had a ton of people move here, guess what happened to housing prices (both to buy and rent)?
Well said. I’ve made this point in other places and haven’t had a satisfying explanation in response yet.
The argument that speculators and investors will just gobble up any new builds, and rent them out for profit, seems to ignore that principles of supply and demand apply to rental homes as well as purchased homes. There are surely enough independent landlords that any price-fixing scheme would be impossibly difficult, so if we had enough homes for everyone and landlords and investors owned an oversized amount, then that should be quickly corrected by the market when rental prices are lowered enough that some landlords decide to sell their investment properties.
then that should be quickly corrected by the market when rental prices are lowered enough that some landlords decide to sell their investment properties.
Quickly is where you got it wrong.
Let’s face it, the housing market has already crashed. The average price is down 20% from the 2022 peak and continues to fall. Investors are trying to sell, but buyers aren’t having it. More people are renting now, driving up rents, as why would you want to buy at this time? The prices are still falling and are going to be a lot cheaper in a couple of years.
The bottom of the market will take time to find. Eventually investors will have to cut their losses and finally sell at a low price. But there is no big rush. They can sit on a property for a long time in hopes of getting a high price. This kind of thing does not happen quickly at all.
Only if there is some strong impetus for landlords to lower rents in the near term. History suggests that landlords will cling to high rents, even after the market isn’t there, in hopes that they’ll get it. They don’t necessarily have to fill the units.
Again, eventually they’ll have to cave and give in to the new reality, but more often than not they can remain irrational longer than you can remain solvent. There is no reason to think anything will happen quickly.
Yup. This is probably largely because under the existing system, property value is tied to how much money the property can make the owner. The horror of this is that from the landlord’s perspective, it’s better to leave units empty than to lower the rent, because if they do lower rents, their “investment” will go down because it would be solid proof of reduced “value.” Any time land is upzoned, it also multiplies the property’s potential value, which makes me concerned about new apartment construction (which I welcome, but preferably not just high cost luxury suites). It’s not just about supply.
The first step is putting a price on housing inequity by adding a modest surtax on homes valued over $1 million. This surtax will apply only to the top 12% of high-value homes – the vast majority of Canadians won’t pay a penny more. But it will help slow down home prices so earnings have a chance to catch up, demonstrating allegiance to the Canadian dream that a good home should be in reach for what hard work can earn.
That does nothing for the prices at the low end, and it keeps most landlords happily in their current (extremely high) rents. What hope do middle and lower class people have to outbid the rich for the same houses?
Wouldn’t this negatively impact people who bought their homes at a much lower price when it was affordable and whose home has since increased in value to 1mil+
If they did buy it as an investment, well, they certainly should learn that investments aren’t guaranteed, and that anyone promising that should have a watchdog alerted on them.
You haven’t explained how hampering others from getting a home helps society.
You seem to think that we should be bending over backwards to protect the NIMBY crowd that cares only about themselves and couldn’t give a fuck about others.
None of the donor class want prices to come down. They won’t be able to price gouge as landlords and the middle class will run out of credit to buy their products.
I feel like it affects a lot of people who want to trade up: sure they can sell their house for a lot more than they bought it, but houses are so stupidly expensive, that they still can’t afford anything nice in their area. Unless they have a great income or are willing to take on debt.
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.
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.
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.
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
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.
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…
One of the aspects I see rarely mentioned is how bad investors is for people quality of life of people actually living in those places.
For anyone that’s been involved in strata affairs they’ve probably seen many cases where investors refuse to make repairs for as long as possible so they can cash out and make it someone’s problem. Or where new builds are accepted with horrible design and finishing. They don’t care if the layout so bad that you have to stand on the toilet to open the bathroom door or the tiles have so much lippage it’ll slice your foot open, that’s s the renter or the next buyers problem.
While I understand the views of this article, I don’t believe it. It’s true that if we build 100k homes in each province, it’ll do little to dent housing prices. We don’t need 100k new homes, we need like a million in each major city. People keep talking about how big of a deal building a few thousand homes are, but they’re literally a drop in the bucket at this point when we should be increasing the supply not by 1-2%, but a good 20-40%.
And while I agree that not everybody would be looking to get their own personal house, increasing housing would vastly let up the pressure on rentals as well. And making rentals cheap enough that you could get one while working part time as a student would also mean that the moment you get a full-time job, you’d have the free time to do everything you could want to improve your life. The fertility crisis we’re having wouldn’t be such a big deal either, not to mention all the stress the young are dealing with since they know that moving out of home before 30 is a pipe dream for most of them.
People keep talking about how big of a deal building a few thousand homes are, but they’re literally a drop in the bucket at this point when we should be increasing the supply not by 1-2%, but a good 20-40%.
I think that’s the gist of the op-ed - we’re unwilling to build enough houses to flood the market and lower prices. So we need to deflate prices in other ways.
No I think the op-ed is trying to say that no matter how many homes we build, it won’t matter because those who already have homes can just leverage those homes to take on loans to buy more homes, preventing those who don’t have them from actually buying homes since they’re always at a deficit compared to those who are effectively already rich.
What I’m saying is that if the supply of homes increase by something like 40% across the board, it won’t matter if many of these people buy a second or third home, as it’s not like every person with a house is going to buy more. And even if they do, they’ll resort to renting them out because a home they’re not actively using is nothing but a cost that has a high chance of costing more than anything they can sell it for in a few decades due to property taxes. If they do rent them out, they’ll be competing with a massively increased rental market, lowering prices or else dealing with property that is costing money rather than making money.
A net win even if everything this person says comes true. And if it doesn’t, we have a massive influx of homes that’ll push down prices. The only issue is that we’ll be dealing with a new and long term recession as the retirement plans of millions go out the window. It’s a risk but taking this risk is the only way to prevent this problem from increasing perpetually, or else the housing prices crashing due to the bubble popping anyways.
It’d be amazing if we could build that number of homes. We should try to build as many as possible. However, it seems unlikely that we’ll get anywhere near even the modest targets the various levels of government have set for themselves.
In the meantime, we should explore other avenues to lower the cost of housing. The housing crisis has many causes, so it makes sense that it’d have many solutions.
Why do people always act like can only be one thing done to resolve the housing issue.
We could build our way out of this like a screw can be driven in with a hammer. It would probably just damage the screw, the wood and do a poor job binding the materials. We could attempt to build our way out of this while seeing how much investors skim off the top.
An extra few hundred thousand houses is going to take years if not decades to get built but we could have new taxes in the span of months and the houses would still be built. However none of these are even the real issue.
@SamuelRJankis@Dearche I do agree that building our way out of this is not really feasible. What we need is a combination of building, permit reform, increased wages, immigration management, and a focus on growth of smaller cities into larger ones. Take some of the focus off Vancouver, Toronto, Edmonton, etc. They shouldn’t matter as much as they do.
Frankly speaking, some of those proposals won’t work I think, and others are little more than bandage solutions.
Increasing the size of cities won’t work, as if you look at satellite photos, you can see that Toronto (as an example) is entirely urbanized about 40km from the lakeshore north, the entire coast westward to Niagra, and eastwards for almost 100km. The urban areas attached to Toronto is basically massive enough that you could spend 4+ hours on the highway just to get from your home to downtown Toronto, and that’s not taking into consideration that in Toronto, it’s actually faster to walk than drive in certain parts during rush hour due to all the traffic already in downtown.
No, what we need is to be allowed to grow upwards, not outwards. We don’t need more houses that are 3+ hours away from work and daily necessities, but places that are in walking distance from at least one of them, and no more than 30 minutes from the other. This can either be done by building 30 floor office buildings out in the suburbs, with a few square kilometers of parking dedicated to those buildings, or we can build up the major cities and tear down the single and two story detached houses. If you make it easy to build low and mid-rise buildings along with other high density mixed-use housing, home prices will naturally fall, making other big changes unnecessary.
@Dearche Please read what I said closer. “a focus on growth of smaller cities into larger ones” - we’ve concentrated and are having the greatest housing crisis in Vancouver, Toronto, etc. There is room to grow and it’s totally reasonable to do so in places like Kamloops, Grande Prairie, etc. (my experience being western Canada).
Larger centers DO need to grow upwards. Those are permitting issues primarily, and I agree that needs to be fixed, also as stated.
I saw that bit, but the reason why I didn’t really mention it is because people tend to chose to live where the money is at, and that’s the big cities. I know how just saying that is a bit condescending towards small cities, but the fact of the matter is that it’s the big cities that are having the biggest housing problems (though I admit they’re not the only ones). Small cities have little issue doing the same mistake that big cities have been making the last hundred years as they haven’t reached a critical mass yet, and you can argue that it’s the small city charm of being more spread out, even if it gives them a massive economic disadvantage.
But the problem for big cities is that by spreading out, they swallow up and destroy small cities. That wouldn’t be much of a problem if development didn’t cause people who work in the big cities to start living in those small cities just to have a place of their own. I knew people who worked in Toronto, yet lived in Barrie, and from what I can tell, a significant percentage of people in Barrie do the same. The same goes for those who live in closer cities around Toronto, but I point out Barrie specifically because it’s over 100km away from Toronto, yet still suffers from this problem.
It’s the big cities that need to fix up their act when it comes to housing, not the small cities, as the small cities need to concentrate more on improving their economic activities. I do admit that they can do both at the same time, but creating a hearty downtown core should be the priority for them, or else they’ll forever just be the backyard of bigger cities that offload their housing crisis onto the small cities.
It would help a lot if the governments would actually lead or if people would actually vote for people who would lead.
99% politicians will only reactively look into solving any problems 10 years after they should. Imagine if we started building inter province transit systems and walkable cities 20 years ago.
The average Canadian household is less than 3 people due to high rates of single child households and high divorce rates. That leaves quite a few families of 3-4 occupying 2 different residences. Not to mention all the single people who have their own place but are looking, then all the younger people who are past 30 yet still haven’t moved out of their parents places because they have no hope of affording their own home within 100km of where they already live.
You are an exception amongst exceptions. Not only are you still attached, but you have more than 2 children. And while divorce rates aren’t nearly as bad as some would perceive, the rates of families with more than one child, and especially more than two, are so dismally low that the official fertility rate of Canadians is currently at 1.484, with a ton of that being bolstered thanks to immigrants.
increasing housing would vastly let up the pressure on rentals as well.
The elephant in the room is that the housing market crashed in 2022. Rent is high right now because nobody wants to buy into a crashed market. If you have somewhere to rent, why would you buy right now? The dead cat bounce we’re watching might trick a few people, but on the whole? Houses will almost certainly be a lot cheaper in another year. It took around three years to find the bottom when the US housing market crashed and it is likely we’ll see something similar.
So, by the same token, what incentive is there for someone to build new units right now? Once the housing market finally does find the bottom those renters are going to start thinking about buying again. The rental boost is only temporary and likely to be gone by the time you get around to building something new – something that cannot happen overnight.
I was looking at the numbers, and while I agree to a certain point (if prices are going down, it’s better to rent and hope that prices will continue going down so you can buy at the best price possible) but prices have shot back up since the last year and are almost at the 2021 prices in the span of a single year. We had a temporary dip in prices, not any form of a drop.
And as for incentive, there’s a massive amount. With prices as high as they are, it’s entirely a seller’s market, and if you can make more homes, you basically have as much cash to take as you have homes to sell. The issue is that builders aren’t able to build new homes due to legislation, zoning regulations, and plenty of other hurdles placed. I keep seeing so many properties that have “we are planning to build this skyscraper condo here once we have our permit” and the old building just sits there for 3-5 years before they get their approval.
They did shoot up, but then started to fall again. A class, textbook perfect, dead cat bounce. The surest sign of all that the market has crashed.
With prices as high as they are, it’s entirely a seller’s market
It’s not. Because people are reluctant to buy into a crashed market, there aren’t many to sell to. High prices does not mean a seller’s market, that just means that sellers want a high price. Housing is notoriously sticky. People can sit on properties for years at a time in hopes of getting a high price. Generally speaking, people buy houses for the long term, so they don’t need to sell them any time soon.
That might change as more and more mortgages start to get renewed. If you can’t afford a property anymore, that becomes a good reason to get a deal done as fast as possible. But a lot of people are still enjoying low interest mortgages, and the rest were stress tested into a mortgage they can still afford even with high rates. Again, there isn’t much pressure to sell for a low price right now. One can just keep the house on the market indefinitely to see what happens. If nobody buys, oh well?
Eventually a reckoning will occur when people start to realize the high price they want isn’t going to happen, and will eventually start to settle for low offers, but that can take years to play out.
The issue is that builders aren’t able to build new homes due to legislation, zoning regulations, and plenty of other hurdles placed.
An even bigger problem was that there weren’t enough builders. Anyone building houses was booked up for years at a time. Even if there were no hurdles, there wasn’t the people to get the job done. Higher wages would have been needed to get more people interested in construction work, but that would mean an even higher cost of housing.
That isn’t the case anymore, though. Many home builders are now looking for work. New home starts have cratered. Nobody wants to get involved in a crashed market – hence why rent has skyrocketed.
Hmm…looking closer at the stats, I suppose you have a point. The number of sales are definitely down, even if only marginally. Though the prices of property is going up, it’s not by as much as the drop in total sales.
While I refute that this is definite proof that the bubble is deflating (hopefully not bursting) I’ll admit that it is evidence pointing towards that as long as the trend holds in the grander scheme of things.
I’ll refrain from saying more until we see how the numbers move once interest rates drop back down, as I believe this is one of the biggest causes for the drop in home sales at the moment. Home prices were out of control back when interest was only 0.5%, so it’s a given that the market would cool off when it’s ten times that.
Honestly, I hope you’re right and this’ll mean that housing will cool off and slowly reach a decent level, but I doubt we’ll get it that easy and we’ll be dealing with a crash with the economic fallout going with it while still having a massive housing shortage a decade from now.
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Every article like this never had a coherent explanation why rents are so expensive.
Like yeah, people hoard investment properties. I get that. But investment properties get rented.
People don’t pay rent as an investment.
Investment properties get rented out. So the laws of supply and demand function much more directly here: if rental prices are going up, that means there are people willing to pay those prices to live there and they can’t find anything cheaper. That means there’s demand vastly outstripping supply.
I’ll believe we don’t have a housing shortage and the problem really is just speculators watching their assets grow if the price to buy is skyrocketing but the price to rent is low.
Otherwise: no, the landlords and gougers are able to exploit people because there isn’t enough to go around.
People don’t hoard food, and when they do it’s not really a problem, because there isn’t a food shortage.
Nobody scalps tickets to my kid’s violin recital because there were more seats than the crowd will ever fill.
Compare vs TP in 2020. And the chip shortage. And the baby formula shortage. I think the last few years have given us all a loud demonstration of how shortages impact pricing.
If you have a game of musical-chairs-for-cash and you have 4 chairs and 6 players, the price of the chairs will be defined by whatever the 5th player can’t afford.
Add more chairs.
Dairy, poultry, and egg producers hoard food. They have a government-enabled system to ensure it. But you are right that it doesn’t turn into a shortage as it is done with the intent to raise prices, while a shortage occurs when price is unable to rise.
Absolutely, housing was relatively cheap in Alberta for close to a decade because demand was low. Now that we’ve had a ton of people move here, guess what happened to housing prices (both to buy and rent)?
Well said. I’ve made this point in other places and haven’t had a satisfying explanation in response yet.
The argument that speculators and investors will just gobble up any new builds, and rent them out for profit, seems to ignore that principles of supply and demand apply to rental homes as well as purchased homes. There are surely enough independent landlords that any price-fixing scheme would be impossibly difficult, so if we had enough homes for everyone and landlords and investors owned an oversized amount, then that should be quickly corrected by the market when rental prices are lowered enough that some landlords decide to sell their investment properties.
Quickly is where you got it wrong.
Let’s face it, the housing market has already crashed. The average price is down 20% from the 2022 peak and continues to fall. Investors are trying to sell, but buyers aren’t having it. More people are renting now, driving up rents, as why would you want to buy at this time? The prices are still falling and are going to be a lot cheaper in a couple of years.
The bottom of the market will take time to find. Eventually investors will have to cut their losses and finally sell at a low price. But there is no big rush. They can sit on a property for a long time in hopes of getting a high price. This kind of thing does not happen quickly at all.
Again, we’re talking about rental units. Sale prices will not move quickly, but rentals would if there really was some massive glut of rentable units.
Only if there is some strong impetus for landlords to lower rents in the near term. History suggests that landlords will cling to high rents, even after the market isn’t there, in hopes that they’ll get it. They don’t necessarily have to fill the units.
Again, eventually they’ll have to cave and give in to the new reality, but more often than not they can remain irrational longer than you can remain solvent. There is no reason to think anything will happen quickly.
Yup. This is probably largely because under the existing system, property value is tied to how much money the property can make the owner. The horror of this is that from the landlord’s perspective, it’s better to leave units empty than to lower the rent, because if they do lower rents, their “investment” will go down because it would be solid proof of reduced “value.” Any time land is upzoned, it also multiplies the property’s potential value, which makes me concerned about new apartment construction (which I welcome, but preferably not just high cost luxury suites). It’s not just about supply.
Here are some of Generation Squeeze’s suggestions for improving affordability. Here’s one that’s interesting:
That does nothing for the prices at the low end, and it keeps most landlords happily in their current (extremely high) rents. What hope do middle and lower class people have to outbid the rich for the same houses?
Generation Squeeze has a bunch of other proposals that would probably help people in all income brackets.
The point of many of these measures is to take investment out of housing, so people with money don’t treat houses as a vehicle to make more money.
Wouldn’t this negatively impact people who bought their homes at a much lower price when it was affordable and whose home has since increased in value to 1mil+
They bought a house, not an investment.
If they did buy it as an investment, well, they certainly should learn that investments aren’t guaranteed, and that anyone promising that should have a watchdog alerted on them.
While I don’t disagree, I dont see how it helps anyone else? Only sounds useful if it’s exclusively on owners of multiple properties
Am I missing something?
If they bought their house to live in they won’t have a problem.
If they bought it because they wanted an investment that would appreciate in value, they knew the risks.
We haven’t been in a stable market for the average person in over fifteen years.
I just can’t muster up pity for the people who want to hold other people back just because they bought early.
It’s that same pity which allowed flippers and investors to put us in this position to begin with
This didn’t really explain how it makes the market better for others tho
How does taxing home owners bring down the price of the house?
You haven’t explained how hampering others from getting a home helps society.
You seem to think that we should be bending over backwards to protect the NIMBY crowd that cares only about themselves and couldn’t give a fuck about others.
Lmao I didn’t say that at all, now you’re just making stuff up instead of producing any valid points for your perspective 🤷
Probably. I think part of the idea is to get them to sell.
Doesn’t make sense to me tho. Someone could non-problematically own one 1mil house, or problematically own ten $500k homes they rent out
None of the donor class want prices to come down. They won’t be able to price gouge as landlords and the middle class will run out of credit to buy their products.
I feel like it affects a lot of people who want to trade up: sure they can sell their house for a lot more than they bought it, but houses are so stupidly expensive, that they still can’t afford anything nice in their area. Unless they have a great income or are willing to take on debt.
Single home owners are the have nots now. You need to own a couple properties, sell them, and buy your ‘forever home’.
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.
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?
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.
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
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.
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…
One of the aspects I see rarely mentioned is how bad investors is for people quality of life of people actually living in those places.
For anyone that’s been involved in strata affairs they’ve probably seen many cases where investors refuse to make repairs for as long as possible so they can cash out and make it someone’s problem. Or where new builds are accepted with horrible design and finishing. They don’t care if the layout so bad that you have to stand on the toilet to open the bathroom door or the tiles have so much lippage it’ll slice your foot open, that’s s the renter or the next buyers problem.
Allow only first time buyers with no other properties to access the new development.
While I understand the views of this article, I don’t believe it. It’s true that if we build 100k homes in each province, it’ll do little to dent housing prices. We don’t need 100k new homes, we need like a million in each major city. People keep talking about how big of a deal building a few thousand homes are, but they’re literally a drop in the bucket at this point when we should be increasing the supply not by 1-2%, but a good 20-40%.
And while I agree that not everybody would be looking to get their own personal house, increasing housing would vastly let up the pressure on rentals as well. And making rentals cheap enough that you could get one while working part time as a student would also mean that the moment you get a full-time job, you’d have the free time to do everything you could want to improve your life. The fertility crisis we’re having wouldn’t be such a big deal either, not to mention all the stress the young are dealing with since they know that moving out of home before 30 is a pipe dream for most of them.
I think that’s the gist of the op-ed - we’re unwilling to build enough houses to flood the market and lower prices. So we need to deflate prices in other ways.
No I think the op-ed is trying to say that no matter how many homes we build, it won’t matter because those who already have homes can just leverage those homes to take on loans to buy more homes, preventing those who don’t have them from actually buying homes since they’re always at a deficit compared to those who are effectively already rich.
What I’m saying is that if the supply of homes increase by something like 40% across the board, it won’t matter if many of these people buy a second or third home, as it’s not like every person with a house is going to buy more. And even if they do, they’ll resort to renting them out because a home they’re not actively using is nothing but a cost that has a high chance of costing more than anything they can sell it for in a few decades due to property taxes. If they do rent them out, they’ll be competing with a massively increased rental market, lowering prices or else dealing with property that is costing money rather than making money.
A net win even if everything this person says comes true. And if it doesn’t, we have a massive influx of homes that’ll push down prices. The only issue is that we’ll be dealing with a new and long term recession as the retirement plans of millions go out the window. It’s a risk but taking this risk is the only way to prevent this problem from increasing perpetually, or else the housing prices crashing due to the bubble popping anyways.
It’d be amazing if we could build that number of homes. We should try to build as many as possible. However, it seems unlikely that we’ll get anywhere near even the modest targets the various levels of government have set for themselves.
In the meantime, we should explore other avenues to lower the cost of housing. The housing crisis has many causes, so it makes sense that it’d have many solutions.
Why do people always act like can only be one thing done to resolve the housing issue.
We could build our way out of this like a screw can be driven in with a hammer. It would probably just damage the screw, the wood and do a poor job binding the materials. We could attempt to build our way out of this while seeing how much investors skim off the top.
An extra few hundred thousand houses is going to take years if not decades to get built but we could have new taxes in the span of months and the houses would still be built. However none of these are even the real issue.
@SamuelRJankis @Dearche I do agree that building our way out of this is not really feasible. What we need is a combination of building, permit reform, increased wages, immigration management, and a focus on growth of smaller cities into larger ones. Take some of the focus off Vancouver, Toronto, Edmonton, etc. They shouldn’t matter as much as they do.
Frankly speaking, some of those proposals won’t work I think, and others are little more than bandage solutions.
Increasing the size of cities won’t work, as if you look at satellite photos, you can see that Toronto (as an example) is entirely urbanized about 40km from the lakeshore north, the entire coast westward to Niagra, and eastwards for almost 100km. The urban areas attached to Toronto is basically massive enough that you could spend 4+ hours on the highway just to get from your home to downtown Toronto, and that’s not taking into consideration that in Toronto, it’s actually faster to walk than drive in certain parts during rush hour due to all the traffic already in downtown.
No, what we need is to be allowed to grow upwards, not outwards. We don’t need more houses that are 3+ hours away from work and daily necessities, but places that are in walking distance from at least one of them, and no more than 30 minutes from the other. This can either be done by building 30 floor office buildings out in the suburbs, with a few square kilometers of parking dedicated to those buildings, or we can build up the major cities and tear down the single and two story detached houses. If you make it easy to build low and mid-rise buildings along with other high density mixed-use housing, home prices will naturally fall, making other big changes unnecessary.
@Dearche Please read what I said closer. “a focus on growth of smaller cities into larger ones” - we’ve concentrated and are having the greatest housing crisis in Vancouver, Toronto, etc. There is room to grow and it’s totally reasonable to do so in places like Kamloops, Grande Prairie, etc. (my experience being western Canada).
Larger centers DO need to grow upwards. Those are permitting issues primarily, and I agree that needs to be fixed, also as stated.
I saw that bit, but the reason why I didn’t really mention it is because people tend to chose to live where the money is at, and that’s the big cities. I know how just saying that is a bit condescending towards small cities, but the fact of the matter is that it’s the big cities that are having the biggest housing problems (though I admit they’re not the only ones). Small cities have little issue doing the same mistake that big cities have been making the last hundred years as they haven’t reached a critical mass yet, and you can argue that it’s the small city charm of being more spread out, even if it gives them a massive economic disadvantage.
But the problem for big cities is that by spreading out, they swallow up and destroy small cities. That wouldn’t be much of a problem if development didn’t cause people who work in the big cities to start living in those small cities just to have a place of their own. I knew people who worked in Toronto, yet lived in Barrie, and from what I can tell, a significant percentage of people in Barrie do the same. The same goes for those who live in closer cities around Toronto, but I point out Barrie specifically because it’s over 100km away from Toronto, yet still suffers from this problem.
It’s the big cities that need to fix up their act when it comes to housing, not the small cities, as the small cities need to concentrate more on improving their economic activities. I do admit that they can do both at the same time, but creating a hearty downtown core should be the priority for them, or else they’ll forever just be the backyard of bigger cities that offload their housing crisis onto the small cities.
It would help a lot if the governments would actually lead or if people would actually vote for people who would lead.
99% politicians will only reactively look into solving any problems 10 years after they should. Imagine if we started building inter province transit systems and walkable cities 20 years ago.
You can’t redistribute your way out of a shortage.
In Canada there are 15m private dwellings and 38m people.
That’s one house for every 2.53 people.
I have 5 people in my house (wife, 3 kids)
I think there is plenty to go around and it’s not a shortage thing.
The average Canadian household is less than 3 people due to high rates of single child households and high divorce rates. That leaves quite a few families of 3-4 occupying 2 different residences. Not to mention all the single people who have their own place but are looking, then all the younger people who are past 30 yet still haven’t moved out of their parents places because they have no hope of affording their own home within 100km of where they already live.
You are an exception amongst exceptions. Not only are you still attached, but you have more than 2 children. And while divorce rates aren’t nearly as bad as some would perceive, the rates of families with more than one child, and especially more than two, are so dismally low that the official fertility rate of Canadians is currently at 1.484, with a ton of that being bolstered thanks to immigrants.
The op-ed’s point about Alberta suggests we aren’t in a shortage, so much as house prices are overinflated.
The elephant in the room is that the housing market crashed in 2022. Rent is high right now because nobody wants to buy into a crashed market. If you have somewhere to rent, why would you buy right now? The dead cat bounce we’re watching might trick a few people, but on the whole? Houses will almost certainly be a lot cheaper in another year. It took around three years to find the bottom when the US housing market crashed and it is likely we’ll see something similar.
So, by the same token, what incentive is there for someone to build new units right now? Once the housing market finally does find the bottom those renters are going to start thinking about buying again. The rental boost is only temporary and likely to be gone by the time you get around to building something new – something that cannot happen overnight.
I was looking at the numbers, and while I agree to a certain point (if prices are going down, it’s better to rent and hope that prices will continue going down so you can buy at the best price possible) but prices have shot back up since the last year and are almost at the 2021 prices in the span of a single year. We had a temporary dip in prices, not any form of a drop.
And as for incentive, there’s a massive amount. With prices as high as they are, it’s entirely a seller’s market, and if you can make more homes, you basically have as much cash to take as you have homes to sell. The issue is that builders aren’t able to build new homes due to legislation, zoning regulations, and plenty of other hurdles placed. I keep seeing so many properties that have “we are planning to build this skyscraper condo here once we have our permit” and the old building just sits there for 3-5 years before they get their approval.
They did shoot up, but then started to fall again. A class, textbook perfect, dead cat bounce. The surest sign of all that the market has crashed.
It’s not. Because people are reluctant to buy into a crashed market, there aren’t many to sell to. High prices does not mean a seller’s market, that just means that sellers want a high price. Housing is notoriously sticky. People can sit on properties for years at a time in hopes of getting a high price. Generally speaking, people buy houses for the long term, so they don’t need to sell them any time soon.
That might change as more and more mortgages start to get renewed. If you can’t afford a property anymore, that becomes a good reason to get a deal done as fast as possible. But a lot of people are still enjoying low interest mortgages, and the rest were stress tested into a mortgage they can still afford even with high rates. Again, there isn’t much pressure to sell for a low price right now. One can just keep the house on the market indefinitely to see what happens. If nobody buys, oh well?
Eventually a reckoning will occur when people start to realize the high price they want isn’t going to happen, and will eventually start to settle for low offers, but that can take years to play out.
An even bigger problem was that there weren’t enough builders. Anyone building houses was booked up for years at a time. Even if there were no hurdles, there wasn’t the people to get the job done. Higher wages would have been needed to get more people interested in construction work, but that would mean an even higher cost of housing.
That isn’t the case anymore, though. Many home builders are now looking for work. New home starts have cratered. Nobody wants to get involved in a crashed market – hence why rent has skyrocketed.
Hmm…looking closer at the stats, I suppose you have a point. The number of sales are definitely down, even if only marginally. Though the prices of property is going up, it’s not by as much as the drop in total sales.
While I refute that this is definite proof that the bubble is deflating (hopefully not bursting) I’ll admit that it is evidence pointing towards that as long as the trend holds in the grander scheme of things.
I’ll refrain from saying more until we see how the numbers move once interest rates drop back down, as I believe this is one of the biggest causes for the drop in home sales at the moment. Home prices were out of control back when interest was only 0.5%, so it’s a given that the market would cool off when it’s ten times that.
Honestly, I hope you’re right and this’ll mean that housing will cool off and slowly reach a decent level, but I doubt we’ll get it that easy and we’ll be dealing with a crash with the economic fallout going with it while still having a massive housing shortage a decade from now.