These are boogieman policies that have zero influence on the root cause.
Foreign investors jump into the housing market because the current system ensures that the supply of housing is limited so it is an attractive way to park your wealth.
But that is not the root cause.
The root cause is the system that is geared to keep houses always appreciating via supply constraints: aggressive zoning, discretionary permitting, NIMBYism.
Until we liberalize zoning, legalize building, and reject the idea that houses have to be appreciating assets, the issue will continue.
As it is often the case, politicians go for the headline with the highest electoral ROI, rather than tackle the real issues.
Eliminating a subset of buyers, i.e. slightly decreasing demand, is an easy and obvious action to take. Will it have a significant and long lasting effect? Very likely not. But when examining the supply-demand equation, it's painfully obvious to say "foreigners who don't live here should not be allowed to buy residential housing". It's way, way easier than incentivizing developers to build affordable housing and dealing with all of the in-place bureaucracies and regulations and all of the hard stuff that comes along with constructing new neighborhoods and large residential buildings.
There's a path dependency problem. In principle, had you just been building housing like that all along, investing in housing is not appealing as you shouldn't see significant gains in general. However, now that it is appealing, the investment itself pushes up demand, which pushes up the appeal of investing because now prices are going up, which pushes up demand, etc.
Again, in principle, if you just keep building, the market would eventually sort this out. Of course, in the process, you'll overbuild housing proportionally to the investment demand. Once the investment demand leaves, the market will crash, which isn't necessarily a great plan either. And we are talking about a lot of finite resources being misallocated in the meantime, while the market forces figure this out.
If you'd like to resolve this problem faster than the market would naturally sort it out, and harness market forces to do so rather than naively fighting them, it makes sense to cut out the excess, artificial investment demand in the meantime. Sure, it would be better to have not created that problem in the first place, but, here we are.
Market forces are not magic, nor the only method of economic planning.
When markets work they are very good at finding prices. But when they fail you get this sort of thing.
There needs to be a lot of planned intervention in the housing sector. Entities with a lot of capital need to build the houses that people need to live in where they need to live in them and then let them live in them.
I live in Los Angeles and am lucky enough to rent on a street that is single family houses. It is illegal to build a duplex here, or a structure above 2 stories, even though each house must be 2500 sqft still.
People who are pro-market forces (such as myself) believe strongly that if you were allowed to build apartment buildings in neighborhoods like this that enough capital absolutely would be raised to raise supply. After all, you could take the current house I rent now and put in two walls for under 50k and start renting it out as a duplex two families but that is currently illegal. Hard to blame the market forces for this.
Though as a maximalist on this I'm still upset this is the best compromise we can get since the lot of this house is definitely big enough for more than just 2/4 units.
The house I live in is rented which means it actually wouldnt be eligible since the owner must live in the house for 3 years after turning it into a duplex.
Maybe this will incentivize owners of houses like this to sell to people who are willing to divide it in two? I hope so! But not sure.
I agree. I lived in Houston and their are a lot of infill Townhomes. I think LA would be great for townhomes vs high rises or those terrible downtown DaVinci Apartments between the 101 and 110.
Ha, did not know about the three year ownership requirement, classic CA NIMBYism. Still progress.
Vancouver and Toronto isn’t a housing market in any real sense of the word. Supply is fixed by government, interest rates are fixed by government, etc.
If you took government control out of the market prices would plummet. Any plank will do, supply, financial backing or interest rates and the whole thing comes crashing down. That’s the real problem, how to cause a 20% “correction” and not 80%.
My house is 8 hours from Vancouver, 8 hours from Calgary, 5 hours from Banff, it’s a town of 10,000 people, it was built in 1904 and is 2500 sqft. It’s been modestly renovated and is worth $950,000. The market is insane.
If so, revelstoke like Vancouver is actually pretty hemmed in by water and mountains. There isn’t an infinite amount of easy to build on land like the on the prairies.
Quality of life in revelstoke is probably amazing! Small town, ski hill, mountains, biking, snowmobiling, fishing, lakes, rivers, airport, and lots of jobs
Demand will always exceed supply in desirable locations, that is part of what makes them desirable. Would you spend 30% of you and your wife’s income to secure a plot in such a paradise? 40%? 50%? Lots of people will take the bet and risk. If you lose and go bankrupt well then you move to the easily affordable town in the equivalent of the fly over states. Odds are the million dollar mortgage will get inflated away you just have to tread water while interest rates are historically low until you can juice your income or hourly rate up enough to make the million dollars you are in debt seem trivial.
Right, cities in Texas aren't cheaper because they don't have zoning (they either explicitly do, as well as HOAs in new developments and all sorts of other NIMBYism, or they do in indirect ways like you mention).
They're cheaper because they can still expand outward more than SF, LA, NY, etc before hitting inconvenient geography. Lots of other places that benefit from this too, of course, not just Texas.
The housing crisis 15 years ago shrank the building industry and it hasn't recovered, yet. Further, construction has historically used a significant amount of immigrant labor, and immigration has shrank recently, increasing costs.
The market ("people who would stand to earn a lot of money") would be happy to do that, but it's not allowed to (zoning: height limits, parking requirements, lot coverage, maximum floor area...)
> If developers build more luxury housing, that'll reduce the price of existing housing, such that it becomes affordable.
If the last few decades have taught us anything, it'd that ___location (and every social category that ___location encodes) matters to people more than luxury, or rather a desirable ___location is the biggest luxury.
This is why a 3 BD fixer-upper in Palo Alto will cost more than a luxury 5 bedroom house in East San Jose.
To have any effect on housing prices I desirable places, you'd have to build gobs more housing in the highly desirable places, but those are usually the places most opposed to new housing development. And if you build a little bit more, because ___location dominates all, the existing housing would be as expensive as the new luxury housing in that ___location, because there is always a higher demand/supply ratio to live in Palo Alto than for East San Jose.
By the same token, building luxury housing in less desirable places won't change things unless you somehow make those places more desirable, but that takes a lot more than new luxury apartments. You usually have to change the kind of people that inhabit that ___location.
We absolutely need to build more housing of all categories everywhere, but it won't have much effect on housing costs until we address transportation, public education, and crime, the massive factors that affect housing costs.
Even if you had no zoning or "organized" NIMBY restrictions, it would be extremely slow to build denser in the most popular "full" residential places: any new construction there requires someone else to sell and leave for that construction to take place. You aren't going to be able to build a hundred-unit tower like you could if the land was empty or was just a vacant old structure.
Targeting stuff that isn't currently residential would be a much easier starting point.
IMO, but more controversially, it goes even further: in the long run, especially with fast transportation and digital communications, it's hard to see certain places ever getting "affordable" given today's wealth distributions. Some locations are going to be in higher demand due to non-human-development related factors (weather, scenery, etc). Others due more to development factors: NYC is more in-demand than if it was an empty bunch of land because we've already done a bunch of development there. (That latter case is especially interesting because it shows how development can both increase supply AND demand, it's not solely something that affects supply.) So if some places are inherently going to be more in-demand than others, and you build more when the market price is currently $X, prices won't fall very quickly at all as you get the people who otherwise want to live there, but couldn't do $X but would do it for $X-1, $X-2, etc, now re-interested in the area!
> Others due more to development factors: NYC is more in-demand than if it was an empty bunch of land because we've already done a bunch of development there.
Agreed, and human development is a major part of that. NYC is a cultural center of the world, which is a result of its human development, and that has a tremendous currency and gravity over and above Manhattan's physical grid.
Except, in a competitive/expensive market, the developer will pick the high-rise (almost) every time when allowed by law.
Locally, when I see people complain about luxury housing being built, it's because the developer is building high-spec townhomes and selling them for $800k+. Instead of lower-spec townhomes at $500k. The developer can't fit appreciably more homes in the same footprint (they're all 3-4 stories tall here - reducing size likely means one fewer stories). And the market will bear $800k+, so that's what we get.
The real answer is build even more homes. Or allow high-rises on the same lots.
In theory, the family that buys the $800k townhome came from somewhere. The smaller house they vacated is now open for somebody else (who in turn moved out of a studio flat that's now open, and on down).
> Except, in a competitive/expensive market, the developer will pick the high-rise (almost) every time when allowed by law.
A developer will, indeed. More profit. But an acre is small enough that it could just as well be a rich individual buyer, in which case they'll build what they like.
There's a half-acre plot for sale nearby for nearly $2M, I'm curious if it ends up being bought by an IPO millionaire to build a small mansion or by some developer to put up two-story apartments. Could go either way.
Local to me, redevelopment of a lot with an existing SFH tends to be another SFH because of zoning (unfortunately - many of the lots would be perfect for a nice duplex or very small apartment block).
Larger lots tend to be bought by corporate developers, both because they have the resources to develop it fully and also because they frequently have to battle NIMBYs for a while to get re-zoning approved (I tend to side with the developers, except when they buy parkland to develop, but that’s a whole other discussion).
> The smaller house they vacated is now open for somebody else
Or, they didn’t sell it and are just seeking rent on it, now. For this effect to really work, the number of home-owners should equal the number of homes.
Right now, there are many, many fewer home-owners than homes.
No, the number of homes has to be slighter higher than the number of residents. If a renter is living in a home then it isn’t going to waste!
(Slightly higher because it is mathematically impossible for anyone to move if there are no empty homes, and they sometimes have to sit vacant while being renovated or are in the process of being sold)
Are there any places that have these kinds of housing pressure where there are a significant number of free acres of land in town?
(I say this sitting in the middle of the LA metropolis between two almost undeveloped hillsides of ~10 acres each, haha; and a thousand more people in this neighborhood would be significant for us (maybe? dunno the actual pop count) but nothing to LA as a whole, AFAIK)
Up to a point, this is true when the affordable housing has had it's cost bid up by high end customers because of a scarcity of high end housing.
However, once that high end market pressure has been abated, then there a real and hard limits to the amount of high end housing that can/will be available to low income customers. Instead of being available cheaply, this high-end housing stock will end up being used as a vacation house or a short the rental, neither of which actually help reduce local demand for housing.
Suppliers will build more until the market clears. If prices are rising, that's a signal to suppliers to keep building. They won't stop until prices fall.
We’re not anywhere close to this in any of the high cost markets. But once we do get to that point another thing will happen: the lower demand for high end housing (there’s only so many vacation homes and short term rentals you can sell) will make it economical to build new mid-range housing
> there’s only so many vacation homes and short term rentals you can sell)
There are many markets the the number you can sell far exceeds the available land to build.
I fail to see how lower demand for high end housing makes it more economical to build mid-range housing? The price for that housing will be lower and land to buiody it on will be taken up by lower density high end housing.
High end housing construction is better than no construction, but please don't pretend it is sufficient to solve the need for other types of construction.
The amount to housing you can fit in a given metro absent zoning is basically unlimited. Manhattan has a population density of 75,000 people/square mile, and could be much higher without “air rights” limiting construction or the abnormally high percentage of commercial real estate. Many of the cities that are supposedly out of land have population densities an order of magnitude lower.
Developers today build low density single family homes often due to zoning. If the law says you can build 3000 sqft on a given lot, the most profitable thing to build is probably single family. But if they were allowed 30,000 sqft or 300,000 sqft then you’re almost surely going to get multi family instead. At that point high end and mid range condos will likely both be profitable, but developer returns would be better for the former (if they can find buyers). So as high end buyers become more scarce, more developers will transition to mid range
There are housing insecure people who need housing now and not some nebulous time in the future when the market could, theoretically, correct itself. Markets are notorious for remaining irrational in the face of obvious market forces that should, theoretically, influence them. While we wait for housing to trickle down, people will go without homes, possibly for decades. It's a classic market failure, and doubling down on "markets but more this time" might not exactly help, either.
If you mean classic "free" market failure, then I would disagree. The housing market is replete with constraints that are imposed by government. I think it is more accurate to say that it is a classic regulatory failure (at least in some jurisdictions).
That (first) either assumes demand remains constant, or requires measuring actual cost vs theoretical cost instead of simply actual; and second, assumes that there aren't complex interdependencies - ie, more luxury housing can make an area more desirable and increase demand more than it increases supply - arguably that's the goal, since otherwise you're literally building places people want to live in less than what's already available.
> more luxury housing can make an area more desirable
Depends how big the "area" is that you're thinking about. The effect of increasing housing supply is well-studied. Demand can only grow as fast as the population does. If one area experiences increasing demand, then another area will have decreasing demand, comparatively.
Hmm. I guess that makes sense if you're looking comparatively within an area. I'm talking about an area as a whole; in particularly, I'm thinking of Venice CA and the DTLA arts district, as two distinct areas.
(AFAIK) Venice is pretty much entirely shit house -> excellent house development, with some multi-unit (townhouses). DTLA is shit building -> modern condos / luxury apts.
AFAIK in both places a secondary effect of all development is that each area becomes more desirable. I guess, sure, if one stopped becoming more desirable the pull from the other would change demand between the two, but, a) they're not, they're both developing, b) (anecdotally) that's a drop in the bucket compared to the overall demand, and c) they have sufficiently different appeals that the demand isn't coming from the same people.
What's causing the increased demand: births, immigration, or increased wealth? The pair of Venice and Downtown LA are not closed system. If people are immigrating to those places, then they've left somewhere else, which experiences a declining demand for housing.
That relationship doesn't hold in ski resort areas. Wealthy people have increasingly bought up vacation homes even as the population remains flat. Those vacation homes are vacant much of the year. There are usually geographic and infrastructure constraints which make it impossible to build significant amounts of new housing within practical commuting distance. So long time local residents are effectively being forced out.
I have little sympathy for people that are "forced" to sell their homes for a large capital gain. They can move to where it's cheap and live large. Maybe my perspective as an immigrant is unusual, but I'm a big fan of the freedom to migrate. That includes the freedom to buy housing at market price.
Then it's even easier to move. If the polity doesn't want to zone for more housing, they've chosen to expel people who can't pay more than $X for rent. They'll feel the pain when there's no one around to make their coffee anymore.
There's no such thing as unlimited demand for luxury housing. Build enough and the rent will fall for the existing housing stock.
Moving requires finding a home somewhere that they can afford. The fact that they’ve been subjected to rising rents rather than a financial windfall like nearby homeowners… makes that far more difficult for them
They could have bought. Instead they took advantage of the optionality afforded to a renter that can up stakes and move at will, without being tied to a mortgage.
If they couldn’t afford to buy then they got to take advantage of a locale they desired at a lower price, another benefit of renting.
(While it would be nice if anyone could live — and own — anywhere they like without worrying about price or competing demand from the billions of other humans around, that’s so far away from reality it’s not worth discussing.)
Alternatively you end up with more empty housing poor to middling people can't afford while a bigger portion of society has the life sucked out of them by housing costs work 2nd jobs spend less time with their kids or on self improvement. Save less. Crash harder during down turns etc.
Speculators will eventually mark to market and sell or rent their empty houses. It might take a while, but it's a big country. Housing is illiquid on a small scale, but is a fairly efficient market on the national level. Except for the zoning rules, of course. That's the nice thing about living in the US or a Schengen country. It's easy to move to where the economy is better.
The vast majority of affordable cars are used cars. Used cars are cheaper when there's tons of new cars, and they get more expensive when new car production slows - prices jumped so much in the past two years that some used cars were sold for more than they were originally purchased for.
We treat that weird situation as obvious undersupply in the car market, but somehow expect it with houses. Why should old, used houses sell for more than their purchase price?
The mental model of buying something new/used doesn’t apply same as cars. Unlike a car, the structure is simply an improvement that’s factored into the price of what you’re purchasing — the rights to the physical space itself. Sometimes a lot of the “value” is locked up in the structure, and sometimes the structure is barely functional and most of the value is in the land.
At some point that ratio of the land:improvements values reaches a point where the “used” structure is relatively worthless and gets replaced, the ratio rebalances.
This isn’t true in all markets. Higher labor costs (for instance, caused by higher rents…) makes it more expensive to construct new homes. That makes any existing homes more valuable, potentially even accounting for depreciation
Basically, not sure how to interpret "sold 10 million cars".
2 scenarios come to mind:
1. Ferrari decrease their sale prices, thus they are more affordable for all, thus exerting price pressure on Fiat.
2. People somehow have a bucket more money and now buy Ferraris. But with all this money sloshing around, Fiat might as well up their prices because it'd make little difference on the end customers purchase decision.
In either case, the Ferrari and the Fiat are closer on price but the price pressure on Fiat varies. Curious to know your thoughts?
Lets build shitty buildings that will last for decades. Affordable housing is and will always be a horrible idea. Build and build until you get a surplus and suddenly tons of housing is affordable.
Affordable doesn't mean shit, it means not optimised to gouge as much cash as possible from the buyer, and also probably means coming with a price control covenant. Many council houses in the UK were historically built to very high spec.
> Affordable housing is and will always be a horrible idea.
This is like saying food banks are a horrible idea, and we should just focus on job growth so everyone can afford to buy their own food. It comes across as really tone deaf to ignore that some people need help now and that even though it isn’t a complete solution, feeding one person today or getting one person off the street into newly constructed affordable housing makes a real difference to them.
Faster than what? It takes a handful of years for a non-profit or government housing agency to build new affordable housing. At the current pace of market rate construction, it’ll take many many decades before newly built “luxury” housing filters down enough for low income households to afford it. Even if there was a massive YIMBY housing boom we’re still probably looking at 10-20 years before market rents fall enough to be affordable to low income folks
Ignoring the problem is not a solution, as we've seen. Nor are bureaucratic bandaids over a mortal wound. Yes, we need to increase the rate of construction 10x and things will get better after a decade or so.
I agree with this, minus the "shitty buildings" part. The way to create more affordable housing is to create more housing period. I do feel that they should be homes they people want to live in, though!
Plenty of people in Hong Kong and Japan live comfortably and happily in apartmetns as small as 300-400 sqft where as in many cities in the west such small apartments are not allowed. That's a building code issue. You can't build cheaper housing because of the code. Similarly in many areas house require garages or parking space and front yards of a certain size by law. Again, housing codes dicate whether you can make something cheaper or not.
The size and shape of rooms, hallways, stairways, elevators (if we're talking about high-rises), the quality of installed windows, quality and presence of a centralized HVAC, etc, certainly depend on the "luxury level" of a building.
Building codes set the lower bounds of acceptable quality of a building, which is good but not all-encompassing (and for a good reason).
This may be a healthy long term outcome but a lot of people have a good portion of their value parked in their home - if there is a sudden oversupply how will you cousin the economic and social shock as millions of middle-class folks suddenly lose their wealth while upper class folks mainly invested in the stock market come out the far side with even more wealth?
This is not an easy problem - and as soon as you try and alert people to the fact that you're going to fix it the market will respond and the problem will occur.
To slow the value gain - I think ideally the government would like to sort of stabilize housing prices in BC & ON for a few years then re-start a slower more reliable growth pace... exploding the housing market fully could cause a value loss - so this is like opening one pressure release valve to slow the build up a bit.
Liberalizing the housing market is a slow process that will be heavily contested politically and in courts, so it won't lead to an instant explosion of the housing market. The political will to continue liberalizing the housing market will evaporate as soon as housing prices become reasonable as a result of it.
The market can generally move faster than politics - as soon as it becomes common knowledge that the housing market will be opened up you'll see a modest drop in prices, when some legislation is passed you'll see a larger drop in prices... if and when that legislation survives the court you'll see even more of a drop.
This issue isn't that the laws will move too quickly but that the open intent to pass those laws will spook the market and cause a panic - which is actually a lot worse if you want to deflate the market because any aide or support you'd want to provide is going to come in well after the market has already responded.
And, to return to my main point above... when that happens people with a lot of free capital sitting around are going to be able to game the system and make a bunch of money off of it. So wealth inequality will increase and it's likely a lot of folks will be in an absolutely terrible spot.
Making it easy to construct new buildings - let's call it liberalization - isn't a binary thing. You can do it a little bit, a lot, or anywhere in-between. If you want home prices to go down, you do it a lot. If you want to stabilize things just a little bit, you do it a little. For this reason, "we don't want the prices to fall too much" doesn't work as a reason to choose banning foreigners over liberalization.
Many people would be forced to sell though if there was a price drop, because the high prices necessitated having a very high borrowing rate (95% borrowed), and commonly at renewal (typically 5 years in Canada) mortgage terms require the borrower to pay the difference between the market value and the borrowed amount to ensure they are not more than 95% leveraged still.
This is the big problem the government has: it is very difficult to unwind this mess through policy without triggering a cascade. Likely it will come eventually, they just want to ensure it’s not their party in office when the shoe finally drops.
thats a view of an owner who wants to get as rich as his property will allow him, and hopefully even more. fuck everybody else. exactly how we get into this situation.
folks who gamble with money have to accept the risk part of the equation, whatever vessel that may be. if somebody invested in tech stocks few months ago they are now probably crying in the corner.
The majority of Canadians are in this situation - you can be extremely unsympathetic towards them and tell them that their investment was unwise - that's perfectly fair... but do realize that the vast majority of Canadians will suddenly find themselves either worth a lot less than they thought they would be or underwater in debt and homeless.
And also don't forget that whenever "everybody loses some money" the people at the top are in a great position to grab an even bigger slice of the pie.
Whether or not you feel for the pain these people would go through, you're going to feel pain when it ripples out the rest of the economy.
This is also, obviously, not intended to be a long term solution as evidenced by the fact that it’s limited to 2 years.
I do think it would have been better if they hadn’t announced it was limited to 2 years but that’s not practical.
I’m a huge proponent of the “build more supply” side. But that takes time. And in addition, there is a huge 2 year gap of supply creation that didn’t happen because of the pandemic.
This may help ease some of that pandemic related imbalance.
The next question to that is why does zoning exist in the first place? Zoning exists because of how hard it is to scale up infrastructure to match demand. And we decided to entrust governments with infrastructure, yet they are not nimble enough to handle these scaling issues
I'm actually happy they did it only because it will get people (at least the subset of people who follow casually and do care) to acknowledge that foreign buyers are not the root cause once a couple years pass and the data will be apparent.
That's a very cheerful take about people's ability to update about politics after a law fails to give them a promised result. I wish I lived in the territory corresponding to your map.
A key point is that people buying for investment are less sensitive to driving the prices up-- so long as they're sustained. If you have enough wealth that you would be buying multiple properties anyways, buying fewer more expensive places just lowers your transaction costs. As such, they likely have an outsized effect on driving up prices.
I'm dubious that Canada's policy will achieve that, as I understand it they exempt purchases by foreign students which is already a major avenue for foreign investment property purchases. If they limited resident aliens to a single piece of property which they also lived in, that would be something but my understanding is that they don't.
In theory BC at least has a residency tax on vacant homes - but that just increases the cost of making the investment and shifts the numbers... it doesn't necessarily make the investment a losing strategy unless you're right on the border.
It'll be interesting in a couple years when prices are still crazy and someone has to come up with an excuse for why.
It's amazing to me how resistant people are to the idea that housing is expensive because there aren't enough homes for people to live in. It's always a search for exotic explanations like foreign buyers and mysterious empty apartments.
>how resistant people are to the idea that housing is expensive because there aren't enough homes for people to live in.
I imagine there are enough homes in both America and Canada (they are two of the largest countries after all). But it's all about ___location. Very few can even afford to move out to the middle of nowhere just to own land. And not many people that can are willing to turn their potentially short commute to work into a 90+ minute trek everyday.
Even with an increase in work from home, there's the whole entertainment aspect of living in the city that makes it a hard sell. When I mean middle of nowhere, I mean a small "town" whose businesses amount to a liquor store, some off brand shopping market, a burger joint, and a 20 year outdated public library. Anything else you need is in the suburbs 30 miles out, and Downtown will be another 30-40 after that.
You will quickly bore of any ventures in town and seek a drive to the city where there's actual events going on. If you're a recluse you can make it work, but I can understand millenial aged people not jiving with that style
There aren't enough homes _where people want to live_ and you solve that buy building more homes _where people want to live_.
But that's difficult because cities have all these veto points. It takes forever to get new construction going, right? Exactly. That's why we aren't building enough, because in the current regulatory environment we can't. That's what people talk about when they talk about NIMBYism as the cause of the housing crisis.
The not so radical solution is to make it easier to build new homes where people want to live.
Given that "want to live" is a factor that is fluid and changes more quickly than building homes (which is how we ended up in this situation in the first place), it's probably also good to invest in making existing places that people are currently fleeing more desirable.
The jobs left quickly enough that our physical infrastructure couldn't keep up. That implies that jobs are more fluid than building and that therefore that's probably the easier approach to getting jobs and housing in balance.
It should be fast to build houses. My family acquired land, designs, permits, and moved in to a place in rural TN in about 9 months. It's taken me 2 years to get a site development permit (permission to ask for a building permit) to modify a roofline so that it sheds water in CA.
Building houses in rural areas is fast and cheap because there's nothing already there and screwing up is unlikely to affect anyone else since no one is nearby.
Increasing density in places that are already built up is much harder. You have to remove the people and things that are already there. If you do something wrong, there are many people in the area who can be negatively affected.
Building permitting regulations are written using the ashes of fires that started from a single house and burned down an entire city.
"you solve that buy building more homes _where people want to live_. But that's difficult because cities have all these veto points"
I'm not going to pretend there isn't some literal gatekeeping going on here that make this more difficult than necessary. But I'm also not exactly surprised that in cities as already densely packed as Los Angeles that there aren't exactly acres or hectacres of land just sitting around to be built "where people want to live". That's how we ended up with tiny studio apartments everywhere that still cost way too much.
Part of it is simply physical limitation. Land (unlike so many arbiturary policies nowadays) is a finite resource. Made more finite when the pareto principle kicks in.
I live in Manhattan. LA is far from densely packed.
It’s idiotically packed, seemingly to maximise time spent in traffic and minimise the number of bars, restaurants and essentials within walking distance of the average resident. But visit Tokyo or Paris if you want to see true density.
>I live in Manhattan. LA is far from densely packed.
Depends on what you consider "LA". the "LA county" that extends from Lancaster to Long Beach (some 90 sq Mi) is extremely sparse. But good luck convincing someone doing business downtown to go all the way out to Lancaster to buy homes.
The "City of Los Angeles" that makes up the 10 square miles of Downtown and some immediately surrounding suburbs is densely packed IMO. There's not exactly acres of fields waiting to be tilled for living quarters, and it's not like there already isn't skyscrapers of studio apartments to reside in (that ofc is still way too expensive).
Maybe not to NY levels, but it's not a competition and I don't see that as a positive personally. especially when we can both admit which city has superior public transportation. I avoid driving downtown at all costs, but there's not really any good alternatives when I do need to do business there.
I question which issue between the two of land and transportation would take longer to resolve. I feel they've both been mutli-decade crusades at this point.
> The population density of the Los Angeles urbanized area is indeed greater than that of the New York urbanized area, with 7,009 people per square mile versus 5,239 people per square mile.
But there are acres and acres of single family homes in both urban areas that could become mid rise apartments.
I explicitly cited G7 cities to highlight that the quality of life in these cities far exceeds LA’s sprawl. This isn’t a discussion about trade offs. It’s one about parking lots and three-story condos crowding out planning.
2. They make more land all the time. Look at a map of Boston in 1800. In fact, look at an old map of almost any city near a large body of water and compare it to today and you'll find a lot more land being used.
> In fact, look at an old map of almost any city near a large body of water and compare it to today and you'll find a lot more land being used.
At a great environmental cost. Thankfully society is a bit more careful about environment destruction than in the days where all garbage was dumped on the shoreline to create landfill and build on it.
I suppose that depends playing definition games with "all the time", but we are doing it right now in NYC with the coastal resiliency expansion. Battery Park city was created in the 70s from the excavation done to build the WTC. And right now there's a proposal to expand the southern tip of Manhattan to reach Governor's Island. Suffice to say that "all the time" is correct in this context.
> There aren't enough homes _where people want to live_ and you solve that buy building more homes _where people want to live_.
You mean, if we had the density of Manhattan or Shanghai, our housing would be as cheap as Manhattan or Shanghai? I'm not sure people would like that (given that those places are more expensive in general). The best example in the states is Houston, but it is horrible sprawl (so housing isn't being built exactly where people want to live, but continues to build outward). Tokyo is the best example internationally, but they have special conditions (housing depreciates since second-hand houses are not popular, decreasing population, liberal definitions on what is needed to call something a home).
Manhattan (where I live) is extremely underbuilt. Lots of people want to live here!
But yes, the implication of a housing abundance agenda is that places will change. I think it's generally underrated exactly how much the cities we know today changed during the 20th century as they grew in population.
That said, you don't really need a lot of high rises to drastically increase density. Even row houses and low rise apartments make a pretty large difference and would be more than enough to meet demand for most cities that are experiencing a crunch.
Don't get me wrong, I'm pro density. However, it seems like they are kind of like building new freeways, which rather than reduce traffic, simply induce more demand. By say taking Seattle and making it 4X dense...I doubt it would become much cheaper...instead it would just become more popular (still, I would love to live in a more dense Seattle, but I don't think I would save money by it).
I'm not sure you can draw a parallel between those two things. Is there any evidence that induced demand applies to housing as well?
I would think it might to some degree, but there would be several cut-off points, as living conditions change with more density, and people who previously wanted to move to a place might not like how a place changes as density increases.
With a highway, you can add as many lanes as you want, and the experience of driving on it isn't changed much.
> Is there any evidence that induced demand applies to housing as well?
Yes, plenty of people are discouraged from moving to a hot city due to the lack of supply. Increasing supply then moves discouraged demand into actual demand. Otherwise why do dense cities (like Shanghai, NYC, Manila) still experience housing shortages?
If the place is desirable, demand increases to catch up to the new supply, bringing us to the same place where we are now. Even if we built a lot of housing in a desirable place, enough that we hit a cut-off point: in a hundred years or so, we might have just had more children to soak up that supply (like what happens with agriculture surplus). Things go until an equilibrium is reached (where prices are high enough that demand is discouraged, or the place becomes undesirable to really reduce demand).
I was asking for evidence, not a hypothetical rationale.
It's possible (and likely) that housing in Shanghai, NYC, and Manila just have not reached a supply-demand equilibrium yet, because housing policy still constrains supply. There's nothing requires that demand is effectively infinite in these cities, or that demand will keep growing as more housing is built.
Let's say unfilled demand for housing in San Francisco sits at 100,000 units right now (making up numbers; they don't matter). If we could magically build those 100,000 units tomorrow, yes, I do expect we will induce some more demand, because home/rent prices will drop. So let's say we build another 100,000 units. Maybe we get some more demand, because home/rent prices drop more. So we do it again, but not forever.
Because my feeling here is that the main driver of more demand in SF would be drops in home/rent prices. Those prices can't drop to zero; they will always have a cost, and it seems unlikely to me that the cost will drop low enough -- no matter how many units are built, within the physical constraints of the space -- such that there will still always be unmet demand. And home prices will still always be propped up by housing policy to some extent; the city would never implement unrestricted housing development with no hurdles. But maybe the "equilibrium" price can be something significantly less ridiculous than it is today.
> I was asking for evidence, not a hypothetical rationale.
Equilibriums are not hypothetical. The fact that increasing supply can induce more demand is well known in many areas (expressways being just one). Cities take off, and building booms don't reduce prices like a recession or bust will.
> the city would never implement unrestricted housing development with no hurdles.
Not many people would like to live in such a city (who wants to live in Houston?), so that on its own would limit demand.
> But maybe the "equilibrium" price can be something significantly less ridiculous than it is today.
Sure. Perhaps a lot more WFH will eventually eliminate or reduce critical mass feedback loops that lead to these problems in the first place (e.g. why live in Seattle when you can live in Toledo?).
> Even row houses and low rise apartments make a pretty large difference and would be more than enough to meet demand for most cities that are experiencing a crunch
5 floors was pretty standard across Europe, from Paris to Kyiv, in the age before elevators, as it was about the maximum height most folks were willing to walk up the stairs. Though, in Paris a lot of the 6th floors (where lots of the typically small studio apartments are found) were originally constructed as the maids' quarters.
In Seattle we hav a lot of 4+1s: a concrete 1st floor and wooden 4 floors above that (some kind of code thing). The first floor is usually retail, however.
Yeah, the NIMBY argument that there are "plenty of homes" is like going into a supermarket whose shelves are completely full of only sardines and saying "there is plenty of food".
I think an extension of that analogy is that there are thousands of supermarkets. A few of them are well-stocked while the rest are full of sardines. There are two proposed solutions:
* Let everyone shop at the couple of good supermarkets and hope the supermarket can keep the shelves stocked and deal with the crowds.
* Get those other supermarkets to start stocking stuff other than sardines.
>If you're a recluse you can make it work, but I can understand millenial aged people not jiving with that style
Which further creates a spiraling effect where even recluses will feel obligated to move to the city just for anything that you can't / is very difficult to get from a town. Turns out it isn't that fun when the majority of your neighborhood doesn't share your generation or interests. Especially for young people still looking to find someone to settle down with.
I dont get why a recluse would not want to live in a city. It is anonymous (no super friendly neighbours), you get the most food delivery choice and faster internet probably.
Noise, most probably. And perhaps smell. Also, being a recluse does not just mean antisocial or anonymous, for many people it means not being around any people at all.
To specifically rail on the "liberal" Bay Area and numerous other "liberal" cities in the US:
The NIMBY housing policies and restrictions on building new housing are a massive part of sprawl, and with it the huge amount of excessive carbon emissions from commuting in single passenger cars.
A dense city is about the best organization of people for the environment. To get things you need, you travel the furthest distance. You centralize utilities and infrastructure. You preserve natural habitats. You reduce the effective footprint, actual and resource-wise, of the average person by huge amounts. It maximizes the effectiveness of public transport, and makes private transport less valuable. It makes transport modes like bikes, ebikes, scooters, or even walking viable. And people generally seem to prefer it.
Of course it's America, the incentives are completely messed up. The carbon tax exists as the one policy that everyone agrees would have helped reduce fossil fuel use to help avert global warming.
The other big environmental issue we face (well that we aren't facing up to) is the sixth mass extinction, which is primarily coming from sprawl. And the simple solution to that is to property tax the shit out of land in the exurbs and suburbs so that urban organization of housing is cheaper than suburban and rural, which is currently the opposite.
The externality to sprawl is the illusion that land is infinite. It most certainly is not. The real abundant supply in modern human architecture is going vertical, or even subterranean.
To get back to liberal cities where housing supply is being restricted, this is DIRECTLY causing environmental impacts, and has been for decades. It's not just a racial issue, it is very much an environmental one.
"the simple solution to that is to property tax the shit out of land in the exurbs and suburbs so that urban organization of housing is cheaper than suburban and rural, which is currently the opposite."
You can't really tax people money they don't have. Maybe it'd work in suburbs, but generally (at least in american cities) the more rural areas consist of
1. Farmland owners who likely contribute resources and get tax deductions anyway
2. mid-low income homeowners far from the city who's property cost as a whole pales in comparison to the cities. Either because of mass emmigration (which can be "White Flight" at worst, or simply dwindling resources/income at best in an evolving world) or simply happening to own/inherit land before costs went out of control.
There's not much to squeeze out of these people to begin with. And not exactly any alternative land to offer them that wouldn't be to their massive benefit (Again, this land isn't exactly valuable to begin with, comparatively speaking). Housing struggles to keep up as is and can't really afford this altruistic effort to try and consolidate everyone into a densely packed area.
The simple solution for global warming has been the carbon tax. But obviously it is a bad idea to do "shock" taxes. A shock tax in ICE vehicles wouldn't maximize the effectivity of stimulating long-term BEV demand, it would be a huge regressive tax on the huge number of people that don't rely on new cars, but used cars for everyday transport. It would inevitably simply lead to political backlash.
But a long term phase-in over a decade, which also is difficult to sustain over successive administrations and controls of congress, would be ideal. Obviously American governance is too incompetent to achieve that.
The carbon tax is for the current largest environmental threat: global warming.
But the sixth mass extinction will probably be the next big environmental issue once GW mitigations come into play. And the key to that is a big land tax to change incentives. And the same issues arise: how to avoid shock pricing and instead phase in over an economically adaptable timeframe.
It even has the same technological potential solutions but lack of supply: vertical farms and artificial meat have the potential to eliminate huge swathes of land that are currently used for 1) grazing and 2) crops that feed grazing animals.
Vertical farming and artificial meat should be getting massive research subsidies right now. Every research university should have substantial grants pursuing these. Because the habitats that we can reclaim back to nature and hopefully avert a total collapse of the "species web" is very important.
I feel we are constantly playing russian roulette with extinctions. Was this species so important that everything collapses? No. Well, how about this one? This one?
I mean, insect populations are dropping. Insects. Very concerning.
While I find some aspects of your comment interesting, I’d also throw out that the environmental devastation from farming far outstrips that of housing. However, in both scenarios, it’s clear that much of the solution space is vertical (pun intended).
I'll stick to my "sprawled out" city where we couldn't build tall even if we wanted to simply because the land does not allow it. I can get anywhere in the city in less than 10 minutes and have access to plenty of creature comforts.
Sprawl is only bad in big cities. In a city of 250k, it's not really a big deal.
In Los Angeles 90 minutes is a very short commute. The average for my colleagues is 120 min and many have a 160-180min commute. Per day. Usually worse on Fridays.
The waste of time, energy and the resulting pollution are mind blowing.
There's the ___location choices you describe (city vs suburb vs middle of nowhere) and there's ___location choices around large city vs smaller city that's still significantly larger then "a liquor store, some off brand shopping market, a burger joint, and a 20 year outdated public library". Especially if/when remote work and non-___location based salaries become the norm.
I recently had a recruiter try to convince me to move back to the midwest by throwing numbers about how median housing prices were over $500k less in my hometown then where I am now on the west coast. I don't need a house with my lifestyle right now, but I'll probably just move back if/when that changes. I enjoy living in a west coast city but not at the cost of 500k-1mil additional housing costs for a smaller place with less land. I'd be just as content moving back and using some of that extra money to travel or fund a long-term sabbatical.
Assuming you don't own in a high cost of living area you may have waited too long. I live in one of the highest cost of living areas. My assumption was I'd end up moving and be able to buy with cash in a semi desirable area in a low cost medium size city.
It is cheaper for sure, but it's not quite as I expected. Most of the desirable homes have doubled or tripled since 2020. They are still under a $1 million and usually have quite a bit more land, but most medium size cities have seen huge increases in housing costs and rent.
There is nothing exotic or mysterious about empty recently-built houses.
They are about 0.5% of my neighborhood and are built by all sorts of people, but always for the same reason: Housing is an asset class. In some places, its expected return is always positive even without rental income.
You should buy in those places. If you leave it empty, you get an appreciating asset, and the demand for homes to live in remains the same.
And then, there are places like Kharian, where there is huge demand for the idea of housing, but the living is mostly done elsewhere. See: https://www.youtube.com/watch?v=_fOYJ3_ZppM
What concerns me, as a non-Canadian not living in Canada, is that if a separate cause (i.e. global recession) makes housing prices drop in Canada during this period, NIMBYs everywhere will use that as evidence that "it works", and will try to replicate elsewhere.
It'll be interesting. Unless the population shrinks I think people will still feel squeezed, since things still won't feel affordable if e.g. interest rates go up and prices stagnate.
It's also amazing to me how resistant people are to the idea that housing is expensive because of near zero interest rates and tons of money being flooded into the economy.
Are people resistant to that? All i see in the mainstream news in Australian (and we know dumbed down it is) is future prediction of house prices based in future prediction of interest rates. They are predicting falls now.
I think the problem is that people want to buy 3 bedroom homes with a 3 stall garage on 2 acres of land. In my market, there are tons of affordable homes, but they aren't brand new, huge, with a ton of land. People are going to have to pay for that. It's a matter of keeping up with the Joneses from my perspective. People just don't want an average size home built in the 60s. They need a brand new 3k SQ ft home and bitch that's it's not affordable. They can't all be.
I live in Toronto, and there is no way that I could buy a small (not even average size) home built in the 60s for less than a million dollars, unless it's in a really bad neighborhood or needs so much work that I will end up spending that much anyway
That's true, but it's generally people from LA, Toronto, and NYC that really have a problem. They are massive metropolises. Extremely high demand and very little undeveloped land. Supply and demand. For everywhere else that isn't adjacent to a megalopolis, I think the housing "crisis" is massively overstated.
Yes, for the minority of people who live outside of a major city, they likely aren't seeing huge increases. But for most people, affordable housing is an issue.
No, most people do not live within a market that has these problems. Yes, something like 80% live in a metro area, but this isn't applicable to all metro areas. In the US, maybe the top 5ish cities. Even Chicago, for example, has tons of undeveloped, or underdeveloped land. It's not even close to Toronto or NYC. For most people, moving a little farther from work is what they need. A Chicago suburb commute isn't even close to the same thing as LA or NYC.
Fair, but packing more people into a small space is only going to drive up land and rent value. Not everyone can live in Manhattan or downtown Chicago.
The issue is that building new “non-luxury” homes is either explicitly prohibited or not economically viable because of the overhead cost of just breaking ground.
At least in my area, developers spend over half of the expense of the home on land (including the legal/political costs of getting it up zoned) and “horizontal development” (utilities, impact fees, permit costs, roads, environmental mitigation, drainage, etc.)
If just breaking ground costs you $400k per lot, then it doesn’t make a ton of sense to build 1500 square foot starter homes that will sell for $600k instead of 3500 square foot McMansions that will go for $1.2mn
All the same, in the recent years wealthy foreigners have been parking their cash in Canadian real estate, and yes, lot of these places tend to sit unoccupied. It's not the sole factor driving up the prices, but don't discount it either.
Why do you think people (lets say people like you and I) will come up with excuses? We will all find out together in a couple years what impact this may have had. I think its a good idea but if nothing changes I'll have some evidence that it was not a high impact intervention.
Like, there is no need to rail against people not changing their mind two years before you might reasonably expect them too. Besides, it would behoove you to reserve your judgement here and let results speak for themselves lest you fall into the same behavior you decry.
Good shout on the whole "build more houses to have more houses" thing though.
Yeah, no one wants to admit that musical chairs is a terrible game to play when the authorities refuse to allow the number of chairs to be increased. Shutting out players who already are no longer playing the game doesn't help. China has blocked money from leaving their country for two years now.
> It's amazing to me how resistant people are to the idea that housing is expensive because there aren't enough homes for people to live in.
I have to wonder if it is ever possible to build enough in the places everyone wants to live for it to become cheap?
Manhattan is extremely dense and yet, incredible expensive. More expensive than nearly every less-dense area. So density isn't helping drive cost down.
As late as the mid-90s the vast majority of American cities had a median house price to income ratio of 3. California was 3.5-4 and New York was 5 iirc. A lot of factors converged to upend this, but within living memory housing markets were affordable. Whether everyone lived "where they wanted to" is unknowable.
> It's amazing to me how resistant people are to the idea that housing is expensive because there aren't enough homes for people to live in. It's always a search for exotic explanations like foreign buyers and mysterious empty apartments.
It shouldn't be. That is describing the demand side of the equation.
> Until we liberalize zoning, legalize building, and reject the idea that houses have to be appreciating assets, the issue will continue.
That’s it.
> reject the idea that houses have to be appreciating assets
Particularly this. This is the outlook in the UK and it so problematic because normal people want this "property empire". Its become a source of content creation on YouTube or boasting on social media platforms. So fustrating
(b) A culture that abhors second hand housing (so structures don't appreciate like land does). Housing that depreciates is no longer a sound investment.
(c) Liberal definition on minimal standard housing to rent (central heating not required, toilets can be shared, no personal shower or even a shower at all in the building you are renting a room in, small spaces are OK).
Maybe not this one:
(d) Not very open to immigration at all, have a decreasing population.
> That sounds tremendously wasteful. All housing will have to be built new now?
It is if you're building concrete houses common in much of the world.
If you're building houses that are common houses in Japan, it's not nearly as bad.
When you think of a house as something that not only you will live in - but also will be the vast majority of your net worth that you pass down to your children - then building houses the Western way makes more sense.
When a house is just something you live in - you think of it more like renters do.
> That sounds tremendously wasteful. All housing will have to be built new now?
Well ya. You don't build to have your home last for more than 30-40 years, which can save some materials. We should get better at recycling and renewing building material, maybe the Japanese counteract things that way?
> You don't build to have your home last for more than 30-40 years, which can save some materials.
I'm very skeptical it would save any non-trivial amount in materials. What would you leave out?
Housing in the USA is already very cheaply built, 2x4s and drywall and the cheapest hardware they builder can get. Such houses easily last over a 100 years barring some disaster.
To build a house that crumbles to unlivable in 30 years, you'd have to intentionally design it to do that. Which sounds terrible from an environmental waste perspective.
> They “last” 100 years with pretty Constance maintenance
It's no surprise to anyone that a house needs some maintenance, that's a given. If someone lives in it and keeps up with basic maintenance, it'll last many generations.
> the average house isn’t that old so the jury is still out on some of it
I suspect the average house will never be that old, simply because a lot more houses are getting built all the time bringing down the average.
But plenty of 100+ year old houses, even here in California where most construction is more recent.
> In many places tear down and rebuild is cheaper than remodeling
Remodeling is a whole different topic. Yes, remodeling a house to be much larger or much nicer (or both) can be very expensive.
But on the topic of simply living in the same house in the same configuration as it was originally built, for 100+ years (multiple generations surely), there's no need to remodel. Only maintenance.
Is this satire, are you really advocating building houses with an expected life-span of 40 years? So if i buy a new house when im 30, i should expect to have to buy new if i live to be more than 70 and I havent moved.
If we assume your idea of close to perfectly recyclable houses comes true, i think people would have to really dial down their expectations and standards. No more drywall, particle boards everywhere. Tiles.. forget it, kitchen counters made by reclaimed wood etc
> Is this satire, are you really advocating building houses with an expected life-span of 40 years?
I'm really not sure. On the one hand, I agree it is wasteful. On the other hand, I personally like living in a new home.
> No more drywall, particle boards everywhere. Tiles.. forget it, kitchen counters made by reclaimed wood etc
The average kitchen where I live is renovated every 10 years, so the drywall, much of the electrical and plumbing, the floor, tile backsplash, etc...is redone. Bathrooms are also on a 10 year schedule. You can let the reno slide, of course, or perhaps you can do a higher quality reno and hope it lasts longer than a decade. (I'm looking at a kitchen reno right now and my house was built in 2016...the builders just made too many mistakes, but $150k to redo the kitchen...ugh)
In Japan, they don't do the reno every 10 years, they just rebuild the house every 30. How is that much different?
(b) is the biggest one. It doesn't make second hand unlivable, it just stops putting a premium on things which clearly aren't premium (unlike say Europe). It also makes it easier to tear things down in case of future needs, whereas Europe tends to "lock" itself in, creating a market which is very inflexible.
>(c)
Keep in mind 1LDKs (living room, dining room, kitchen) come with everything you'd expect a full apartment to come with, and are still very cheap in Tokyo compared to most metropolises and big cities. Many DKs also come with personal shower, small kitchen and toilet. Their spaces are generally on par with what you'd get in bigger European cities, for an equal or lower price. Not bad considering it is Tokyo.
>(d)
I mean, between the US and Japan, Japan isn't that much more difficult to immigrate to, unless you expect to get by with just English. Decreasing population also isn't a problem considering population numbers are getting far too big for comfort among developed countries.
The USA is about 12% immigrants, Japan is around 2%. I mean, it is definitely no China, but it has the lowest immigration rate of the all the developed countries.
That's not what I was pointing to. Check the visa requirements for various visas for the US, Japan and other developed countries. They follow similar thought patterns: skilled workers with demonstrated experience and/or knowledge, who won't be a burden on the state. The biggest boon being most skilled workers from developed countries already know English at an okay level, and most developed countries accommodate non-native language speakers better than Japan does when it comes to immigration.
> (b) is the biggest one. It doesn't make second hand unlivable, it just stops putting a premium on things which clearly aren't premium (unlike say Europe). It also makes it easier to tear things down in case of future needs, whereas Europe tends to "lock" itself in, creating a market which is very inflexible
Could you elaborate on what this paragraph means? How do we "lock" ourselves in here in Europe? I can go out _today_ buy a rundown house and tear it down. If the cost of renovating it exceeds the cost of building new, it's financially sound to do. Unless i'm buying some historically important building there are zero restrictions.
If you can buy a rundown house, yes. Now place yourself in the shoes of the generation who can't reasonable buy a rundown house in a place close to work, and are expected to commute to work. They are dependent on laws and profit margins for anything to happen.
When the profit margins say "building apartments isn't profitable" and the laws say "well whatever", nothing's gonna get torn down for apartments. Turns out when you build things to last and the mentality is that a 30yo house should still be in good shape, there's not a lot of profits to be gained tearing it down and building an apartment complex compared to renovating it a little and selling it to some upper middle class family with more dough to spend.
And yes, there are ways around this, e.g. turning that SFH into a sharehouse. Why that isn't happening more is a whole different story.
USA is a "salad bowl", it expects immigrants and varied cultures. Basically, coming from anywhere in the world, with some getting used to, you can blend in.
Japan is much more homogeneous culturally, and as an immigrant you will always be a stranger. Even if people will be nice and polite towards you, they likely won't be able to treat you as they would treat a Japanese, because you'd miss the cultural context which builds up from early childhood on.
> A culture that abhors second hand housing (so structures don't appreciate like land does). Housing that depreciates is no longer a sound investment.
If you want a house that depreciates faster, manufactured homes are an option. It's not at all obvious to me though that a structure that depreciates faster will necessarily be more affordable than a traditional house that has been properly maintained. Even if it is, building a new home every N years will almost certainly consume more resources over the medium to long term.
Or we could, you know, intelligently tax property nationally and tie it to a national dividend that directly goes to landed immigrants and citizens in the form of a basic income. It will make sure that the poor and lower middle class don't get hosed and simultaneously make property a less attractive investment for foreigners or would-be mansion builders.
I don't want to live in the same place my whole life and I don't want every Canadian city to look and feel the same.
>It will make sure that the poor and lower middle class don't get hosed and simultaneously make property a less attractive investment for foreigners or would-be mansion builders.
It will also make sure that you get enough leeway to build in all the corruption you want. Or at least all the NIMBYism you want.
"Yeah, to build in this region you have to pay this huge tax unless you fill out this form and we approve."
Any time you build an intelligent (read: complex) system you rely on the goodwill of the people that build it and maintain it to do what you want the system to do. This in turn gives those people great opportunities to take advantage of others.
That is actually a good idea but you shouldn't tax the improvement to the land. If someone constructs a building that building should be privately owned just like a car would be privately owned.
A national dividend that pays out land value taxes democratizes access to land for all citizens of that nation and thereby makes it pointless to have exclusive access over specific plots of land for the sake of rent seeking. It only makes sense to own a plot of land if you want to "work" that land or rephrased, when society collectively agrees that you should have this plot of land.
Property taxes should be doing that already, maybe we just need a national property tax? I'm all for basic income as a form of wealth re-distribution (as long as the money does't come from nowhere and stoke inflation).
Land value tax would prevent people from buying land without a plan to make it useful. IE ending land speculation and encouraging productive uses of land.
> Land value tax would prevent people from buying land without a plan to make it useful.
Ya: a land value tax is just a property tax that ignores improvements (charing based on what could be built rather than what is built). But it would totally destroy the low income housing market (since property owners of old run down low-end rentals would be seriously penalized for not building new luxury apartments).
1. There is a difference between luxury apartments and new apartments.
2. More likely the most egregious wasted land uses will be destroyed and not something already being used fairly productively. For example empty lots or parking lots are low value and would be turned into housing, driving down prices far before any existing building would be affected
> 1. There is a difference between luxury apartments and new apartments.
In the USA, not really. Today's new luxury apartment is tomorrow's old but affordable housing. Given the expense in building something, there isn't much cost difference to developers in building low-income units or high-income units, and if they go with the latter they will lose their shirts (Not to mention the low-income tenants of those houses would have to pay land use taxes similar to their richer neighbors).
> For example empty lots or parking lots are low value and would be turned into housing,
There really aren't many of those left in the cities people want to live in. Undergound parking and multi-level parking garages are already a thing in dense locations where property values alone mean turning something into a parking lot is bad use (unless you are saving up the parking lots to create something rand like Vulcan's South Lake Union project in Seattle).
I'm still all for it, but we would probably have to sink a lot more money into public housing to prevent a bloody revolution from occurring.
In what sane universe is not requiring toilets and showers a solution to housing issues? I'm reasonably sure we can meet housing needs and still maintain basic human dignity.
Not all housing need to go to a 4-person family. In my late teens and early 20s I shared a bathroom and a bedroom and never felt my dignity impinged. At that age it was much more important for it to be cheap than for it to be good.
It should not be illegal for such housing to exist.
I think you're speaking past each other. The comment mentioned no access to shower facilities at all. Go search Youtube for tiny apartments in Japan or Tokyo and you'll quickly find rooms for rent where bathrooms and personal or communal showers simply don't exist, residents must walk to nearby businesses or public facilities like libraries during business hours just to relieve themselves. This is not a desirable housing situation either.
I think a dormitory or barracks style housing is perfectly acceptable as a solution but putting the burden of supplying bathrooms on private businesses or implicitly requiring people shit in buckets in their one and only room is not.
For example, it would be nice to be able to build a dormitory- or barracks-style high-density, low-creature comforts housing, where multiple rooms may share a common bathroom and a kitchen, in areas with high homelessness to give those folks a place to call home. This is not currently legal in many jurisdictions due to building code limitations.
I might feel that a gigabit fiber connection is necessary to maintain basic human dignity ;-) but I don't think that should be enforced via law. One should be able to opt out for something more afforable.
Well, that's another whole issue that relates to policy. From what I've gathered, there's an ungodly amount of red tape involved in trying to be an upstart ISP at the residential level. So much so that one of the richest companies on the planet has only made inroads in like ten cities.
A $250/month room with a shared toilet is better than living in a tent somewhere. Also, the need for showers can be mitigated with public bath houses, we used to have more of those...again...it makes lower end housing more viable, but most people will probably want their own toilet and shower and will pay for it.
> I'm reasonably sure we can meet housing needs and still maintain basic human dignity.
The proof of your hope would be in the pudding, and right now we have no pudding.
> A $250/month room with a shared toilet is better than living in a tent somewhere.
For the person living in it, yes. For other people living in the area, bringing in a large number of people who are just one step above living in a tent, may have impacts on the neighborhood that they don't want. Much of the resistance to building more housing is this at various different levels.
This is an absurd argument considering that American zoning has been exceptionally successful at segregating black people into their own separate communities. You have homogenous American neighborhoods and cities. When you are blaming someone else in this way you are not only admitting defeat but you are also an asshole.
I'd certainly be interested in how racism within japan affects the housing market there, especially considering the racial bent behind this Canadian policy
Toronto has tons of upzoning. There are developments all over the city.
The problem is that your primary residence is a tax-advantaged vehicle in Canada (infinite tax-free capital gains). So the optimal choice is always to buy as much real estate as you possibly can. People also use their children to hold deeds when they want to expand into second and third homes. The tax advantaged status drives the Canadian housing bubble
People are regularly talking about "housing cannot be both a good investment and affordable". In Canada, it is a 'good investment' by tax law.
Look at how much real estate prices have diverged from rent in Toronto. It is mind-boggling. The gap's growth accelerated with COVID-era quantitative easing.
This is a policy addressing one side of the supply-demand equation.
I think most people would agree that measures can be taken on both the supply and demand sides. It’s a rather extraordinary claim to suggest that root causes don’t exist on the demand side, and that the issue can only be addressed from supply side. That’s an opinion on a debatable topic stated as fact, and it may be a popular opinion among the HN crowd, but that doesn’t make it more of a fact.
If foreign buyers are using Canadian housing as an investment vehicle and to park assets, that additional demand decreases supply for Canadian citizens who require housing for shelter.
Of course, they can (and should) directly address the supply side as well. But there’s the possibility that foreign buyers’ demand will continue to outpace supply, leading to ghost cities like there are China, with 65M+ empty homes. Canada is under no obligation to perpetuate that.
It is not just that it is an attractive place to park wealth as far as ROI. It is attractive period because you can park your wealth in an obscured way in a place more fair than where you live.
If you have a lot of money in places like China and Russia or if you have money from graft, it could all be taken away quickly. So these people are very willing to buy something real in a "safer" country, even if it has a negative ROI.
This is not the only problem with housing in general, but it is a contributing factor that does not provide value for people that are looking to actually live somewhere.
> If you have a lot of money in places like China and Russia or if you have money from graft, it could all be taken away quickly.
I don't think people from Russia or China can do this anymore. At least the Russians can no longer do it in the West. As for the mainland Chinese, the CCP has blocked capital flight and they have even blocked cryptocurrency. This happened two years ago ie. unless they already got their money out of China two years earlier, they can't buy anything in Canada
EDIT it happened three years ago and not two years
From that perspective, the simplest way to resolve the money parking issue is to seize assets owned by chinese or Russian citizens. Break that assumption for non-canadians.
Alternatively, provide a dedicated asset class for that, so they can put their money in something other than housing
> The root cause is the system that is geared to keep houses always appreciating via supply constraints: aggressive zoning, discretionary permitting, NIMBYism.
These are contributing factors, but the energy that drives the bubble is capital, and bubbles have a way of becoming self-perpetuating. When a bubble becomes critical, you can't "build out of it", unless you think you can actually produce 10% more houses in a year, every year!
You can pull capital out of it by making it expensive to leave a home empty. Then capital will go where they can get better returns. Bonus tax when the average occupancy of the property drops below a certain percentage, say.
I don't know what the solution to the problem is, but I fear where it's heading. If people cannot get housing, anarchy and revolution are in the making. Then it's heads on pikes, French Revolution style.
Yes. That's the point. People will rent it. Which means they need to be priced such that people can rent it. (If the rent is too high, people can't rent, which means it sits empty, which triggers the punitive tax). Lower rents will drive prices down, as people will decide to rent instead of buy for a while.
The real reason is that those foreign investors are productive and have excess capital available to invest. They are from creditor nations, not debtor nations.
You cannot lie in the foreign exchange market. If you bs your productivity vis-a-vis loose money supply, your currency will rightly be worthless. The USD would usually be worthless too, it's just that due to Petrodollar system and reserve currency status, it's artificially propped up to be strong.
I hope you notice the irony in your comment. You praise the exporters while completely ignoring that imports must exist in equal proportion to exports.
> You praise the exporters while completely ignoring that imports must exist in equal proportion to exports.
In a closed system with two economies, yes, true. But in reality, many nations either run a trade deficit (exports < imports), or a trade surplus (exports > imports)
Mark off China and Russia from the list. With Russia it's obvious, while for China, the CCP has clamped down on capital flight starting two years ago. They keep clamping down harder, which is a big reason they banned crypto
I agree that this is the root cause, and it remains a third rail in Canadian politics. The province of Ontario commissioned a "Housing Availability Task Force" to do a [report](https://www.ontario.ca/page/housing-affordability-task-force...) spelling out the problem. They identified under-supply due to land use restrictions as the primary cause. The government ignored it and addressed secondary issues with lame bandaids in their June election platform.
They are conservatives, this "foreign buyer ban" bandaid is put in place by liberals. NDP and Greens offer nothing different. A quadri-partisan consensus on ignoring the root cause.
I do think there's another major cause - cheap money. It's fuelling a lot of the meteoric price growth and making the housing market even more of a wild speculative one, where all that matters is the carrying costs and not any underlying fundamentals. This one is more of a worldwide problem, and a small country like Canada cannot use monetary policy to bludgeon the housing market back into reality without bludgeoning the rest of the economy with it.
The recommendations of the committee reflect the fact that they had only one month to work in and as such severely limited the consultations they did. To take just one example of how ridiculous some of the conclusions are: They recommend forcing any municipality to accept 6 to 11 story buildings on any street that has a bus route regardless of whether that bus route actually reaches the building or not. This is a huge deal in Canada as many streets are absurdly long. Yonge Street for example is the longest street in the world and effectively transitions into a highway through rural areas. Still this policy says you could build an 11 story building without providing parking in any small township on Yonge Street because it has a bus or subway route while it's in Toronto.
I think we have a philosophical difference here. You seem to accept the idea of centrally planning a city down to the micro-management level. I reject it. Yes, as you say, "this policy says you *could* build an 11 story building without providing parking in any small township on Yonge Street".
The operative word is *could*. If there's market demand for it, you could and you absolutely should do it. If there isn't, you (the builder) won't build it, and you (the tenant) won't move in.
If you focus urban planning on the big picture and allow the market to determine how many parking spots a building needs, or whether a single family neighbourhood makes any sense next to subway stops, the housing crisis will literally solve itself with private money. Instead, we keep floundering while entire generations of our under-30s struggle in precarious housing, because we are unwilling to adopt a different approach. 3/4 of discussions about 'housing affordability' at my city's council meetings are about money pits and bandaids such as airBnB bans and 'affordable housing' (can we build 30,000 units of it with taxpayer money? Didn't think so, let's move on).
If you ignore the blah-blah and focus on actions, we the voters don't really want to solve this problem. If we did, we'd act on the obvious solution.
I think you are leaping to a lot of conclusions not in evidence. There is a big difference between "centrally planning a city down to the micro-management level" and overriding any ability for a municipality to assert what it feels is needed in a development. Negative externalities are a very real thing and allowing developers to have arbitrarily many of them at arbitrarily bad levels is not the only alternative to complete and total central planning. Believe it or not there are reasonable middle grounds that allow some influence on developments from central planning to limit negative externalities while also listening to market forces. My beliefs align somewhere in this middle ground.
>I think you are leaping to a lot of conclusions not in evidence. There is a big difference between "centrally planning a city down to the micro-management level" and overriding any ability for a municipality to assert what it feels is needed in a development.
Not really, if the municipality is in fact willing to centrally plan a city down to the micro-management level, and a different level of government wants to prevent it from happening. Some overriding is gonna have to happen here.
>Negative externalities are a very real thing
Indeed. Example: artificially embalming swathes of single-family neighbourhoods in time, right next to recently built public transit we're sinking billions into building. So let's not be selective about negative externalities and consider the ones created or exacerbated by NIMBY-driven urban planning, too.
>allowing developers to have arbitrarily many of them at arbitrarily bad levels is not the only alternative to complete and total central planning. Believe it or not there are reasonable middle grounds that allow some influence on developments from central planning to limit negative externalities while also listening to market forces. My beliefs align somewhere in this middle ground.
Sure. I too am somewhere between allowing toxic smelters next door to kindergartens and Soviet-style central planning where government owns all and builds all. Everyone's gonna align themselves somewhere in this middle ground between two contrived and straw-man extremes, all NIMBYs included. The whole debate is about where in this middle ground we ought to be. Forgive my skepticism, it's just that I've heard this middle-ground line often. And often, this is simply a rhetorical cop-out and a prelude to killing off any meaningful changes that allow for building the types of housing people want in places where they want it.
>Not really, if the municipality is in fact willing to centrally plan a city down to the micro-management level, and a different level of government wants to prevent it from happening. Some overriding is gonna have to happen here.
I never said some overriding isn't going to have to happen. I never said the municipality should be able to plan down to the micromanagement level. All I said was that a blanket allowance for all buildings of a certain size on any street with a bus route regardless of the route reaching the building or not was absurd.
I criticized a specific recommendation of a panel that suggested we completely override municipal planning and not allow them to address any concerns with any buildings on a street with a bus route as long as those buildings were 6 to 11 stories tall. I pointed out how it allowed for certain absurdities and was not a sound policy recommendation.
>Indeed. Example: artificially embalming swathes of single-family neighbourhoods in time, right next to recently built public transit we're sinking billions into building. So let's not be selective about negative externalities and consider the ones created or exacerbated by NIMBY-driven urban planning, too.
What you call artificial embalming others might call a status quo. It has its own negative externalities, I agree. I want more development than many people I know and don't think the status quo is sacrosanct. I also don't think the status quo is a state like any other that doesn't deserve any special consideration. I think it represents a way of life that people bought into and became part of a community with. Parts of that are bad: low density forever doesn't work. But there is a certain standard of services provided in the neighbourhood and developments need to be cognizant of that and be coordinated in ways that don't have huge adverse effects on that.
I want smart development that considers the surrounding neighbourhood in reasonable ways. I don't want 50 story condo buildings in crowded school zones without a plan to build new schools. I don't want 50 story condo buildings that aren't on highways or good public transit when traffic studies show nearby intersections are at or near peak capacity. I also don't like it when developers consistently claim buildings in my neighbourhood will end up with 76% of occupants using public transit when after the fact surveys show that number is 39%. Instead of 24% of occupants driving we end up with 61% doing so, an impact of 254% of what was predicted on traffic patterns. I also dislike that we consider each development in isolation and don't do any holistic studies on the impacts, the net result of which is four different developments within two blocks of my house each show that facilities won't be overcrowded and traffic will be "within acceptable limits" if only their development proceeds. Then the province overrides the city and approves all four at once and we get severe overcrowding and overburdened facilities.
There is also the double whammy that property taxes are based on a percentage of property value (which is lower for condos) and the percentage used is also lower for condos. The net result of this is that the municipality gets far less budget per capita and this leads to a decline in services. I'm not sure what a good solution is since we need more density but I have a lot of sympathy for people who don't think it's fair that the services of their neighbourhood are forced into a significant decline.
>The root cause is the system that is geared to keep houses always appreciating via supply constraints: aggressive zoning, discretionary permitting, NIMBYism.
I don't agree that this is the root cause. The root cause is the artificial demand on housing created though our mass immigration policy. Canada accepts _at least_ 500,000 people per year through various channels, "temporary" foreign workers, international students (many of whom stay), refugees, and of course, normal immigration. And I am low balling that number. It could be closer to 1 million.
When you bring in an entire large city worth of people, it stands to reason that this will cause massive pressure on housing prices. Now sustain that yearly increase for decades, and you have the problem we face today.
There are 9 million people in Canada (a country of around 40M) currently living here on 10 year visa's. - Crazy!
So there you have it. How could you leave that completely out from your argument and only blame zoning laws and nimbyism?
When more people show up, you should build more housing. Canada is a big place with a small population relative to its size — you have plenty of space. Your argument might work if Canada was a small island like Singapore, but it is one of the largest countries by land area in the world.
What prevents you from just building more housing in all that extra space you have? Zoning laws and nimbyism.
>"What prevents you from just building more housing in all that extra space you have?"
That's the wrong way to look at the problem. Developers can already build in the hinterlands, but there's virtually no demand to do so because the economic activity is concentrated in the established cities. You also run into the Siberia problem where despite having massive tracts of "free/undeveloped" land in the taiga, actually inhabiting it is very expensive because of how brutal the weather can be. Unless you have something like a literal gold mine or oil well, the expense of heating the buildings and maintaining the equipment is not at all economically viable.
You don't need to build in the hinterlands. Looking at a map I see space around many major Canadian cities.
Vancouver may be the most constrained geographically but quite a lot of it looks suburban and could be built up if the political will existed.
Or, Canadians could choose to build nothing but single-family homes, but if they make that choice, they should own it and admit it is the real reason rather than blaming foreigners.
>What prevents you from just building more housing in all that extra space you have?
There is plenty of cheap, available housing in the hinterlands of Canada. And yet, nobody wants to move there. Why do you think that is? Prime locations are scarce no matter how much land mass you have.
Because people want to move where jobs are available. There is a decades-long trend of urbanization throughout the world, as economies continue their transitions towards services.
Canada has a deep labor shortage in its urban areas, with plenty of pent-up demand for growth.
It's certainly true that if we must perpetually conserve each and every single family home in an urban area, then we'll remain housing-constrained. If that's what everyone wants to do, that's their right, but it's necessarily going to result in lower income and living standards for the country.
Honest question: where are these cheap, available houses? I thought I did live in the hinterlands, and there's nothing in that category here that doesn't need to be torn down. Since I work online, I might be able to move if the prices are right.
In what world are "temporary" foreign workers buying homes in Canada? With what salary? Same with Refugees, students.
Funny how in the first hundred years in Canada, we didn't have any issue with housing costs, despite accepting vast amounts of refugees. I'm not saying it's not making the problem worse, but to SOLELY pin it on them is IMO willful ignorance.
if we banned all immigrants, of any kind, tomorrow, would Canada's housing prices collapse? I'd suspect not: credit is still cheap, and every day canadians still want homes.
In the real world! There's enough rich people in the world, that some of them send their kids to Canada for school. And some of them buy houses.
Why does near every American assume that everyone outside of America is poor.
Temporary Foreign Workers is everyone with a work permit for their first three years (or longer!) regardless of qualifications -- NAFTA means doctors, engineers, and software developers are TFWs for a few years at least until/unless they apply for permanent residency. The idea that they are somehow less wealthy than the average immigrant is incorrect. So to answer "with what salary?": The one from their jobs.
This is factually incorrect. NAFTA workers--TN visas--are not part of the the TFW program, which is something entirely different and requires market assessment impacts.
My residence status for three years under NAFTA was Temporary Foreign Worker. I still have the paper permit. I was exempt from a labor market opinion but all other requirements, such as a single employer sponsor, applied until permanent residency.
If you're referring to mainland Chinese people, China has banned capital outflows in the last two years. It's so bad and strict that mainland Chinese people are freaking out that they can't move their own money outside of China. Game's changed. Wrong scapegoat.
Demand for housing is not artificial merely because it doesn't come from a citizen.
Separately, Canada's population growth rate is the lowest it's been in over a hundred years, and it isn't close. The lower trend continues for decades and decades. The last time the population growth rate was increasing was in the 1950s. So this is a very strange argument to make.
> Canada accepts _at least_ 500,000 people per year through various channels, "temporary" foreign workers, international students (many of whom stay), refugees, and of course, normal immigration. And I am low balling that number. It could be closer to 1 million.
> When you bring in an entire large city worth of people, it stands to reason that this will cause massive pressure on housing prices. Now sustain that yearly increase for decades, and you have the problem we face today.
You make it sound like those people enter Canada and then just sit there doing nothing. Which is wrong.
As long as they're LEGALLY in Canada, I don't see a problem.
They're studying/taking up jobs or whatever, and they're also spending the money that they make in Canada, in Canada. This helps the existing Canadians as well. And some of them start their own businesses. That's how the economy develops. Money should keep rolling.
> There are 9 million people in Canada (a country of around 40M) currently living here on 10 year visa's. - Crazy!
What's so crazy about that? You should check the numbers for USA.
As for the 10 year visa part. From what I know, Canada grants B1/B2 visa with a 10 year validity for businesspeople and tourists. It does not mean they can enter and stay for 10 years. They can enter, stay for sometime (they have to state how long they intend to stay at the time of entry), and then they leave. Or atleast, the vast majority of them do. They have better things to do back home.
By the way, you might also want to look into Canadians emigrating to USA. Not that there's anything wrong with it. Just saying that it happens.
Labor generally ranges from 20-40% of the cost of a home, the land and materials make of the majority. An absolutely massive percentage of all immigrants would need to be in construction to outweigh the increased demand from their presence.
I assume the response would be that with policies that allowed for rampant building/sprawl, the market would sort this all out regardless of the population.
However, these kinds of price spikes still happen in lots of places that have neither a ton of immigration or constraints on building, so it's not clear to me that either one is really a singular root cause.
A price spike, maybe. A long term unending price increase, no. Would love to see an example of a place that doesn't have such constraints on building that has high prices.
The root cause is the system that is geared to keep houses always appreciating via supply constraints: aggressive zoning, discretionary permitting, NIMBYism.
You can believe that if you want to.
Any level-headed analysis of the situation, however, points to multiple factors at play, here -- dark actors with huge pools of dark money to park somewhere (that just so happens to be mildly appreciating on average) being one of them. A system which promotes and protects de-facto anonymization of luxury assets at scale being another. Truncating the root cause analysis simply to "supply" is simplistic at best.
Until we liberalize zoning, legalize building, and reject the idea that houses have to be appreciating assets, the issue will continue.
As much as one may want to believe that this is the right fix in the long term -- even under the best of conditions, it will take years, more like decades to pan out. Meanwhile the housing market needs relief now.
I hear this all the time on HN, but I never see any data to back it up.
It's also a very broad statement: I never see any construction when I visit SF, but in Montreal everything is under construction all the time. There are a dozen new condo developments within a few blocks of where I live, and yet the prices of homes still rose something like 20% last year.
There isn't usually one The Root Cause for economic issues, so blanket statements about policies being "boogeyman politics" are the kinds of unlikely sentiments that I'd like to see backed up by significant evidence.
Building more housing does not lower housing prices. This should be fairly obvious but here’s why it doesn’t work, at least in the US, and frankly would cause huge problems if it did.
The major problem is that the vast majority of the U.S. which is not underwater in debts, has the majority of their wealth in their houses. So if building more housing led to a secular reduction in housing prices, people would get poorer.
Which means that it will never happen, because people who own housing in those areas and therefore control the entire political processs, will not accede to shooting themselves in the foot even if they are YIMBYs.
What this means then, is that the only housing that will be allowed to be built, or the only housing that will not in turn make the people of the area poorer, will be “luxury” housing, which does not lower their property values because it compensates for the drop in housing value due to greater supply by adding “amenities”, allowing them to maintain their existing house values.
The escape route for this is low income housing. Creating cheaper housing for people who couldn’t afford to buy their houses anyways, and therefore even though it leads to lower cost housing, it doesn’t lead to a drop in their house values (if anything, it may lead to an increase in their house values since it reduces virgin land that could have otherwise been used to build non low income housing that would compete with their houses).
> The root cause is the system that is geared to keep houses always appreciating via supply constraints: aggressive zoning, discretionary permitting, NIMBYism.
You're conspicuously avoiding low interest rates and 30-year mortgages from that list.
When people can borrow against their entire life's earnings to buy a home, the price of a home will trend towards that of a person's entire life's earnings.
Limiting maximum mortgage terms to 9 years would do more to bring down the price of homes than dealing with anything else you've listed.
To rephrase my point: What do you think would happen to the price of the average home if we printed, and handed out, each man, woman, child, and dog in Canada a million dollars?
My guess is that it would increase by ~2.6 million.
But it would certainly level the playing field between the average person and 'the landlord with capital'.
So if we are so concerned about keeping the average Joe up with that landlord, why don't we go ahead and do it? [1] It's not like it's hard to run the printing presses!
[1] Unfortunately, we do do it, except instead of just handing this money out, we wrap it up in decades of indentured mortgage payments, instead. The net result is the same, with the addition of a colossal wealth transfer from borrowers to lenders.
No I don’t think that argument holds. A hand out is not a loan. It’s also possible that even if loans raise home prices, that there’s a floor to this effect if loans are shrunk.
Many companies and people buy homes currently for investment rentals. They’re competing with homebuyers. Strictly speaking I would expect the share of homes owned by landlords to rise even if prices fall.
It has the same inflationary effect on the economy. Under fractional reserve banking, loans inject money into the economy, increasing prices. The lower interest rates are, and the longer mortgage terms are, the more such money gets injected.
On the flip side, what do you think would happen to home ownership if the mortgage terms were set to be 1 year max? That ought to really lower the home prices, right?
My guess is most homes on the market would be bought by private equity firms and retirement funds. There are a lot of confounding factors; just changing mortgage terms is not sufficient.
Building a modern home requires more than 1-person-year of resources and effort, so a 1 year mortgage term wouldn't make any sense. You can't make something out of nothing, so obviously, there would be a pricing problem in that situation.
The root cause of the supply constraint that ultimately gives real estate it's value is the land, and more specifically, the land being in a particular ___location. For example, a row of condos built right next to a major employer of the town, in the center of the city. That land is going to be valuable so long as that town exists, and as the population continues to grow, will only become more valuable. Adding more houses won't reduce the value of those condos the same way that adding more lanes to a highway doesn't reduce the congestion.
The idea that houses are appreciating assets doesn't come from some fundamental law or ideology. It comes from recognizing reality. There is only so much land where people want to live, and population tends to increase (we are talking about urban and suburban areas, of course), so the demand and price increase. It's pretty simple, really.
NIMBYism, zoning laws, permitting, those are always familiar and convenient boogiemen for people who don't want to do actual analysis of market factors. But, what you are really wanting to argue against is private property ownership.
I think that most YIMBYs are arguing the opposite: That if I buy a piece of land, and I want to build a duplex in it, all the way to the property line, I should be able to do it. As it is, zoning and the approval processes make all kinds of viable projects impossible to do, by the property owners.
If I wanted to turn my single family house into a duplex, or just tear it down and build bigger, to far closer to the property line, I'd be completely unable to do so, because the zone is R1, the minimum offset to the edge of the property is enough to part 2 F-150s lined front to back. The maximum legal usable square footage, across all levels, of the house must not exceed 40% of the square footage of the lot. Most of my property must, by regulation, be lawn, and the taller I build, the more lawn I need. There's houses with this zoning structure right next door to supermarkets.
So how is asking to be allowed to redevelop your own lot being against private property ownership? If land is so plentiful nobody wants to build taller, the land will remain very low density. But the idea of having a lot that, if razed, would be worth a million dollars, but where building a duplex is illegal is not, in any way, going against private ownership.
> So how is asking to be allowed to redevelop your own lot being against private property ownership?
To answer that: consider, would me being allowed to build a joint pig farm and jet engine testing facility 10 feet from your bedroom window be compatible with your property rights?
Externalities exist. Changes in the usage-- which includes density-- of the surrounding property can have a real effect on the existing residents. Debate over zoning is just a debate over the thresholds.
This isn't to say that existing policies in any particular place are well informed. But the basic concept of setting out the characteristics of neighboring properties, particularly to the extent that these rules were done in advance of your ownership and were clearly established, not only doesn't conflict with private property rights but can help protect them.
There’s a far cry between “no unlicensed pig farms” and “each house must be an entire freeway’s width from the next one”, especially as one is a different type of use instead of just a more dense one.
I used an extreme example, for sure! I think it highlights that stable zoning rules can promote property rights rather than undermining them. Sure, they can go too far-- but there is no fundamental contradiction.
> one is a different type of use instead of just a more dense one
Differences in density are differences in use! perhaps insubstantial ones--- ones that don't meaningfully impinge any existing residents property right, and if so they shouldn't rightfully be restricted by zoning. And obviously they are-- I'm not attempting to defend existing practices-- only arguing that the conflict is not fundamental and that people arguing over them can all be making reasonable arguments over the right thresholds.
You can always build more dense housing on land that is in high demand. In fact, doing that is the most obvious and effective way to keep prices low for desirable locales. Backed up by pretty much all the economic research on the subject in the last decade.
>You can always build more dense housing on land that is in high demand.
you CAN. But that takes a while. There's always something under construction in Califnornia and a good portion of that is trying to build more apartments and housing. The time to make those don't keep up with the influx of people emmigrating to LA or otherwise leaving the parents' homes to seek their own lifestyle.
It's honestly a more feasible solution to try and convince certain companies to build in a city that is otherwise "vacant". Make it a place where people will work around, have the existing land and homes appreciate in value. That's why Amazon and Apple had such aggressive bid wars from cities to try and get them to make new campuses in their respective city areas.
We dont have a shortage of dense housing because it takes to long to build
We have a shortage of dense housing because it is illegal to build dense housing in the places it should exist, and where it is legal, community review processes quickly shut it down
It's a bit of both, at least for my state specifically. There is a bunch of gatekeeping, but also some necessary restrictions and codes in California which is stricter than most other states, but necessary given its history. You can't take shortcuts anymore here like you could in the 60's (or heck, even in the 80's in terms of Los Angeles).
It's a a long and expensive process and I wouldn't be surprised if some deals fell through something because the minimum expenses exceeded what some potential clients expected.
> You can always build more dense housing on land that is in high demand. In fact, doing that is the most obvious and effective way to keep prices low for desirable locales. Backed up by pretty much all the economic research on the subject in the last decade.
In which dense cities in Canada (or the USA) did this work, resulting in a desirable dense city with cheap housing?
Great, is that economic research based on thought experiments or reality? I'd love to read it. Let's go back to my example. You build denser housing on top of or next to the condos I mentioned, what happens? The workers move in closer to the city center. The price is low for a short period of time, until more people migrate. Just like when the highway opens up a new lane. The traffic is better for a short period, until more people begin using the highway more. Then you are back to the status quo.
You could argue that you can just keep building up and up until you cross the threshold of demand affecting the price, but without a market incentive to do that, it's wishful thinking at best. "Well the government could fund it" you could say, and indeed it can. But speaking of economic research, everytime the government has done such a thing, it causes widespread economic depression of the local area.
Those are empirical studies. The Finnish one is the most recent I'm aware of, but they all say basically the same thing[1], here are a couple more [2][3].
Housing does not suffer from induced demand like road capacity does. This is easy to disprove by reading those studies. Sure, building nicer better neighborhoods does make them more desirable but it doesn't follow that they have to be more expensive, as long as you build enough homes for people to live in. Taken to its conclusion the induced demand argument against density is an argument against improving quality of life in general, and pretty nihilistic.
Tokyo has managed to keep housing prices pretty affordable (and while Japan's population may be shrinking, Tokyo's has continued to grow). Unsurprisingly, they build a LOT of housing and removed most legal/regulatory obstacles to building it a few decades ago.
They issue more permits for new housing units in a year than the entire state of California does, even though California has more than double the population. (or for an East Coast comparison - they issue around 9x the housing permits that NYC does, even though the population is <50% larger).
> As of April 1, 2020, there were approximately 115.8 thousand square kilometers of high-class asphalt roads in Tokyo metropolis, Japan, which was the dominant type of pavement.
Tokyo metro area is 14,034 km2.
Meanwhile LA is 14% parking lots or so I’ve heard.
>You could argue that you can just keep building up and up until you cross the threshold of demand affecting the price, but without a market incentive to do that, it's wishful thinking at best.
Tokyo, with its reasonable zoning, seems to have figured out how to build densely without being absurdly expensive. The key here is that the "market" is indeed allowed to figure it out, and not as restricted by NIMBYism.
The best thing the government can do right now is to get out of the way in regards to building more units.
> The idea that houses are appreciating assets doesn't come from some fundamental law or ideology. It comes from recognizing reality.
Houses are not appreciating assets, in general. They are durable goods but tend to degrade if not maintained. Land is often an appreciating asset for the reasons you mentioned. And of course the "NIMBYism, zoning laws, permitting" play a part in that, by restricting the land available for various desired uses. Removing these factors would help, though of course it wouldn't completely negate the tendency for land prices to rise, especially in densely populated areas.
> But, what you are really wanting to argue against is private property ownership.
Removing private property ownership wouldn't make more land available, or cause it to be used more efficiently. Quite the opposite in fact.
To be clear, I wasn't suggesting that I support removing private ownership. I was merely suggesting to parent to be honest about what they are really upset at. It isn't NIMBYs or town councils with their, admittedly, sometimes backwards zoning laws. Its private parties who own land and are acting in their own best interests.
> Until we liberalize zoning, legalize building, and reject the idea that houses have to be appreciating assets, the issue will continue.
Even if all those things are done the issue will still continue.
There is a limited amount of land at desirable locations with desirable properties.
You can increase density-- sure-- but after densifying more than some threshold of land it won't help because the extremely high density housing is itself extremely unattractive to many people, so building more density only helps to the extent that there are people who want that with unmet housing needs.
The fundamental natural of housing is the root cause, restrictive policy is an exacerbating factor.
To use an extreme example, you can easily go find big tracts of land in Montana for under $1000 an acre where no one would prevent you from building a gosh darn arcology if you wanted to. Yet the existence of cheap land someplace else doesn't magically make the issue of housing costs solved. People don't want to live in that someplace else, they want to live in particular places and there always is and always will be a finite amount of land in those particular places.
In general I agree, that the root cause tends to be a supply constraint. Even if there were a bunch of people buying up houses, at least in theory that should make rents go down.
However, in places like Vancouver people are buying up property as a place to park money and they remain unoccupied. Policies like additional taxes on unoccupied or secondary residences. Seem like one good way of adding supply.
The easiest way to solve that is by making housing a less attractive investment, which you can do by building a lot more of it.
Otherwise you're stuck crafting clever anti-investment legislation which may or may not work and may or may not create weird distortions due to some unforeseen consequence of how the regulations are worded.
I feel like this works for housing but not really for land? As density increases the cost of housing should go down (more houses), but the cost of land would go up (ability to build more houses on the same plot). I’m imagining the house from Up in the middle of manhattan; you could never build enough housing to make that a bad investment.
Similar happens in Sydney. There are a lot of foreign people looking for safe havens for their cash. I can't blame them (I'd do the same), but it is problematic for the people living there because it does reduce supply.
If they buy properties as an investment, why not rent them out? If you dont want the hassle, there are property management companies that will handle everything for you.
It's more a place to store value - they aren't looking for a return on it per se. It also adds complexity tax wise. If you have a lot of money in a jurisdiction where it could "disappear", just dumping it in real estate in a safe jurisdiction is attractive.
The lack of housing is not a issue of attracting investment. Canada (and basically every other country with a housing price crisis) is perfectly capable of funding construction with domestic investment. It is, as you mentioned, an issue with policy.
Until the policy is fixed, additional foreign investment is pointless and only serves to drive speculative price increases. It makes sense to deter it.
In theory as countries apply similar policies across the world, the surplus countries driving these capital flows will be forced to either invest in developing countries that could actually use the funds, or park the cash domestically. That will force countries like China and Germany to deal with their issues internally instead of exporting them.
> Foreign investors jump into the housing market because the current system ensures that the supply of housing is limited so it is an attractive way to park your wealth.
If they were targeting mainland Chinese investors, it's too late. China already stopped capital flight out of their country two years ago. They even banned crypto, so getting money out of China is both difficult and expensive for both Chinese citizens and even expats. The former is understandable since it's an authoritarian country, but expats? That's a new one unless countries in the Middle East do the same thing.
This has most to do with being a signal to investors that Canadian housing is not a safe place for their money and that has the largest likelihood of having a more lasting effect beyond two years.
I disagree that zoning alone is the problem as you see these market developments in almost all western nations and some of them have ample land to build upon.
Zoning could be more liberal, but it would still be massive stakeholders that would build new homes and rent them out to get a decent ROI.
When you liberalize zoning you get slum cities. This has already happened many times in latin america, india and africa. It also happened in America when we had liberalized zoning. (See, for example, the history of San Francisco, and New York).
I am all for increasing density in places where there is high demand for housing. But a lot of people are living in this libertarian fantasy that all you have to do is liberalize zoning and you will magically get a perfect high density city like Singapore (which ironically has some of the strictest zoning in the world) and not a sea of slums (which actually happens in the real world when you combine high demand with no zoning).
I think cities should increase density when they see high demand for housing. But they should do it smartly by providing services and infrastructure for more citizens when allowing higher density buildings.
The most important service for high density living and the first pain point a city hits when population increases is transport. So if you want higher supply of housing, the most important thing to do first and foremost is to vote for all mass transit initiatives and try to convince your city leaders to put in more mass transit. Once the mass transit is there it will be far easier to put in apartment buildings and increase density without choking the city in traffic.
We bought a house, then had to move cross-country. After owning, where all they did was examine our finances, it was really degrading having to submit an application to rent a house, background check, references etc. Also when something breaks I have to call someone, who will then, within a week or two schedule a handy man to come by and fix it. I have no say over the appliances, external appearance of the house, can't apply for a permit to convert the attic into a third story, fix the inadequate wiring (technically to code, but my space heater will blow out the circuit because it's attached to several other things in the house). I recently reseeded the back yard, at great time expense, and things generally while nice, look a lot more run down than if I owned it and could make improvements knowing I would retain the value, but I'm not going to pour money into this house just to let the landlord receive that value at no charge. Also when he and his wife feel like retiring here, we're going to have to move, at our expense with no recourse. We already tried buying it from them. Renting sucks.
because you want to settle down and stop moving? maybe have a family? have a place for your own that you can actually configure to your own liking? not get kicked liked a football because rent was increased for lease renewal because new corporate landlord doesn't give a shit? give next generation a fair/reasonable chance of making it on their own and not because they were not lucky enough to be born with family money?
I laugh when I see people have BLM signs on their property because those are the exact people who don't want to care about it.
The wealthy of the world should shouldn't be able to buy up our real-estate period.
In the USA, all it takes is a email, or phone call, from practically anywhere in the world and they own it.
At minimum we (USA) need to start with citizenship as a prerequisite. Oh yea, stop corporation for buying up precious stock too.
(Until we have more stock--the last thing we should allow is foreigners with funds buying our land. I have found it infuriating since I found out about how easy it is to buy here. Other countries do not let wealthy Americans buy land so dam easy.)
I'm a homeowner in Toronto and I don't think this will help. They've eliminated a small number of buyers from the market but have added other incentives like a first home buyers tax credit that will only fuel the fire - Australia tried this with tragic results.
>> working with provinces and territories to develop and implement a Home Buyers’ Bill of Rights and bring forward a national plan to end blind bidding.
Blind bidding is where multiple parties submit a sealed bid on a property. The realtor and seller review these bids behind close doors and then often request subsequent rounds of bids from the bidders *without telling them the current winning bid, or who's bid is winning*. Bidders end up out-bidding themselves.
IMHO blind bidding is an unethical practice that should be outlawed regardless of its impact on housing prices.
The question is why does something like blind bidding exist in real estate? It could exist in all sorts of places but doesn't. Imagine blind bidding when interviewing for a job. Write down the number you'd be willing to do the job for. Someone came in with a lower number, please resubmit.
These weird market distortions in real estate have underlying causes. A lot of them are based off patchwork rules and regulations around real estate. Stuff like who you're allowed to sell to, how much you're taxed, the paperwork required etc. Putting more patch work on top of a system that's obviously broken will probably make things worse in the long run.
I'd argue the main cause of this is the REALTORs/real estate boards/MLS system that stonewalls any attempts at making real estate information publicly available precisely because the size of their paycheques relies on this information remaining hidden from the public. The conflict of interest beggars belief, but it's allowed to remain, among other reasons, since it also tends to benefit political parties courting votes from homeowners who see their home values continue to rise.
All of this though (ending blind bidding, making buy and sell data publicly available, etc.) is just using a bucket to bail out the Titanic since the system is designed to have prices continuously rise since Canadians are in house debt up to their eyeballs and have no idea how else to actually save for the long term and any party that actually changed this would likely never get voted into power again, if they even continued to exist.
What's stopping Canada from increasing its housing stock? Surely Canada has plenty of space for its 30M citizens, right? (Yes, I understand that much of the territory is uninhabitable, but even still...).
38 million, with an annual immigration target of over 400k, plus foreign students, temporary visas, etc. New construction simply isn't keeping up with demand. Politicians have tried to solve this from the supply side for decades, but many of the issues like zoning are in provincial and municipal jurisdiction, where the incentive is to keep prices high and homeowners happy.
So the federal government refuses to address the demand side of the equation (very high immigration rate) while the the provinces and municipalities block increases in supply. The natural result? Runaway price increases, and the rest of Canada's economy becoming uncompetitive because employees can't find a house within a 2 hour commute for under $1MM in the GTA.
Regulations...
Most land is off limits. Were I live the land is ’protected’ for agricultural use even though it is marginal at best and most farms doesn’t use the land.
In my case it killed my agribusiness project because the amount of work, the delays and the risks where too much to bear.
We can no longer build what we used to build in the 60’s and 70’s because of the regulations in spite of the technology being much better.
There is plenty of housing for plenty of people in most parts of North America. The 'problem' is that what people _want_ is cheap housing in urban centers, a.k.a cool spots. Because that doesn't exist, we claim to have a housing shortage.
In Ontario it's not just urban centers. Prices are going up almost everywhere. Towns with a grocery store and Tim Hortons are seeing prices explode.
One problem in Canadian provinces is your taxes remain the same regardless of where you live, but if you need access to healthcare or education, then you have to live near a major city. Particularly if you want quality healthcare.
In fact the cost of living goes up if you're a rural inhabitant in most of Ontario. Electricity is more expensive, heating is expensive, etc.
You portray it as being some capricious choice by entitled brats, but ignore that there's economic and efficiency advantages for society to have more centrally located workforce and services.
Strange argument to switch to. If your day to day life is better because you live near where you eat and work and obtain healthcare and what not, isn't sort of hard to argue against? Where's the downside to this efficiency? It looks to me like an entirely win-win situation for the individual and society. Sometimes efficiency translates directly into resiliency. In your argument, proximity and density makes urban populations easier and cheaper to deliver to.
I think that used to be the case and I would have argued as such as early as 2018 w.r.t NIMBY and San Francisco but I think it's becoming less true. Now sure you can buy a trailer in the middle of nowhere in the Nevada desert, but what were previously considered "cheap" houses in places like Des Moines are increasing substantially in price, and that's not just the cool spots either. You might say "Well just rent then" but rent is going up too.
With that being said, naturally homes near economic activity should be more expensive. It's more expensive and always will be to live near Google's HQ in Mountain View than it will be to live in Grand Rapids, Michigan or Toledo, Ohio. That's just economic physics. It's ok, normal, natural, acceptable, and economically good. And these homes are only going to get more expensive over time as energy costs increase (EVs won't save us), road maintenance costs increase (already far out of control), and people move to live in more walkable areas. But as these costs increase, people who were expecting that it would be cheap to live in the suburbs are surprised because energy costs and moving far away just won't save them anymore like it did in the past (oh I'll live here and just have a 40 mile commute) - hence it appears that we have a housing shortage when in reality the costs are more reflective of economic reality and were artificially cheap. New housing won't help here because even if we could build more faster we'd still be building it in an economically handicapped way and rely on traveling far distances in cars and on highways, which just will not work when we can't pump cheap oil out of the ground.
You have two options. The first option is dense skyscrapers. But those aren't going to be efficient enough in places unconstrained by geography. They also have maintenance issues and it'll be too expensive to keep them going in the future with much higher energy costs. The second option is medium-density mixed-use development. Think the beautiful streets with brick single family homes next to townhouses and 2 story apartments with a cafe or an office at the bottom, bikes, walking, and street cars or other similar efficient transit. These you can repair yourself and the maintenance is much lower on the long-run and they don't rely on cheap oil to be livable.
But we'll keep building skyscrapers and suburbs (I didn't mention these as an option because they aren't) and the prices will just keep going up.
I don't really disagree with your larger point, but I can't help but explore this nit because it seems interesting. I don't think anyone is arguing that EVs will markedly reduce energy prices; however, there is an argument that renewables will decrease energy prices by virtue of being cheaper per unit power. Of course, it will take at least a decade before renewable energy isn't supply-constrained, so I don't think anyone is expecting this to happen soon, and moreover I've heard counter-arguments that the figures associated with renewable energy aren't including the storage costs which would be required to make renewable energy suitable for base load generation or the costs to decommission/recycle hazardous solar panels and fiberglass wind turbine blades--maybe there will be a ~10 year window during which the supply of renewable energy meets/exceeds demand but before the recycling/decommissioning costs kick in en force? :)
Oh yea I definitely think EVs are the future and to the extent that we have vehicles, in the majority of cases they should be EV. I guess what I'd say here is that even at a reduced cost (which is arguable) for a "commute" (self-driving, etc.) you aren't going to get EVs cheap enough to offset b/c the very act of driving 10, 20, 40, miles to a job or driving a mile down the road to the grocery store is just incomparable to just better design. If your grocery store is within a half mile and you can walk or bike there, EVs could never compete. So it's kind of like we're improving the technology of something we shouldn't be doing, versus just not doing that thing.
If I had to completely armchair it here, if you looked at total impact to society, the environment, car accidents, you name it something like a gallon of gas in the US should really be about $20-$30/gallon but it feels like it's expensive at $5 b/c we're so used to the low prices. We are probably experiencing these costs through inflation and things like housing prices.
Renewables (should) drop overall energy costs by virtue of capturing natural movements (I'd throw nuclear in renewable as well IMO but I understand why you wouldn't) but people are going to focus on kWh being expensive because they're used to extremely cheap gasoline. I guess in other words renewables on paper will be more expensive "at the pump" but externality cost to society will be lower. I wouldn't be surprised if in the future as more EVs come online that energy costs to charge even at home are approximate to gasoline.
> If I had to completely armchair it here, if you looked at total impact to society, the environment, car accidents, you name it something like a gallon of gas in the US should really be about $20-$30/gallon but it feels like it's expensive at $5 b/c we're so used to the low prices
Price per gallon is probably the wrong unit. You probably want $/mile. Car accidents get priced in via insurance. Environment isn't priced in at all in the US, though a carbon tax could change that if there was any political appetite for it. EVs already significantly reduce fuel and maintenance costs even though ICE cars enjoy a "carbon subsidy" (i.e., pollution isn't priced into the cost of gas).
> people are going to focus on kWh being expensive because they're used to extremely cheap gasoline
Electricity is already much less expensive than gasoline. The current US-average gas price is $4.10/gallon and a 30mpg car will cost over $0.13/mile. The current US-average electricity price is $0.14/kwh--with ballpark 85% charge efficiency (not all energy drawn from the grid makes it into the battery) and 300wh/mile, an EV will cost less than $0.05/mile. EV fuel costs are just over a third of those of ICE vehicles.
> Electricity is already much less expensive than gasoline.
How I'd phrase that is: "Electricity is currently much less expensive than gasoline "at the pump". What I think is likely to occur is that as we switch over to EVs (I own one btw if that helps here) there will be continued pure electricity demand which is going to cause prices to go up and up. Everything runs on electricity, and soon cars will too. So I think the kWh price is going to go up, and be measured and scrutinized much more (you can make an app to calculate this, not so much with gasoline easily) and it'll be more measurable. But gasoline costs just aren't "counted" in the same way. So eventually it'll cost, idk, $20 to go 300 miles and people will think that it's expensive because you could do it with gas much cheaper in the past, but the problem with that comparison is you wouldn't have accounted for the externalities so you're not really getting true costs. I hope that makes sense where I was going with that.
I agree $/mile is the right unit, I was just thinking about how to isolate true gas cost versus true kWh rate in some way. I personally pay closer to the $.05 kWh rate at home, but I see peak rates in California hitting $.4/kWh and all I see is the writing on the wall for the rest of the country.
If I had to summarize:
We live in an era of extremely cheap energy. It may go on for another 50-100 years, who knows. Maybe it goes on forever. But it won't be from fossil fuels. And if energy becomes much more expensive and we haven't designed cities and transit for optimizing cheap/efficient energy costs we're beyond screwed. Relating it back to housing, I think it makes sense the housing is getting much more expensive and that this phenomenon is more than just "living somewhere cool" and part of the reason that people want to live in these "cool" places is exactly because the implicit energy costs are less. You don't have to drive to a coffee shop. You walk.
I guess one good thing about America is we have all of these navigable waterways so we won't have big food shortages as distribution costs can remain reasonable, at least in the mid west and the east.
-edit-
One startup idea I have is a way to truly measure your total energy expenditure. Right now I just get a bill in the mail and figure that it makes sense because it's sooooo cheap to run all of this stuff. What happens once energy becomes 5x more expensive? Well, I want to know how much it really costs me to run dual monitors. Maybe it's an extra $50/year I don't want to spend (just a contrived example).
Agreed that increased electrification of previously fossil fueled applications will create upward pressure on prices, as will the decomissioning of fossil fuel power plants. However, this will eventually stabilize as we (1) increase renewable capacity and (2) increase our efficiency (American energy consumption is decreasing gradually as we improve efficiency).
It is worth noting that unlike some other energy sectors, unit costs of storage and renewable continue to trend down aggressively.
It’s still not quite so cheap that recycling it makes no economic sense, so if it is possible a way will be figured out sooner or later. (Metal is recyclable because recycling it requires so much less energy than producing it; plastic is super cheap and so is basically never recycled.)
We do in fact have an affordability crisis in Canada. I bought a home in a small town outside Toronto (too far to be a commuter town) in 2017 for $425000, and sold it in 2020.
We're friends with the people that bought it from us and on the same street in that same small town in Ontario, houses are going for $1M+ now. This is not entitled millenials wanting to live in Vancouver. This is the place where things are supposed to be affordable. This is exactly the sort of place where Boomers love to tell us to go live if we can't afford the city.
Housing is cheaper if you are willing to relocate to e.g. Swift Current, Saskatchewan where a 2-bedroom home with 900 square feet will cost you $175000, but of course there are very few jobs in a small town of 15000 people that's 3 hours away from the nearest big city and the unemployment rate is among the highest in the province.
Just to add to this, we live in a town of ~50k people about 2 hours out of Toronto, and house prices are up 20% yearly since before COVID. 2-3 bedroom houses, are brushing up against $1million this year.
Not as bad as other parts of Canada to be sure, but most people living here have manufacturing jobs or are in the military. I don't see how this is sustainable, since there's nothing for rich people to do here.
Very ordinary detached family homes in decent shape pretty much anywhere in Ontario are near a million dollars or more. If people could buy a family home for vaguely affordable prices in even the most remote parts of the province, people would flock there. There's plenty of land, but getting permission to build anything in much of Canada is a difficult and slow process, even in remote areas.
I don’t know that people want to live where the jobs are necessarily (although it helps for ease of switching jobs). Personally I think the move to remote work was very overhyped during the pandemic, but it is having an impact on the housing market of smaller areas.
People want to live where the amenities are, and all other things being equal more population can support more diverse sets of amenities. E.g. you need enough gay people in a town to support a regularly open gay bar, and generally speaking people want to have a choice of bars for going out.
I live in a rural area with a small local town about an hour outside of Ottawa. Lots of rural houses are going up, as the hour drive is okay for the occasional commute. Nothing is being built in the town (which currently has about 350 dwellings). The problem? There is no local water / sewage system, and quite a few of the wells in town get contaminated with e-coli on a regular basis. Nobody wants to build a new subdivision in the town because it doesn't have the basic infrastructure need to support development.
The worst part of this is that the town has the money in the bank to build the water and sewage system. There's upwards of $8 million earmarked for the project. However, each homeowner is going to be responsible for $30k in hookup costs, and the town will have to shell out $500,000 per year to operate the new water system. Since it's a low income area, the >50% property tax increase needed to run the system won't fly, and neither will the hook-up costs. Instead, all the new builds are focused in rural areas where there is no infrastructure needed or in the larger towns / cities where costs are significantly higher but deemed to be an acceptable risk by developers.
The trend in the last couple years has been the reverse of that, but it'll be interesting to see if that continues now that the most of the pandemic restrictions are over.
I'm not in Canada, but I am in the NYC region, and your comment is absurd. Assuming you want to live in a safe area, but not live inside the 5 city boros, you're looking at 1MM for a house, and an hour+ commute.
There’s certainly an element of ignorance in their comment, but there’s also some truth.
I am originally from a rural area in the Midwest USA. I know a statistically significant number of people from high school and college who purposely moved to bigger cities because of “the culture” or “there’s so much more to do.” They are right. I live in a much bigger city now for those exact reasons, but the demand justifiably has resulted in wildly more expensive houses. I could buy a modest house in my hometown for $85k right now. That same house where I currently live would easily be selling for $300-350k. You make more money here, but not by much.
We need to work on improving our housing density issues, but there’s an undeniable element of “I don’t want to live there” going on.
Nothing is better than sprawling outwards. Most of the white collar jobs can be done remotely , so commute is not needed. Most of groceries and other stuff can be delivered. A truck doing 100 deliveries is surely less traffic than everyone going to the supermarkets. And most importantly with sprawling outwards citizens can enjoy the outdoors and take care of their health. And even more importantly high density of population leads to increased crime , encourage homelessness and provide all sorts of administrative nightmares.I would say we have reached a technological inflection point where we at at last free to spread out and yet stay connected. Let us embrace it. This is the future. This is the way.
Service availability decreases with population density, and relying on subsidized last mile delivery for the economic elite is not a sustainable model for an entire society. The road network alone is a funding quagmire, to say nothing of hiding the infrastructure burdens of servicing sprawl into the eldritch horror that is the municipal bond market.
> Service availability decreases with population density, and relying on subsidized last mile delivery for the economic elite is not a sustainable model for an entire society.
I don't think this is strictly true. I don't like the model, but big box stores seem pretty sustainable (everyone drives to a distribution center for their goods). An actual last mile distribution system (a la Amazon) also appears to work pretty well. Neither of these are exclusively available to the economic elite.
> The road network alone is a funding quagmire, to say nothing of hiding the infrastructure burdens of servicing sprawl into the eldritch horror that is the municipal bond market.
I don't doubt that infrastructure costs decrease with density, but density doesn't keep urban municipalities from building infrastructure that they can't afford to maintain any more than other places. Quality of governance and density are almost certainly independent variables.
Service availability decreasing with population density is still old school thought. Rapid advances in technology over the years enable stretching infrastructure outwards. Who knows someday we may be extending our infrastructures to cover the whole globe and even to outer space. It is not subsidized and it is certainly not for the elite only. It is more about human aspiration. As a species we can look towards piling on top of each other or we can choose to expand and live a quality life according to one’s own aspiration. Look at the big picture.
> A truck doing 100 deliveries is surely less traffic than everyone going to the supermarkets. And most importantly with sprawling outwards citizens can enjoy the outdoors and take care of their health.
No, the lowest traffic solution is having the smallest number of trucks that are needed to serve local markets that a relatively high volume of people can access via walking, biking or mass transit. All that walking, very healthy.
Further, why should city dwellers subsidize this expansion? Surely these far flung communities won't have sufficient revenue to support the infrastructure needed to make all that work.
City dwellers are not subsidizing anybody. In fact there are certain things the government does for the common good. Like protecting border or extending healthcare. It is the kind of civic planning that determines if a community will be able to support ordinary human aspirations like living a comfortable life in a spread out space or a community is going to pile like ants on top of each other. Of course certain people in the top (elite?) may actually love the second option and would love to see people stuffed in small apartments and live life like mechanical robots so that they can enjoy their life in Malibu beach houses.
The government pays for those things with money generated in the cities. We need rural communities to grow food, but most rural and suburban communities in the US do not generate enough revenue through taxes to support themselves without federal assistance. Sometimes it is worth doing, but the cities make the money that pay for it. So again, why should we subsidize lower density that requires more subsidy and more energy to support? Our existing cities could be redesigned to be more human friendly and higher capacity - if we are going to spend federal dollars, thats where they need to go.
Entitled, huh? I don’t see what entitles you to any particular mode of living, but its your ethos.
Suburbs may be the majority (I have no idea if thats true), but that doesn’t make them self-sustaining. They only exist because cities paid for highways, water, and power infrastructure to make it all possible (and continue to fund their maintenance) - exponentially moreso the further west you go.
Nope I don’t agree. Cities have morphed into Subarus in the 1950s and since then they have been the source of more influence and revenue generation at least in NA.
City dwellers already subsidize rural living through taxes. On the federal level, more rural states are subsidized by more urban ones, paying more per capita and receiving less per capita. Similar things happen at the state level, but the numbers are a bit harder to track down.
The decreased density of sprawl causes the maintenance of infrastructure such as roads, electricity and water to often need to be essentially subsidized by higher density areas. For example, in suburbs with culs-de-sac, taxpayers fund the streets (in perpetuity as they must be maintained) but the vast majority get no utility from them. To your example of a truck doing deliveries, if it did those same deliveries in a more dense area it would obviously travel a smaller distance. IMO sprawl also makes life more difficult and more dangerous for those without cars.
I cannot imagine ordering fruits and vegetables online: how do you assure its quality without actually looking at them? I always prefer picking these myself, so yes, maybe it is a good idea to offer better transportation means to those who prefer to do in person grocery.
I too wonder about the sustainability of the Mexico City paradigm. When land becomes precious, we re-pave and re-evaluate. In Japan (On the island of Japan), space is precious, if you are going to build it, it better last, and it better make sense to keep around. Until we reach a limit on land area, it seems that slime-mold-esque endless sprawl is somewhat inevitable. I do wish the opposite, that we would heed the lesson before driving off the proverbial cliff.
Increasing housing stock doesn't imply sprawling outwards (e.g., replace a detached house with an apartment/condo complex), and anyway housing stock is probably a negligible contributor to climate change and habitat destruction (presumably forestry, agriculture, heavy industry, fossil fuel energy, etc are far larger culprits).
>Imagine blind bidding when interviewing for a job. Write down the number you'd be willing to do the job for. Someone came in with a lower number, please resubmit.
This is how it works in the trades, for contractors, and some small company employees. I've Never Been Told what past applicants for a job position asked for salary and were denied
Those are scenarios where the bidders are experts who participate in the market every day, which are very different from the home selling market where the average bidder will have participated never, once, or maybe twice in their lives (and be assisted by an agent who is paid for by the other party).
Employment, outside a handful of environments where salaries are public, is probably a great example of a market that is indeed blind bid - this is what a recruiter is doing when they ask what your “salary expectations” are.
Not... really? The problem with blind bidding is that it's iterative — that's the "bidding" part. People don't "bid" their own salary expectations down; let alone are they prompted to do so by their potential employer.
> Imagine blind bidding when interviewing for a job. Write down the number you'd be willing to do the job for.
You've got that relationship backwards. The person doing the job is the seller. They are the ones taking bids.
The employer – the buyer – is indeed blind. They don't know who else you are talking to and how much they are offering. If you can convince the employer that the other employer down the street has given you a better offer, they just might up their offer, and you stand to gain a higher income out of it.
So, yes, employment is a great example of where blind bidding is common.
I'd be very surprised if the average employer doesn't have far more information available to them than the average candidate. Especially given that's at least part of HR's role, knowing market salaries and deciding hiring budgets. They might not know about the hiring candidate directly, but more often than not, there are entire B2Bs dedicated to distributing this information. That's on top of skilled hiring managers and employers having vastly more experience with the whole procedure than the average candidate would.
> They might not know about the hiring candidate directly
That's what we're talking about. It's not hard to understand overall housing market trends as a housing buyer, but you don't know what a specific seller is going to do with the offers they have on the table. That's where you're blind, just as an employer is blind to what else a candidate has on the table.
If there's a difference, it's that the housing market is hotter (in Canada, at least) than the labour market, so you feel more pressure to buy a particular house when it comes up for sale. If you miss it, you might not find another one for a long time. If, on the other hand, you don't get one employee because you didn't offer enough, you can just wait for the next one that comes along the next day and try again. No big deal.
The revenue equivalence theorem for auctions suggests it doesn't matter that much. Now, empirical testing has shown violations of this theorem, but the magnitude of the violations are not so huge as to really move the needle. Someone might be paying 10% more in a sealed bid first price auction than they otherwise would, but it's unlikely that it's more than that, and it may be a good deal less or none at all.
No matter how you transact, of the good is too scarce compared to demand, the price is going to be high. We've seen skyrocketing prices in the US too and we don't use a sealed bid first price auction for the transfer of houses.
I would refrain from using the word “obvious” since many things we believe to obvious are non-obvious to others. Better to explain your point clearly and with greater detail.
The point I was making is that it’s too easy for us not to consider the implications to average or poor people of the proposals we make. It’s not that it’s the main point, but we also must not trivialize errors.
a 10% bump over market price quickly adds up to a high rate of price increases simce that bumped price helps form the new, higher market price which is then bumped up by the auction process even higher.
In addition, the process being described is NOT a "sealed bid first price auction" as the seller opens the bids and requests rebids without disclosing the current winner or top bid. The only reason to do this over a normal auction of that type is to trick people into thinking they didn't win, so they bid higher.
Australian living in Canada here - unsure what the tragic results were? It’s helped a number of my friends buy their first home - with a small (~$10k) credit /reduced stamp duties and taxes on the first home owned and lived in (ie not an investment). Negative gearing has been far more impactful in increasing the cost of housing, with people buying multiple homes for investment purposes.
It’s largely understood (I am in a pub halfway across the world and have no specific citation) that the FHBG just bumped the purchase price up by that amount. In Australia, many new buyers’ max purchase prices are dictated by their total borrowing capacity (in that, few limit themselves to less), and many FHBs are competing against each other for a similar cross-section of the market, so grants are easily absorbed by total prices because now FHB B can bid [x] higher and will.
I agree that negative gearing is far more impactful, but I certainly don’t believe my FHB grant helped me enter the market. It just meant I paid that much more to a seller for the same thing.
And then the people who profited in the interim buy up all of the cheap surplus, sit on it for a few years and then trickle it back out as the prices return to normal, making massive returns on their investment, profiting off of the misery they created in the first place.
And you can't even be mad at them for it because there's no collusion, no intent to manufacture the disaster, no single person responsible for it all, this is just the consequence of economic torture by a hundred thousand cuts. Their hands are clean even though the damage is still done.
Well, if only there was a way to let the market say that there is too much financial capital and tell lenders to go away. It's actually quite stupid.
As you said, no single person is responsible. You have this gold standard thing. The reason why it doesn't work is that gold or money is the financial equivalent of real estate. You don't need money in itself for anything. You need money to trade your labor in for products and services, as a medium of exchange.
It's analogous to a bazar except you must go to this specific bazar and there is a limited number of stalls. You only need a stall for 5 minutes to do your transaction, you don't need the stall itself.
We have collectively decided that people have the right to own these stalls. Here is the problem. If you are young and you have to work, you need to go to a stall and do transactions that let you sell your time. However, all the stalls are already taken by older people. They won't let go of their stalls, they want to take them into the grave, because they are scared of not having a stall when they really need it. So instead, they rent out the stall and let you use it for a short amount of time.
Now let's say the interest rate demanded is way too high and you refuse to borrow and fall for the debt trap. What are you going to do? Stay unemployed? Ok, but now you have lots of time to think and organize and a clear group of people that you dislike. This is the perfect growth medium for extremism.
So, we did away with a fixed number of stalls. Instead, we have decided to give everyone a stall. The problem is that those old people are now buying a second, third, hundredth stall. The amount of free stalls remains laughably small, forcing the government to keep increasing the number of stalls exponentially.
When you think about it, those stalls are public property and people who have no business blocking them are wasting everyone else's time. It's like someone is parking in the middle of the road and blocking traffic. Normally you would call the police and they will confirm the traffic violation and then tow the car away and fine the owner.
We don't do this with the stalls. There is no incentive for anyone to get on with their business as quickly as possible, so people grab as many stalls as possible. There is no opportunity cost to them but there is a huge opportunity cost to those who need stalls but can't get them. This is where the exploitation of the have nots by the haves originates. There are enough stalls for everyone but nobody is giving up the extra stalls that they don't need immediately. The wrong/incorrect allocation of stalls toward those who don't need them and away from those who need them is at the root of the problem. In theory, a market would automatically solve this problem. Why doesn't it?
My argument is that we need to introduce a fee on the stalls to punish slowpokes and make sure people keep those stalls free if they don't need them. This means that if people are refusing to rent a stall, the owner of the stall would be left with an asset that is losing them value instead of a tool that can be abused for power.
In short, the problem is that the interest rate must become negative to discourage people from indebting other people against their will when an economy that is no longer growing (for short bursts or maybe even forever) has no need for further debt, debt that can only be paid through inflation.
If I were king of the country, I would institute a federal property tax on single-family homes that is equal to the state property tax times the number of homes that you own for as long as homelessness is over 0.05%. Right now, we're at 0.2%, so homelessness would need to be reduced 75% in order to obviate the tax.
Further, if a non-human, non-bank entity was listed as the owner of the home there would be an automatic additional federal 2x state property tax fee on the property as well. These tax payments would further not qualify to reduce the taxes owed on your other incomes.
Banks and other such lending agencies would only be subject to the property tax penalty if they did not list the home for sale at fair market value within 60 days of acquiring the deed and they would be required to accept an offer that met the fair market value requirement. (i.e., if they only got bids for $50k under fair market value, then they wouldn't be required to accept those bids).
The monies generated would be used to fund anti-homelessness measures across the country. This would make it unbearably onerous to own more than 2 homes for all but the richest Americans, and it would make it so that people who are using real estate ownership as an income producing machine would lose out on that income.
This decree would be set to roll out over a 4 year period to give the mom and pop airbnbers and other non-financially entrenched in the real estate market companies time to liquidate their equity in the housing market. Those companies that are fully dependent on rental income from single-family homes would have no motivation to purchase the newer homes on the market as each additional home would add a federal 1X multiplier to their tax burden, housing would decrease in value, more people would be able to buy in, apartments and multi-family homes would become more readily available and the prices would decrease, more people would be able to afford to rent an apartment, and fewer people would be homeless.
That's a win all around except for any company that fills its pockets by sleeping on its horde of unused homes like ancient dragons and ill-gotten gold.
This is actually a disproven myth. College prices rise because historically high state funding per student has been cut or not kept pace with increasing enrollment. The federal government has capped the amount it loans to $52k for an undergraduate degree for a long time now. Reducing access to federal loans doesn't have anything to do with the cost of providing a college education.
I've always wondered whether higher-level "global top-down" market distortions (i.e. ones that use economic statistics as an input) would work here, where these sorts of naive "local bottom-up" manipulations fail.
For example, requiring that home sellers sell their homes with total consideration (incl. any required "side payments" to third parties) matching the mean market value of equivalent homes in other non-manipulated markets.
Or requiring that homeowners get their home appraised, and then legally mandate that consumers be charged a total compensation of at most the appraised value minus 10% to buy said home; with it being left up to the homeowner how to make that happen. (Where they can apply for their own government grants or whatever else, but they can't do anything that increases the total compensation demanded from the buyer—which would include taking any grants given to the buyer for buying a home.)
Not every house in the market is going to be a first home either though; especially when such incentives are often limited to a certain (the lower end) range.
Exactly. Which makes the subsidies a funnelling of taxpayer money into the pockets of landowners - obviously this is not good, but if you have a population of majority landowners, then this is a sure-fire way to get votes.
If there are 9 homes and 10 people, the 9th guy is going to bid everything he has, including government subsidies so he doesn't end up as the 10th guy who gets nothing. Those subsidies only work if there are 10 houses and 9 people because then you can choose whatever house you want and sellers must compete with lower and lower prices.
I disagree. IMO, blind bidding is suppressing prices not inflating them.
Here’s why, as someone who has been on the ground and lost a few offers because we didn’t want to overbid. After the sold price was released, on multiple occasions we thought “damn! we’d have our that and $25K on top to get it had we known”.
In a blind bidding system, you bid what you think the house is worth. In an open bidding system you start to bud as much as you are able to afford.
Except you're rarely sure how much it's worth. The market is fluid, the psychology is working on you, and the feedback takes too long that by the time you know how much you missed it's too late to learn much from it.
You say that, but the fact you didn't bid $25k+ initially tells us otherwise, no?
Here in DC metro, people are massively over-bidding (relative to list price) because they've already bid/lost 5-10 homes in the last few months. So, they go in strong, $100-$150k over on a $600k list price isn't uncommon right now.
> You say that, but the fact you didn't bid $25k+ initially tells us otherwise, no?
That doesn’t follow at all. You are going to bid the minimum amount you think can win the auction, not your max price you are willing to pay.
If you want people to bid the max amount they are willing to pay, you would want a Vickrey auction, where everyone presents a sealed bid, and winner is the top bid… but they pay the price of the second highest bid. That way you can bid your actual max price without worrying about bidding against yourself.
In a hot market with little supply, a list price is a marketing tool to get people into the door, and for a selling realtor to be able to brag about how good they are.
That’s it. It has been like that for years. It doesn’t make sense to post a list price that is too high or accurate (unless you don’t want the hassle to deal with multiple bidders.)
1500 sqft houses in my formerly middle class SV neighborhood are listed at $2.5M and sell for $3.5M within a week. Everybody knows that this $2.5M is imaginary. If you want to know what a house will really sell for, just look at the sales of the past 2 months. It’s a much better indicator.
It's just a reference. A bids/closings so far over list is relatively new to this market; the last time we had anything similar was the lead up to the 2008 crash.
More typically, a "$500k" house would list for $480 and close at $520 or maybe $550. Today, that same house is listing for $599 and closing at $700+. Not only have the prices gone up, but they've gone up fast enough that nobody really knows what a home is worth until it closes.
Blind bidding leads to more conservative offers because noone wants to grossly overbid on a house. The ceiling is basically what you think is "fair". The seller will then make a decision with very little back and forth - generally they will give you one chance to "improve" your offer.
Now, in an open bidding system, you are literally in competition for who can/is willing to pay the most for the home. The ceiling is what you can/willing to afford - back and forth with other bidders until literally the highest price is extracted.
That kind of rationality is rarely found in a hot market. You'll essentially be driven to massive overbidding due to the highest bid in the group. In a big enough market with enough demand, you can be sure that high bid will be well beyond a rational amount. Fairness has essentially nothing to do with it.
Once you lose 5-10 bids, you'll either give up on owning a home, move to the country or start upping your bid to suit.
Confirm this is the same in Austin. We moved from a blue state last year and kept losing conservative bids. We decided to go all-in on the next place and got it. What a stressful situation!
That doesn't make sense. If you really bid what it was worth to you, why were you disappointed that the house went for more because you would have paid it (and more)?
> IMHO blind bidding is an unethical practice that should be outlawed regardless of its impact on housing prices.
Why? There’s no special virtue ascribed to the purchaser v.s. the seller.
Nothing stops the purchasers from standing in front of the property and publicly announcing their bids (outside of game theory). If they’re bidding less than they are willing to pay, then de facto they’re low balling the seller. There’s no gun to their head to purchase a particular house.
The theory of that, and the reality of it are two different things. As someone who has been on both sides of this in Ontario, I can tell you for a fact that blind bidding results in people over paying, and never knowing by how much. The stress of buying a home in the GTA has lead people to stretch their budgets beyond reasonable limits, and realtors have only made it worse now. In recent years it's started to become normal for the list price to purposefully not reflect reality, causing the true sale price of a house to be left up to the buyers, and after probably losing dozens of bids, people get desperate and throw everything they can, which ends up in homes that regularly go over over $100k over asking.
When I sold my house, I had three bids, and the highest bidder payed over $30k higher than the second place. It was still over $100k over asking, with no conditions. That's just the reality of things right now, and it's not the sign of a healthy market for something as critical as housing. People are desperate, and it's getting worse.
1) as someone who has been on the ground as well, I’ve lost a few offers because I was worried about over paying. On multiple occasions, after seeing what it sold for we thought “damn, we woulda paid another $25K on top to get it had we known.”
2) Canadian banks has a very conservative “stress test” for securing mortgages. This includes qualifying at much higher rates then is being offered. Therefore it isn’t possible to “stretch yourself beyond any reasonable limits”
That “damn we would have paid X more” is exactly what it’s designed to encourage - we’re not good at calculating large numbers so once you’ve “made the decision” to pay $500k making a decision to pay $50k more is relatively easy (and seems like nothing).
In a normal Dutch auction style situation you’ll pay $1 more than the second highest bidder, which is a bit more fair.
I think you mean a reverse Dutch action. Which is almost a regular auction.
In a Dutch auction (regular dutch auction. Not reverse.) there is no second bidder. The price starts too high and drops until the first bidder to decide the price is low enough (as it drops) buys.
Canadian banks has a very conservative “stress test” for securing mortgages.
... is excellent. More places need it.
Please stop gambling on housing as an asset class.
The middle class doesn't do it in France, Germany, or Japan. In those places, housing prices are kept _fair_ through clear, transparent planning and a blend of free market and regulation. What the hell is wrong with US/UK/AUS/NZ that allows insane leverage to middle class house buyers that drives up the price of houses? It's all silly to me. (I'm less familiar with how much CAN allows middle class people to gamble on housing.)
In a sense you are both right, you just don't set the threshold at the same place.
The bank will look at how much you earn and how much you owe and say "We can pre-approve you for $X at Y%". They consider that you can pay that rate and they are most likely right.
Now if you do take $X, you have effectively leveraged your entire earnings, which for most people is a pretty bad idea because stuff happens and you can end up with a mortgage you can't pay because turns out you also want a car.
That being said (at least in Canada), your broker won't really let you take the full bank offers, or at least they don't expect you to do it.
In the US, most lenders will do between 36 and 43% of your earnings pre-tax. Assuming you pay another 25 to 30 in taxes, this should be half of your disposable income, leaving 50% or cars food Etc.
For a $5,000 mortgage, that's a $5,000 a month buffer
Um. Look at your numbers again. Assuming your 36-43% is correct (I haven't shopped a mortgage in almost 15 years), that puts the combined total at 61-73%. Also, that combined tax rate feels really low for anyone with the income to effectively bid in this current market. Add up SS and Medicare taxes, federal income taxes, state income taxes, and sales taxes and 30% feels like a floor rather than a ceiling.
You are not going to get an 800,000 loan with a repayment of $4,000/mo on a 120K income. For one, that's in jumbo loan territory with more onerous requirements for DTI above and beyond 20% down payment.
You haven't factored in property taxes, home insurance, or anything. Putting these numbers into a calculator, your monthly loan payment is going to be closer to $5,400 a month.
You're taking home $6,800 a month.
You're not living on $1,400 a month in the Bay Area.
What is normal? It's hard for middle class people to afford normal housing stock in highly advanced countries without 30 years of amortizing debt. Yes, I understand that some countries force you to chain bullet mortgages over ~30 years to achieve a similar effect.
I think you're conflating mortgage term (which is typically 5 years fixed or variable in Canada) and amortization. The latter can go up to 25 years for CMHC-insured loans at the time.
Seems like you're not talking about over paying, but rather out-bidding someone. It seems like maybe a first offer should establish a baseline price, and everything subsequent should be transparent, or perhaps have a blind expiry on it, so you'd know if your offer was declined before an offer has been accepted
It’s still quite possible to stretch yourself. Variable mortgages are common and interest rates are going up at a rapid clip. It’s possible for them to rise further than the stress test numbers. Refinancing in five years may be painful if you got a mortgage at 1.5%, stress tested for 3.5% and refinanced at 5%.
Tell that to the 5.1% rate a friend of mine just got on a new home purchase with >20% downpayment. I dunno if rates are a lot better in Canada or something, but we're already in 5-6% range in the US for some properties. They had excellent credit too.
US mortgages are 30yr fixed. In Canada you cannot get a fixed rate for that long and 5 years is the norm - everyone here effectively has an ARM. This is why rates are almost always higher in the US.
Yep, house on my street was listed for $950k a few weeks ago and sold for almost $1.4m. In my area (Kitchener/Waterloo), every house is selling for $250k-$500k above asking.
Houses are listed artificially below market to expand interest and create bidding wars. No one expected to sell for $950k and if that was the only offer they got it would have been rejected. I had this experience on a property in Toronto where they listed at $1.5 million didn’t get a bidding war, rejected our offer, relisted at $1.71 million and eventually sold.
Above asking is a meaningless number because asking isn’t a reflection of what anyone expects a house to go for. It’s a game price designed to attract as many of the right people as possible to the property.
There was a time in the not too distant past where asking was exactly what a house was expected to go for. When I bought my current home in the early 2000s, most homes went for under asking price by a small bit.
The question is, would an open auction be any better? The process will just happen at smaller increments. And you will have ghost bids to prop up the prices.
I think the issues with Vickrey auctions for houses is that a lot of buyers really have no idea what price they are willing to pay for a particular property. The open price auction format gives them a (weird and easily manipulated hint) at what price might be sensible for a particular home.
Yes it would be better, because you wouldn't pay your bid (for many it seems to just be max affordable) that was potentially the largest by a long shot.
And I don't see that ghost bids propping it up would be much of a problem, they'd risk winning? You could require registering names, putting a deposit down perhaps, no real need for it to be anonymous even?
This seems intuitive, but it's wrong. As someone who went through the process, I think blind bidding suppresses prices, not inflate them.
When you are making a blind bid, the only information you have is the home itself. The ceiling for your bid is on what you think the house is "worth". You are very conscious about "overpaying" because you have no perspective on what other people are offering.
In open bidding, you are competing against other offers and the ceiling is basically what you can afford to pay.
Can't tell you how many times we lost offers because we didn't want to overpay - when the sold price was revealed we realized we would've paid another $25K on that had we known.
Well I suppose it depends on bidder mentality, sure, but in that case it's still better - you would have seen & bid the extra $25k and got it (maybe).
> In open bidding, you are competing against other offers and the ceiling is basically what you can afford to pay.
Well, what someone else can afford (and is willing) to pay. i.e. you never overpay, pretty much by definition.
(I think there probably exist 'open' auction system where the highest bid (not second) is paid, but the main ones don't work like that, and nobody's suggesting that as far as I've seen.)
I suspect real estate markets are a lot less efficient than we think.
We take people who know nothing about pricing homes, put them in a high stress time sensitive situation, advised by realtors who are incentivized to close deals quickly and at higher prices, and then expect them to make reasonable bids.
In my opinion real estate assets are likely overpriced and inflexible from what they should be due to the current regulatory situation.
The “money on the table” argument is weak, because the first bid is when people are most rational, it’s only after human psychology takes over that they start bidding higher.
Farms often are sold in live auction this way with the bidders announcing their bid. Each bidders knows their maximum, but none give that way, all they give away is they are willing to top the previous bid by someone else (even this is a trick - some bidders will pretend to be more/less interested than they really are trying to scare off other bidders)
The auctioneer is typically a licensed real estate agent. The whole farm will be sold that day, sometimes field by field, sometimes as a whole (sometimes both ways - this is complex to understand: they get bids an all fields separately, then for the whole and the larger total wins). Then they sell the equipment and junk. Bankers are on hand to verify financing... For houses most people wouldn't work this way, but for farms it makes sense.
As a farmer in Canada, I haven't seen a farm auction like that since I was a kid. Most farms these days are sold either by someone knocking on a door and making offer that can't be refused or by tender, conducted by law firms. Real estate agents/auctioneers, and the cut they want to take, have largely been taken out of the equation given how easy the farm properties are to sell.
> I have no idea why there are regional differences
I'm sure it is multi-faceted, but supply management is a big difference. Notably, diary farmers in some provinces voted to impose a quota price limit in an attempt to make it affordable for new farmers back in the mid-2000s. This means that the amount that quota sells for is the same now as back then, even though the fair market value has at least doubled in the meantime.
This has created a market aberration where the quota is undervalued and to resolve it farmers have started tacking the difference onto the purchase of land. In other words, on paper I pay you $x for quota and $y for land in order to stay compliant, even though in reality I'm actually paying you $2x for quota and $y-x for the land.
This, of course, has driven up the price of farmland to unreasonable heights as people notice what farmland is selling for on record. $40,000 per acre isn't unheard of these days. I bet you in Iowa, despite having a climate that can easily outgrow us in Canada, won't see anything close to that.
As farmland prices have risen (up ~700% since 2007), residential sprawl out into that farmland has become much more expensive. This has increased the pressure on housing in existing urban areas, pushing prices up there. And, thus, the Canadian housing problem that's being discussed in the larger scope here.
For those who don't know, the best farmland in Iowa can go for just over $20k, and as you say can grow more value than anything in Canada. Iowa should be the most valuable cropland in the world - great soil, good climate, great national economy, and relatively flat land. (there are places better in some of the above, but they are lacking in at least one significant way and so the value of their land should be less today.)
I don't know how it works in Canada, but in the UK the incentive is that most estate agents take a % of the sale value. They have every reason to push house prices higher. Cartel or no cartel, it is very harmful.
That's exactly how it works in Canada too. Both estate agents split a % of the sale value. That's fine on the seller's side, IMO. But on the buyer's side, it's a silly conflict of interest.
The issue is that the flat percentage incentive is not a valid one, there was a chapter in Freakonomics about that (I seem to remember it was about Chicago estates, but it could have been another city in the US).
The study determined that when a house was the property of the estate agent sold in a little more time at a noticeably higher price.
The idea if that your house sells (today) for (say) 100,000 units of value (pounds/dollars/whatever) the estate agent will get (still say) 5% of it, i.e. 5,000 "units" (also today).
If in a few more months time you can sell it for 120,000, the agent will get (a few months later) 1,000 "units" more, but he/she will have spent a lot more time visiting the property with prospective buyers, runnning ads on newspapers, whatever, so the incentive for the agent is to conclude the sale as soon as possible, even if at a (reasonably) lower price.
The proposal to correct the incentves was to have a flat percentage (like the mentioned 5%) until a certain amount and a much higher percentage (like - if I recall correctly 15% or maybe 20%) on the excess.
Of course it depends on the local current market, but estate agents have interest to push house price higher only until the property is an "easy sale", the sheer moment the house stays on the market for some time (this highly depends on the local market, it could be weeks or months) they will start saying something "Hmmm, maybe we valued a little too much, we (that means you) should discount it by 10%", this in the same 100,000 unit house means that you will get 10,000 unit less, while the agent would get 4,500 units instead of 5,000.
The buyer's realtor is supposed to be working in the buyer's best interest and getting the lowest price possible. In reality it doesn't often work that way, especially when the buyer and seller realtors know each other.
I just bought a house and both realtors ended up being from the same office, and are good friends. Do I honestly think I got the best price? Not likely.
Maybe it’s different in Canada, but in the US (or at least in Massachusetts and New Hampshire) the agent merely must disclose to whom they owe allegiance. In both of my purchase transactions, the agent I worked most consistently with was legally working for the seller. (I was comfortable with that and acted accordingly, having “my” agent submit bids that I was comfortable with, but not treating/trusting them as if they were my lawyer).
You can have an agent working on behalf of the buyer, but my experience is that’s a minority rather than majority arrangement.
Your experience is not the norm, nor is it one I would recommend in most cases. You should find an agent you trust and can work with well to represent you, and they should be the only agent you ever have to speak to.
Dual representation can work out ok in some scenarios, but the hyper-inflated and super competitive market we're in right now isn't one of them.
Even in a situation where your agent is representing only you, they still have a massive incentive to get you to raise your bid so they get 1/4 of the total commission (and their brokerage house gets 1/4 of it). Their incentive is even stronger than that of the listing agent, because when it comes time to choosing a bid, the listing agent and brokerage is getting their commission one way or another and so a 1% difference in final contract price on a $1M house represents a difference of around $150 pre-tax to the listing agent. A difference of 1% that causes that specific buyer to get the house can represent a $15150 pre-tax difference to the buyer's agent.
If you tell "your" agent that you'd like to bid $1M but are able to and would pay up to $1.2M because you really love the house, you're giving away a lot of information that I decided I wasn't willing to give up and so kept all Realtors at arms-length.
Coming from country(Finland) where the buyer does not employ realtor the whole thing of buyer paying someone to get house feels weird. And seller's realtor really doesn't only care about price, but also about the speed they can sell the property, thus spending less time on it.
The buyer doesn't pay the representative. The seller pays for both agents. Having a buyer represented is generally a good thing even if there are problems. It improves access to the market and helps a person in deciding what houses they can realistically get. A big thing for my wife was that she didn't want to see a house we couldn't afford because of how it would alter her expectations and we couldn't figure out on our own which houses were listing enough below ask that we didn't have a chance at them. Our agent helped us filter houses so that we looked at houses we could end up in.
Blind bidding doesnt 'inflate housing prices'. the marketplace competition does. itnis neoyher unethical or the rooy of any problem. its the latest boogeyman in a world that seeks to turn other peoples property into public commodities.
1) 'Foreign Buyers' are price insensitive. In a market without much rational pricing, it's the 'confident signals' that set the price.
i.e. 'Foreign Buyer' comes in and buys for 5% 'above asking' on Street A. What happens then, is all the other houses on that Street set their prices a big higher, and hold. Other buyers see that sale, and it 'validates' the price for everyone else. More sales on that street, set the pace for sales in the area. etc..
Everyone is 'following' the confident bidders.
2) 'Blind Bidding' just favours the seller.
Buyers will only ever bid what they are willing to pay - not more.
It's just a form of auction, that's it. It's not unethical.
3) Low interest rates
4) Way too much migration
There is actually already enough construction. The notion that a city should expand it's services and population at break neck pace to accommodate the world's population is crazy. It's a 20th century 'body count' growth delusion strategy.
I saw an Australian sitcom where the house went up for auction. It was a proper live auction where everyone showed up to bid on the house. I was flabbergasted as I had no idea things were done in any other way than blind bidding as that is how it is always done here in the US.
In Melbourne, this is totally normal. Everyone stands in the street, prospective buyers, neighbours, and people starting their house search. The estate agent stands on the front step, acting as the auctioneer, using the rolled up "Section 32" document like a gavel.
Typically the auctioneer draws out bids in $10-20k increments, then knocks it down with a "going once, going twice, going three times..." call.
Just before declaring it sold, the agent normally stops, goes inside to consult with the vendor, and if the price is above their reserve price, goes back outside and says "the house is now on the market".
Now the auction gets serious...
Usually another couple of bidders reveal themselves at this stage. The increments can drop to $1k. If there is a battle between the last two or three bidders, the final price can go up another $50-100k or so. Eventually the final bid is locked in with a final call of "going once, going twice, going three times, to the man in the blue shirt."
The winning bidder goes inside with the estate agent, hands over a cheque for 10% of the purchase price, signs the contract part of the Section 32 statement, and is then committed to pay the balance in 60 or 90 days. Sales almost never fall through. If the buyer cannot get financing etc, the seller keeps their 10% deposit. The seller cannot back out.
I bought my house like this, and sold it again 20 years later the same way.
It's a totally predictable, well regulated, very transparent process. The weekend auction results are all published on Monday morning, both for every house, and the aggregate "clearance rates" for sold versus "passed in".
This is so unlike UK, where each sale has a chain of buyers, all "subject to finance", and no certainty or speed!
> Sales almost never fall through. If the buyer cannot get financing etc, the seller keeps their 10% deposit. The seller cannot back out.
In the states, once the purchase agreement is signed, the home goes through inspection at some point before the sale. The inspector finds a hundred little problems with the house, and the buyer can back out of the sale for any little complaint.
Right now, in DC metro, all contingencies are being waived, bids are $100k+ over list on moderately priced homes, and the seller is demanding a 2-month free "rent" back from the buyer.
Both my home purchases have waived inspection. The second waived financing contingencies as well. This isn't uncommon, based on what friends and family have done.
You can still back out of the deal but you will typically forfeit your deposit or earnest money (sometimes in the $10’s of thousands). But I hear you with the seller’s market - we just purchased a couple homes in the Austin area, bid significantly over asking price, waived all contingencies, and offered free 2-month rent back.
I discussed this with our realtor: forfeiting your full 3% earnest deposit is apparently rare. It’s not automatic, and when somebody backs out due to a non-contingent reason, it’s usually for a fraction of the full earnest deposit. (At least, that’s for the SF Bay Area.)
Yeah, I can imagine if it’s for a legit reason (especially in a hot market like the other poster pointed out), the seller would probably try to work something out. I would feel like a jerk if I took someone’s $10K and then turned around and sold my house the next day.
in really hot markets the seller often does BETTER if someone backs out and they move on to the next set of buyers. It's not worth the trouble to try and collect, which is not a gimme. The deposit is not a formula but more convention and an amount that demonstrates good faith. You want to get back on the market and not mess around to maybe capture 5 grand gross.
In Canada this is called conditional on inspection and it’s a permitted clause in a sale. The problem is the minute you have multiple buyers there is overwhelming pressure to remove conditions that can make the sale fall through because the seller is more likely to take an offer that gives them a guaranteed sale.
In Canada inspection contingencies only protect the buyer for major problems, and definitely aren't a "get out of jail free" card... I haven't seen anyone be able to back out after inspection in the last handful of years. Hell, we're having trouble even getting an inspection contingency to stick as people are more and more often foregoing that in hopes of getting their bid in.
Only time I ever used this was a wood foundation was found on inspection for a home we conditionally purchased listed as a concrete foundation. There was nothing wrong with it based on the inspection but I wasn't comfortable so we backed out. Every other case we've used the inspection to get concessions on mechanicals and roofs that needed replacing but I don't think we'd get the inspection or price reduction on an offer today.
As a buyer, you can try and write whatever contingencies you want into a purchase contract. In supplier markets like most right now they'll just refuse them. In a slower market where "simple" purchases are not so typical, offers with few or no conditions are often the difference maker, or even worth a slightly lower offer price to the seller. Even with a conditional home inspection "a hundred little things" typically won't disqualify the deal; the inspector will be looking for larger single issues that are up closer to 1% of the price. In reality sales don't often fall through unless something is extremely major or misrepresented; the inspection is used by the buyer to promote price concessions and help them deal with the stress of such a massive purchase. Inspectors miss important stuff all the time, which isn't surprising when they're spending only a few hours for an entire home.
> The inspector finds a hundred little problems with the house, and the buyer can back out of the sale for any little complaint.
But that’s a very well known risk. An agent will have a whole checklist of things to look at before putting a house on the market to minimize that risk. Also, buyers lose at least some money if they back out, there’s a nominal sum put up that you don’t get back if you decide to not buy once the process is started.
In my NY suburb, you do the inspection before the contract is signed. No money has yet changed hands, and it can be a point of negotiation or just walking away.
But it's an open process. That it's close to optimal efficiency isn't a bad thing.
Imagine the same level of stress, but you have to guess what the other buyers are bidding. Do you bid low and hope everybody else does? Bid high, but risk overpaying?
Can you hire professionals to do the bidding on your behalf? That would be ideal. Get some a wolf in sheep's clothing. Some old gran who is actually a bidding shark.
There's been a bunch of issues, though. When I grew up in Australia, there were regular news/investigative reports of auctioneers pulling bids from trees, etc., to kick the price up a bit. Not without risk, but definitely possible.
There are new systems to bid online, and over the course of a week. Much less stressful, no emotion and heat of the moment bidding. Nothing wrong with open bidding, all about the techniques used in person.
That still suffers from the stress at the end of the week.
Say an auction closes at 5pm Friday... I bod $500k on Wednesday. Somebody bids $501 Friday 4:50. I bid 502... they 503, right up to the last moment.
And if the site is like some online car auctions, any activity in the last 5 minutes extends the auction by another 5 minutes. So, 504... 505... and on up until somebody walks away.
A home purchase is the largest single thing most people will ever buy. It's going to be emotional, even if the buyer manages to stay calm.
In my experience it was less emotional than in person auctions I've attended. I knew my limit and stuck to it, there was no agent talking me into bidding higher.
That's what I was thinking. In theory it should be a better system. Submitting a bid significantly over the asking price and then losing to another higher secret bid is very disheartening.
> It's a totally predictable, well regulated, very transparent process.
No it's not.
- Ghost bidders and staff posing as buyers on auction day aren't uncommon with smaller outfits.
- They can list the property at a range of say 1-1.2M but the reserve on the property might be 1.5M. They waste everyone's time doing this, and you don't know until auction day - and that's only IF the property meets it.
- They will negotiate with buyers after hammer down, technically the "right to negotiate" goes to the highest bidder - however there's no laws, and I've seen every single agency in Melbourne do this - will go around and gauge what people are willing to go up to. They'll then instruct the vendor to accept/not accept an amount. This is why they have multiple staff on auction day.
It actually does happen in the US, but the only place I've seen it is bank or county/town auctions, where the house was either taken by the bank for non-payment or taken by the town to cover past taxes.
I live in Toronto as well. We make a good income, have large savings for a down payment, and recently thought about buying a house. It's depressing.
So, I decided to look at the City Plan -- to see what the actual plan is for addressing the housing cost crisis in Toronto.
Not surprisingly, the real problem became very clear to me, almost immediately.
The problem is not blind bidding.
The problem is not foreign buyers.
The problem is not low interest rates.
The problem is the official city plan is 100% a NIMBY plan.
From the plan itself:
> While communities experience constant social and demographic change,
the general physical character of Toronto’s residential Neighbourhoods
endures.
In other words, let's not change our back yards.
> Physical changes to our established Neighbourhoods must
be sensitive, gradual and “fit” the existing physical character.
Again -- this means that the large inner-city neighborhoods full of mansions (such as Rosedale and Forest Hill), have to stay full of mansions.
Just to spell it out:
> If, for example, an existing zoning by-law permits only single detached houses in a particular geographic neighbourhood and the prevailing building type in that neighbourhood is single detached dwellings, then the Plan’s policies are to be interpreted to allow only single detached dwellings in order to respect and reinforce the established physical character of the neighbourhood
You see this reflected in the development that does happen. Yonge & Eglinton just gets more dense -- because that's the "character" of the neighborhood. Meanwhile, in "fancy" neighborhoods, housing often gets less dense, because that conforms to the "prevailing" characteristic of the neighborhood.
With the current plan, the city is going to be a city with super high density combined with ultra low density and very little in-between. In other words, it will be full of wonderful enclaves for the wealthy, and sardine-can housing for everyone else.
This, of course, leads to issues such as the lack of schools available in the Yonge & Eglinton area, anod overcrowded transit, not to mention the lack of quality housing for families with two kids. (Try finding a decently sized 3 bedroom unit near playgrounds and schools. Yikes.)
The solution, would be to allow more medium and low rise development throughout neighborhoods. The "character" of the existing neighbourhoods should be allowed to change.
I don't blame Toronto though, this is a problem that is happening in most wealthy cities in North America. Doesn't mean we can't do better. We should.
> If, for example, an existing zoning by-law permits only single detached houses in a particular geographic neighbourhood and the prevailing building type in that neighbourhood is single detached dwellings, then the
Totally agree with you.
I just returned home from a visit to Cape Canaveral, Florida. It has a true mixed residential pattern. Lots of singles, duplexes, and small apartment blocks mixed. Felt "natural", scaled well, etc. I'm sure there are problems, but from a short visit, it looked like a reasonable assortment of housing.
>With the current plan, the city is going to be a city with super high density combined with ultra low density and very little in-between. In other words, it will be full of wonderful enclaves for the wealthy, and sardine-can housing for everyone else.
For ease of searching, this phenomenon is often called the "missing middle" problem. And it sucks, because as the already-high-density areas get more and more dense over time, it just reinforces the fear of density that people in the low-density neighborhoods have, because it confirms their prior belief that density means 50 story condo towers, and only 50 story condo towers.
Chicago is a wonderful counterexample to this - lots of neighborhoods are a mix of SFH, SFH with ADUs, MFH with 2, 3 or 4 units, and small 4 or 5 story apartment buildings, with nary a condo tower in sight.
There's this idea of a "city as a museum", to normalize the balance of power you describe.
In NYC there's a very similar balance of power. On some rarefied streets, it's illegal to change the silhouette or facade of a building, because it's an "historic district".
But if you go 40 minutes outside of lower manhattan, relatively affordable housing abounds and there are essentially no rules. The "museum" core creeps outwards, but with sloth-like predictability.
You're right, these places are not "for you/us". They're for people whose means allow them to make mole hills out of the mountains you describe (access to education, public transit, quality housing), and for the rest of us, who are willing to compromise their ideals and cope with the egregious terms and conditions.
Your solutions make sense in a utilitarian sense, but this is not a sense that appeals homeowners who have already rationalized away the irrational aspects of the status quo. Generations of experience have shown that, absent some highly-destructive disaster, it's cheaper to move to place you perceive to align with your ideals, or to change your own ideals, than it is to change the ideals of zoning policy.
There is a selfish component to this vector of development, but it's reductionist to say it's the only component. At any given point in time, the selfish component is there; but at many points in time it is not the biggest contributor.
Some of it is NIMBY. But the officials can’t change the fact that there is only so much land to go around and a disproportionate number of people strongly desire a detached house.
Building huge quantities of condos may help some with density and may drive prices down slightly but there is little that can be done to have new detached houses on the market.
You could potentially tear down some mansions in rich neighborhoods to build two or three houses and that might help slightly at the margins. There aren’t enough mansions in the city for this to really move the needle though.
The problem is a handful of cities are winners and everywhere else is losing. Toronto is the lifeblood of Canada and many people want to be here for opportunities that are unavailable elsewhere. A large population that grew up here doesn’t want to leave friends and family behind to start a more affordable life elsewhere. As long as we create a society where there are a handful of great places to live those places will be prohibitively expensive.
Being unable to create successful cities in Canada outside of Toronto and Vancouver has been the bigger political failing than NIMBY within those two cities. If Canada had five cities that were as successful as Toronto there would be more opportunity to go around and less pressure on Toronto. Disproportionate amount of both internal and external immigration is to the places with the best jobs and that drives up housing quickly.
> But the officials can’t change the fact that there is only so much land to go around and a disproportionate number of people strongly desire a detached house.
That may be true, but the housing cost crisis extends beyond detached houses. We need more apartments, condos, townhouses, etc. Not just nice detached houses. Prices should get lower in all of those categories. Even condos in towers have grown much, much more expensive.
> You could potentially tear down some mansions in rich neighborhoods to build two or three houses and that might help slightly at the margins.
Most of the land in Toronto is tied up with single family detached housing. Why not replace some of these with small apartment buildings, brownstones, and townhouses especially when near transit, or villages? I live in a large house that is a 10 minute walk to transit and two major strips of retail. This neighborhood is mostly detached houses and duplexes. Why not allow for double, triple, or quadruple the density with townhouses or small apartment buildings? If done at scale, across the city, this could absolutely make a huge difference, in terms of the availability of housing.
In terms of mansions, why not spend a few hours walking around Forest Hill. You'll probably need more time, though, if you want to see them all. It's a beautiful neighborhood. And very large.
> The problem is a handful of cities are winners and everywhere else is losing.
There are other nice cities that are growing -- and the housing prices are growing exponentially there as well. (For example, Waterloo and Victoria.) Everywhere else is definitely not losing, though I agree that there should be more thriving cities in Canada, that is also a daunting task. Frankly, it's also a lot more daunting than changing the zoning to allow for medium density in single-family neighborhoods.
The bottom line, though, is that you're right about what officials can't change. They can't change the amount of land available, but they certainly can and should change the amount of development that is allowed on it. The current plan is simply not working. Something needs to change. My proposal is to allow medium density development; I don't see a better alternative.
If you’re waiting for a progressive zoning plan which incentivizes enough building to naturally bring down housing prices in Toronto, you will be dead before that reasonably priced home becomes available.
> Our goal is 72,000 new homes across Vancouver in the next 10 years.
Unfortunately, if the Vancouver population continues to grow at an annual 1% rate, that means 275,000 new people to house. 72,000 homes would mean an average of 3.82 people in each of those new houses, which is just not realistic.
In short: Vancouver isn't even planning on building enough to be able to house everyone.
I'm not very familiar with the city, but clearly, their attempts to solve the housing issue are not actually serious if they're not even planning on building enough housing for everyone.
You are exactly right, but this is by design. You're talking about the Canadian Federal Liberals. The Prime Minister is a trustafarian who got elected because his father was Prime Minister. Every major minister of their party owns several investment properties. The Minister of Housing and Diversity and Inclusion (what a combo!) owns investment properties.
These people have zero interesting in seeing property values go down. It's their own net worth we're talking about, not to mention the net worth of their friends and donors.
The plan is to virtue signal their way to taking the least effective action possible (E.g. "ban foreign buyers", but leave loopholes so they can still buy through corporations), bring in another 500,000 people that will need housing, and then do as little as possible, but as loudly as possible, to "increase to supply". They've been in power 6 years and this has been an issue since day 1. Why anyone would expect them to address this issue on the face of Canadians still voting for them, is a mystery to any rational thinker.
It's a group of people where you have to ignore what they say and focus on their actions. Did the Canadian Federal Budget look at all like a budget passed by someone trying to reduce inflation? Trying to cool down housing markets even a little bit? Of course not. Look at the hand signing the cheques, not the mouth speaking the lies.
The rate of income property ownership is the same across all federal caucuses (including the NDP). Singling out one party for the transgressions of all parties does not prove any point other than maybe a personal partisan bias.
The fact is the party political system in Canada is heavily biased towards the wealthy. Heck, in Ontario MPPs don't even get a pension so you you have to not only be wealthy to join the game but already self-supporting into retirement to be willing to consider it. You can only rely on politicians carrying through on their virtue signalling to do the right thing for the rest of us, so I'm not willing to criticize any of them for it.
Its actually much more endemic than this. To start off, Canada's service sector dominating economy means jobs are concentrated in cities like Toronto, Vancouver, Montreal etc. So most people want to move and live those places. To make it worse, the government has plans to bring over 1.2M people over next 3-4 years time range as immigrants who again because of the fact that our economy is not diverse enough, tend to settle in those cities. Which makes the already heated housing market worse.
And everyone knows in those cities, local officials and councillors are all in builders' pockets. Large tier builders like Richcraft are routinely raising their prices by 5-10K per every release within last 2-3weeks since last 2020 and still they have all slots closing in 5 min of opening. They are keeping the supply artificially low and I imagine the inflation and supply chain issues are not going to make things any easier.
Bottom line, house prices continue to rise. The only thing that can temporarily put a halt to this is if we end up with rates as high as 10+%. Even then I suspect there are enough people with equities and large cash pool (hell our point based immigration system makes sure this is the case for all incoming immigrants)..
Middle class dream in Canada is over for most people. When you can't afford a decent place in Toronto or Vancouver with a tech salary you know its over.
There's stories of professional couples - both doctors - who can't afford a place in Vancouver. It's completely crazy there. I consider myself lucky to have got a foothold (well) outside the city when I did.
I can't imagine how bad it'd have been with the Liberals (provincial) still in power.
Just throwing my two cents in here from the Bay Area and in a similar market. The things that are wrong with real estate aren't headline producing or interesting.
- Blind bids sound completely unethical. Why are real estate agents enabling this? Are they not bound to a code of ethics?
- Allowing buyers to offer cash on top of the value of a home should be illegal. You should be allowed to sell your home for what it appraises for, no more. Again, why are real estate agents enabling this behavior?
- Requiring buyers to submit letters, photos, and videos in order to buy a home is insane. They did away with this in California, but is it gone everywhere else? Another question of real estate agent ethics.
- Stop allowing companies to acquire residential real estate. This just, doesn't even make sense.
Patch these things up and you'll have major progress in freeing up a lot of real estate transactions and overvaluations.
One nuance to this is that the "bid" is much more than just the number of dollars to be exchanged. It's credit quality, cash offer/not, and subjective things ("I want to sell my house to a family with kids, not a real estate developer")
So even if someone is told which bid is currently in the lead, the subjective elements may mean out-bidding that offer would not put them in a winning position.
Not to say eliminating blind bidding wouldn't be a good idea.
PARTS of blind bidding make sense, from an unfortunate necessity standpoint.
The primary scenario that comes to mind is where the neighborhood finds out Joe Outsider is the leading bidder, and they -really- don't like him for a reason they shouldn't. Blind/sealed bids help prevent Joe from getting specifically targeted for being outbid. (To an extent.)
Do you have data on how often neighborhoods come together as a collective and pool their money to bid on a property, not with the intent of actually purchasing but just to drive up the price because they don’t like the prospective buyer?
I suppose it depends on the jurisdiction, but I would think it makes sense to protect both potential buyers and sellers, that an earnest money deposit would be required for a winning bid subject to forfeiture.
Can it hurt though? It's a massive conflict of interest to have foreigners buying your homes without any personal stake in your country. Shouldn't this be the default stance for all nations?
It's not like we haven't seen deleterious consequences already from California allowing the Chinese to buy up homes ad nauseum.
The one advantage of blind bidding is the slowness. You’re able to consult with everyone you need to between bids. In a live auction you might not get to call your family before having to decide if you want to go $10k higher. Even if your wife is there you don’t have time for an extended discussion on whether it’s worthwhile.
This makes me wonder why not just use a one-time second price auction? In that case everyone just needs to huddle up with their family once, submit their maximum price for the house, and know that they won't have a risk of over-paying relative to everyone else's valuation.
Wouldn’t people set a maximum ceiling beyond which they would not go? Like you make your initial bid, which would not be the maximum and you go up till you win or you hit your max.
If you bade your maximum already then obviously you’re out of contention.
I have found straight up bidding to be a much slower process. You don't have to immediately respond, if an estate agent is applying pressure you should just ignore them and respond with your bid when you're ready.
On the other side if the sellers aren't happy with the highest bid they can just keep waiting for more people to turn up.
Unethical? Give your honest best price and you're done. Whatever the seller is saying, whatever words come out of their mouth, unless it's "Sold!" you ignore them.
In a perfect world, yes. But that discounts all the psychology of the situation, FOMO, how invested the buyers may be in the property, etc. Its a rather one sided and exploitative situation.
When you're applying to a new job, do you feel it's ok for the hiring company to ask you what exactly you currently make so that they can offer you $1.00 more than what you currently today? If not, how is that not "unethical"? (Also note, in the US at least - you can't ask someone what they currently earn).
I just don't understand why it's unethical.
Maybe the seller way under estimated the value of their home, why shouldn't they be allowed to sell it at the highest price?
EDIT: why the downvote? If you don't agree - why not reply so we can have a healthy dialogue.
>do you feel it's ok for the hiring company to ask you what exactly you currently make so that they can offer you $1.00 more than what you currently today?
Yes but I don't have to accept it and I can then tell them what I want and they're free to turn it down and it's a discussion. The hiring equivalent would be every applicant would write their expected salary down. Then the lowest wins with no negotiation.
That happens, hard to say how often, but it happened to us.
On my current house they said there was another competing offer and it was a close choice, they asked if we wanted to increase our bid to be more competitive. We dropped it by $15k and it turned out the competing offer wasn’t even close to our initial offer. They just wanted to know if we’d throw in $5k or $10k more.
A quick look at the data suggests only about 2% of properties in Toronto and Vancouver are owned by overseas investors. Yes, housing is priced at the margin, but this won't do anything at all to prices over the long term.
I'm sure this will be wildly popular politically, because people LOVE the idea that some foreign boogieman is the reason their children can't afford homes anymore.
It's much easier to outsource your problems to some outside "other" then deal with the much harder task of introspection over the poor housing policy that you and your neighbors have voted for over the last 60 years.
Like all cities in areas with heavy-handed zoning regulations, abuse of historic preservation clauses, and filibuster-style city council meetings blocking new construction...the issue is one of supply.
It's the same problem in literally every developed country on earth right now. The industrious, forward-looking people who originally built the cities during the major growth phase died...and then their kids grew up believing that the way things ended up was somehow divinely ordained. Never to be changed or built upon again.
> Like all cities in areas with heavy-handed zoning regulations, abuse of historic preservation clauses, and filibuster-style city council meetings blocking new construction...the issue is one of supply.
> It's the same problem in literally every developed country on earth right now.
The problem with making generalisations is that you're often wrong. The French real estate market has problems, with prices rising in some city cores ( mostly Paris), but it's not nearly as bad as many other places due to a myriad of factor and policies, like decent to good public transit ( which is undergoing massive upgrades) to nearby dense "suburbs", multiple programmes encouraging newbuilt homeownership and buy-to-let (at fixes prices) through lower taxes or cheaper loans. Paris is expensive, but you can get a much cheaper appartement or house within train distance. Of course, for newbuilt waiting lists are at ~2 years due to demand, but there's a lot of supply being built constantly, in Paris and around it - entire neighborhoods or former industrial areas are getting razed to the ground and rebuilt as decently dense (5-6 floor) appartement buildings. And that's just Paris, most other cities are better.
All that while there's very strict zoning, high building standards, lots of protections for tenants and buyers, including rent controls, hard rules around eviction and absolutely crazy preservation rules.
I know people who can't cut the dangerous trees in their yard because their yard is visible ( less than 1km) from the roof of a church which is a national monument, and they need approval from the Architects of France.
I’m not sure that you’ve made the case that they are wrong strongly enough.
Does France have heavy handed zoning and historic preservation policies? Sure.
But you aren’t getting 5-6 story multi family buildings constructed at a face pace in major metro areas. In many places, such construction in prohibited entirely by also how family zoning.
And while France may protect historic monuments like an old church. “Historic preservation” in North America often implies restrictions on building in a single family residential area that was built in the 1920s.
Your post does show, however, that restrictions don’t have to be eased all that much, but unfortunately it’s a lot easier in North America to lay the blame all on foreigner and other greedy people, than regular homeowners who show up to city council and lose it over a multi story senior center from going into their neighborhood.
> But you aren’t getting 5-6 story multi family buildings constructed at a face pace in major metro areas. In many places, such construction in prohibited entirely by also how family zoning.
Of course you are. Tons! They sell like hot bread ( as in within weeks of starting sales all appartements are sold, with 1.5-3 years of waiting for the construction to finish), and cost an arm and a leg in the really fancy parts of the metro area ( the Western suburbs).
I was referring to North America (had a typo in there, should have said “at a France pace”, ie france is building these and NA is not), I get the sense your comment here is in reference to France?
I'd love to see what the numbers are when you follow the capital and not just 'ownership'. There's a lot of ways around this ban.
I don't think it's a boogieman. But I also don't think it will change much when these cities are primarily 2-story houses.
If this stops some amount of cash offers 20+% over asking by foreign investors who have no intention of living in it - great. There's a hundred factors affecting this real estate crisis, it might need a hundred solutions.
Better Dwelling paints a bleaker picture when you isolate certain relevant categories of homes
For example, in BC (as of 2020), 9% of new condos (built after 2016) were owned by foreign interests, which is down from 2019, but probably holds steady for a number of years.
Pales in comparison to amateur domestic investors (25% in Ontario 2021) [0], "mom and pop" landlords that the federal government have chosen to protect.
Canadian MLS says 600,000 properties sold each year. Over 5 years that'd be roughly 3,000,000 homes. 1/3rd of that would be 1 million homes sold to foreign investors.
There's only 1 million people globally (including Canadians) with a net worth over $10 million.
That means every single one of them would have bought a Canadian home in the last 5 years.
I mean Canada is nice and all, but does that seem plausible?
This sounds like trying to measure a stream by sampling a lake.
It’s entirely possible that people with high liquidity were buying and selling multiple properties while people with low liquidity were staying put. That would naturally mean more wealthy people are buying (and selling), and foreign owners are likely much wealthier than the average Canadian home owner.
Even if 2% of global HNW individuals bought a home in Canada in the last 5 years (and 2% sounds high to me), they'd each have to buy 50 Canadian houses per person to reach that 1,000,000 number.
So 10 houses a year per person of the %2? That still sounds very plausible for high net worth investors, again especially if the purpose is to move/wash/hide cash, which my understanding is, generally is one of those 3 for overseas investments.
If they are washing or hiding, they don't care as much about the profit, so it makes sense they would be buying in larger numbers if they can.
> only about 2% of properties in Toronto and Vancouver are owned by overseas investors. Yes, housing is priced at the margin, but this won't do anything at all to prices over the long term. I'm sure this will be wildly popular politically, because people LOVE the idea that some foreign boogieman is the reason their children can't afford homes anymore.
Overseas investors may own only 2%, but Canada has 23% foreign-born population. That's a lot of demand. Granted this law does nothing to address that, but it plays perfectly into the foreign boogieman you dismiss.
I don't know a ton about Canadian immigration, but while raw net immigration volume is likely important in pricing a relatively inelastic good like housing, I think the details of who the immigrants are is too often overlooked in this kind of conversation.
In the US our largest immigrant group (Mexicans), and more recently Guatemalans and Salvadorans, are disproportionately the ones building new houses. Without them I have a hard time believing we'd be able to build the volume of houses we do. Does a parallel group exist in Canada? Are immigrants likely to work in construction?
this is textbook xenophobia and you should be ashamed. Implying that the foreign born population in Canada are somehow less canadian or more foreign is not what anyone should be saying.
"this is textbook xenophobia and you should be ashamed."
Keep things civil, I dont want HN to evolve into reddit.
car_analogy comment was benign, but honestly as a Canadian living abroad I am different than the other people I live around. I would not call myself X country adjective here (e.g. Swiss). That is not saying I'm not trying my best to integrate.
Yes yes xenophobia - but is it true? Did Canada's past immigration policy contribute to current home prices? And more importantly - will the current immigration policy contribute to future high prices?
If the goal is affordable housing, why is immigration the one policy that must not be adjusted to meet that goal?
Population cannot grow without limit, no matter what "everything" Canadians have to pay for. Sooner or later, we will have to learn to live with a stable population. Many industrialized countries have already done so - Japan, China, South Korea, eastern Europe.. By any sane environmental standard, there is already too many of us*, so sooner would be better.
*Yes, if we changed our lifestyles to reduce consumption, we could fit more people in - but until we do so, we should stop adding to the population.
It's a major component of the supply side of the equation, and one which is controlled by policies. And it's not like you proposed "close borders completely!" or "send people back". There's a limit as it is. How is changing that limit going forward any more xenophobic than blocking foreign investors?
The parent you're responding to is saying that Vancouver has a massive supply issue caused by zoning, and these measures are targeting a relatively small source of demand.
I know, but this 1) is a moratorium across all of Canada and 2) places with better ROI like those with more limited supply are more attractive to foreign investors and will cause the median price to increase to an even greater degree.
It depends on what value you assign to owning instead of renting. No landlord to deal with and being certain you don’t have to move for as long as you want are benefits to owning that are worth a premium over renting.
> No landlord to deal with and being certain you don’t have to move for as long as you want are benefits to owning that are worth a premium over renting.
The premiums you listed have always existed, there's no reason for them to grow now.
What's grown now is that, because home prices are rising, people look at the rising prices and want to take advantage of it. And the primary residence in Canada has infinite tax-free gains - so as long as prices rise, it seems like it makes total sense to pour as much as possible into housing. This is a bubble. Canadians think of housing as the best possible investment because housing prices are going up and its a tax-advantaged vehicle. Once prices start falling, we'll see this leveraged investment unravel quickly
Instead of attacking me personally and appealing to an undisclosed authority, I would love to hear a well-reasoned argument against the idea of it being a supply issue.
Combine this with the backdrop of 40 years of falling interest rates. Do you really think the foreign boogieman is having a larger effect than the simple explanation of restricted supply and falling interest rates?
Prices per sq. foot in Toronto recently surpassed Vancouver. There's no way Toronto has more foreign property investors than Vancouver.
Foreigners, especially the billionaire type, can and have been setting up shell corporations through which to purchase Canadian real estate. The proposed measure will do nothing to stop this practice.
The measures proposed by the Canadian government are likely just political posturing and indented to "pull the wool over the eyes" of Canadian voters because the housing bubble/crisis has reached epic proportions and everyone is talking about it.
Cripes. This is crazy good. I read for about 30 mins. This feels like The Onion from 10 years ago! Example headline: <<Gay teen moves to Toronto, must once again live in closet>> Perfect fit with this discussion!
We don't have implementation of the bill yet, just the budget line. Obviously the government knows about this problem, so if they take measures to prevent it, then we'll know they are actually serious.
Note that a corporation is not consequence free. An owner occupied home pays no tax on capital gains. A corporation owned one is double taxed.
The typical workaround in UK is that instead of selling the house, the corporation that directly or or directly owns it is sold instead, usually on a tax haven.
> The typical workaround in UK is that instead of selling the house, the corporation that directly or or directly owns it is sold instead, usually on a tax haven.
Couldn't that be addressed by regulating based on the beneficiary owners, rather than whatever legal entity is the technical owner, and having onerous penalties (e.g. forfeiture) if the beneficiary owner is misreported or obscured?
The British Columbian government is working on a Beneficial Owners Registry that would attempt to address this issue, though there was a recent article that suggested the registry was struggling to get set up. It's a tough problem.
> government knows about this problem, so if they take measures to prevent it
As a casual watcher of Yes, (Prime) Minister I'm sure they will take measures to get some votes but not solve the problem. The sweet spot is the point where you can gather most vote with a measure that causes as little change to the existing problem as possible.
I think if the corporations/foreigners but to rent, this is OK--the house is on the rental market and doesn't sit empty.
The problem arises if ppl park money in the real estate and the units are empty:
- This is often "luxury" housing which prevents a more regular buyer/renter-friendly housing units to be built.
Another problem is that some units are converted to airbnbs, and they start to compete on the hotel/business/vacation short-term rental market instead of being rent out for long term for people who live/work in the area.
I'm based in the EU, and this is what I've seen in some of the cities/neighborhoods here. I know very little about Canada's real estate market.
In Poland another phenomenon (not sure how widespread outside of PL) is that ppl buy large-ish apartments and split them into multiple rooms or studios and rent them out to students or ppl early in their career. This inflates prices (as the capital that would have been invested in the stock market goes to housing), but otherwise the number of units increases, so probably less of an issue in the grand scheme of things.
this statement only matters for the current conversation if taxes raised through this mechanism helped maintain property price levels where the taxes are being raised.
Could a better thought out measure achieve the same goals? How would you do it?
I feel a strong tax on houses you don't personally live in (because you rent them or because you're a company) could be efficient, but I'd love to hear other people's take on the subject.
Which is an incentive to not sell and instead take out a low interest loan using the properties as collateral. Many cities do have a Homestead exemption which reduces the real estate tax for primary residences.
Why should investment properties be taxed worse than say, stocks?
If property is expensive, it means there's a demand for it. The price is a good signal that the area needs more properties built. It's only the gov't (local gov't perhaps, or NIMBYs) that are stopping it from happening.
Raising taxes isn't going to fix the problem. It only forces existing investors who are on the margins to get pushed out.
It is not a fundamental human need to live in a super cute townhome in a hot walkable neighborhood near lots of other people you’d like to socialize with. If you want free housing, it’s out there, just not where you want it.
shelter is a fundamental need, not the desire to own an asset. You do not need to purchase, as renting is much cheaper (esp. at current asset prices).
And while you cannot create more land (tho tell the dutch that!), you can build more dense. And in an area of growing population, this might be a good solution, as demonstrated in many other cities. However, people who would prefer a single family home with a backyard must be prepared to pay a premium for this privilege.
And my proposal of more investment will indeed help alleviate the lack of shelter by incentivizing more to be built! Taking away investment money for it will only mean a different group losing out vs the existing group. Policies shouldn't decide winners and losers - policies should be made win-win.
Only 50% of the gain included for taxation. One could include more (say 75%).
They could also bring in additional property transfer taxes for reach home, taxing people more for each additional property they buy. Singapore does this.
I think Switzerland requires some swiss ownership threshold. From the top of my head it's over 50% owned by the end natural/physical persons. Even trough shell corporations.
Otherwise hike the tax on real estate while reducing at the same time taxes on local residents.
> The measures proposed by the Canadian government are likely just political posturing and indented to "pull the wool over the eyes" of Canadian voters because the housing bubble/crisis has reached epic proportions and everyone is talking about it.
Politics, particularly here in the west, is beginning to feel like exclusively this to me.
There is no law yet so no implementation that shell companies can skirt. You are getting ahead of the horse. This is a signal from the Canadian government to foreign investors that Canadian housing could no longer be a safe investment for their money shortly.
It's really crazy to me that so many people have apparently come to believe that it is bad for countries to implement measures that protect the interests and well-being of their own citizens above those of foreigners.
Im one of those 'greedy' old farts who owns more than one home. We have one for ourselves and 5 rentals.
Im starting to agree with those who are feeling priced out of the market. What would make me stop buying homes? A graduated tax would.
If there were no sales tax on the first two, and then 15% tax on the third, 25% tax on the 4th, and going up by 10% for each subsequent house, it would definitely make me quit buying likely by the 3rd or maybe the 4th house. Too expensive after that.
Then that money could go half to the gov, and half to subsidizing first time homeowners by giving them no interest loans for downpayments, or even grants if they qualify at a low enough income. I wouldnt object to that - real estate has been good to me, I think it would be fine if my taxes were helping others to start out.
I agree this is closer to the root of the problem. It's not just foreign capital, or faceless corporate ownership (although both are part of it).
IMO it's that every professional / business / owner / wealthy person in Canada can basically easily borrow against their existing home equity, use that to purchase add'l rental units, and claim the mortgage interest as an expense against the rental income (thereby making the loan "free" of cost, although obviously you're still on for the principle). You have the risk of the housing market crashing, but that hasn't seemed realistic for the past 10+ years or so.
I'm not sure what the solution would be. I hesitate to even call it a "loophole" since to me, from a business POV, it makes sense (the cost of the debt is an expense to be put against the income, so you shouldn't have to pay tax on it).
Then, even if you're just breaking even as a landlord after the interest, property tax, maintenance, vacant times, etc - the underlying asset is appreciating as well.
So there needs to be solutions (like graduated tax on subsequent properties, or perhaps changes to being able to claim your mortgage interest as deductible, etc) to change this underlying dynamic.
Yes, dramatically increasing the supply of housing would be a better fix, but that's not likely to change quickly while economically de-incentivizing the real estate investment I described above would change things.
Your loop-hole doesn't make any sense. Mortgage interest is deducted against income but that doesn't make your loan "free" from cost since the tax rate isn't 100%.
Example:
$1000 in net operating income, $500 in mortgage interest, 25% tax rate
I think what happens is then your wife goes through her 4 houses and then your kids, etc. It's a good idea though. I'd prefer all homes get high taxes and then give a homestead exemption to the one you live in for 6+ months out of the year at a normal tax rate.
Well I have to ask you whether or not you participate in zoning board meetings? Have you actively fought or supported any motions to restrict mixed use development or anything that would bring the "missing middle" to your city?
If you haven't done the following then I don't think you're the problem but a symptom. Sure, we could tax small landlords more over an arbitrary amount of real estate valuation or something but I would suspect that due to how corporate structuring can be handled that it would be mitigated by such things. I think it'll be a complex set of decisions that'll need to be taken before North American cities become economically viable for most folks in the lower income brackets. Until the various benefits are exceeded by the hidden costs of keeping them for multiple take holders, nothing will change.
I'm curious is there not a property tax effect? Here where I live in Illinois I pay property taxes on my home. Where I live it is currently about 4.4% of my home's real value every year. I am able to deduct it from income only for state income tax purposes. There are limitations there that I don't reach based on my income but also I can only do so for a small handful of connected parcels. So in your case you would only be able to deduct for one of your homes. Can you please explain how it works where you live?
Additionally for a home sale in US I have to treat it as income for income tax purposes. In my state there are state, county, and often local transfer taxes as well. Here $1 for every $1000 of sale price to the state and an additional 50c for every $1000 to the county are typical numbers. There are also a number of other fees like recording fees, but those are flat rates.
I pay a ton of property taxes. About 1500 a month but its all deductible against rental income except for my primary dwelling.
And Ill pay a lot in taxes when I sell the rental houses. My primary dwelling is tax exempt for capital gains but the rest are taxed at 50% of the gain.
Eg. If I bought for 300,000 and sold for 400,000 then 50% of the 100,000 is taxable. So if I made 100,000 that year then my new income is 150,000 and that will be taxed at about 36% so Id pay 54,000 in taxes that year instead of 36,000.
Similar to tax avoidance which people tend to loathe, you’re only doing what makes economic sense. So long as it makes sense, it’s hard to criticize or resent someone for making sound investment in their economic well-being.
I do think it’s a problem when a handful of people have 5 houses and far more have none, but I really don’t see the problem as one originating from the people who own 5 houses. It’s a systemic issue.
I’m not sure your tax solution would work well. Like most individually limited purchases, people can simply forward purchases to family members or in some cases subsidiary corporations.
I don’t see a way through this without major reform. As long as housing is a commodity I don’t think we can fix anything.
Would you object to a graduated tax that gets applied to your existing mortgages in addition to an outright ban on new purchases of secondary properties within the metro area? I'd be fine with it.
I don't any reason why we shouldn't do that. It discourages people in your position from hanging on to multiple residences, and it levels the playing field a bit, at least until some equilibrium is reached in which existing and incoming demand approximate the available stock and pace of development.
Stocks aren't as attractive as they used to be, because people seem to be pessimistic about the development of the economy. Stagflation is the word that keeps emerging again and again in conversations of people who never used it two years ago.
At the same time, cash is obviously losing its value.
So the only thing that attracts investment is real estate, which cannot be printed at will, nor can it really "stagnate" as long as certain cities act as a magnet for immigrants, domestic and/or foreign.
Basically, this situation reflects our collective pessimism for the future. If/when people start believing that strong economic growth is around the corner, stocks will soak up some of the money that now flows into bricks and mortar.
The government isn't a for-profit organization, its profits are our profits. We all get to profit off it. If the government makes profit off it, that's just corruption.
This is true for an ideal and perfect bureaucracy. But in practice, some government employees will use bigger budgets to arrogate more power to themselves - bigger projects, more headcount.
Now we do need a degree of bureaucracy, but it’s best to have most of the money circulate in the market where there is pressure to employ it efficiently or lose it.
It's not unreasonable to want to protect your hard-earned money. Inflation forces people to invest in assets. We have reached a point where everything is overpriced (stocks, homes, etc.) and inflation is rampant. So unless you want to have less purchasing power than you did last year, you invest in what you think gives the best return.
Placing the burden on the individual to "do the right thing" is scapegoating in the same way that it's common to ask people to use less energy to fight global warming. Individuals going about their life are not the problem.
" I think it would be fine if my taxes were helping others to start out. "
so that poster was saying having his taxes jacked up to help someone out is 'ok with them', and yet he has the power to help others out already - without the law forcing him/her to do it - he obviously thinks he can afford it, and is in favor of it - but he is not going to do it without the law requiring him to - i.e. he is virtue signaling.
as usual, "someone should do something", once again really means "someone else should do something"
Let's not get carried away here with emotional language. Perhaps you could see it as a giant rock lying on someone's leg and this guy is saying "If others will help, I will lend my strength to lift the rock". He just doesn't want to push the rock by himself alone because it won't work. Rock's too big.
It's not an outlandish sentiment so I don't think it needs all this "disgusting" and "virtue signaling" and "right thing" stuff. It's just "I believe we need group action to have outcomes. I am willing to contribute in such a group".
There are loads of such examples:
- Indiegogo
- Aforementioned Rock
- Kickstarter
There's some minimum activation energy necessary for rock to get off leg and if we cannot accumulate that, it is possible for energy to be spent elsewhere more productively.
Because as I alluded to, that person would fall behind in terms of purchasing power. Allowing your money to erode away is not going to affect the greater good. The incentives (taxes) need to be changed.
Suggesting a change that you think is positive but not acting on it in the meantime is not virtue signaling.
Virtue signaling requires that you say these things only for attention or praise. Your definition is equating a suggestion of change with virtue signaling.
I don't see it as virtue signaling. The opposite almost: doing what you suggest would help one person out (and unfair - how is that person selected?).
As far as helping the bigger problem, it's a drop in the bucket and thus 99% for the feeling of righteousness. Besides, he didn't say his houses were empty or borderline slums. He's using his intelligence, capital, and capacity to take on risk and housing people.
Related, I’m concerned about the trend of megacorporations gobbling up single-family homes which appears to be happening in the US and Canada.
I wonder if it’s possible to construct a law that would limit corporate ability to acquire these assets while making it possible for families to do so.
Unfortunately, even if there is, politicians at least in DC seem to have zero motivation to solve political problems unless they belong to megacorps or the 0.01% income class.
This is one of those things that a proper tax structure would do wonders - those who hoard housing should get a kick from a exponential tax.
Like, what value are those corporations bringing to people, to the market, and to a country by hoarding houses other than controlling the renting market for some areas?
They are translating between a lump sum and an income stream. They are making a six-figure asset available for the low four figures a month, without someone needing to bring six figures of money, or five to six figures of down payment and closing costs and five times as much debt. If the six figure asset actually falls 50% in value, the tenant is not stuck and does not lose a penny.
In short, they’re offering homes to rent. You can live in the home without buying the home. That’s the value. It’s kinda huge.
And to some extent it becomes class warfare to deny this to renters.
These investors are betting big on the houses’ value going up, and expect them to go up a fair bit. This is essentially a bet that the housing market will fail to add new supply, and that anyone who does not own a home yet will suffer greatly from increased rent. And if we’re fighting over is rules on specifically who can buy, instead of doing things to actually make new homes, it seems a fairly sure bet to me.
Yeah, except you have to take into account that "valuable achievement", or let's frame it as a "game" that's played, is being played for a long time without the involvement of massive corporations that hoard houses.
But you might have pinpointed a couple of problems, so either:
- Those corporations are driving the costs of buying homes so high that regular people are being pushed out, because, you know... they are playing with funny money;
- People's income is so crushed, or they are so deprived of access to free/cheap money - like the corporations - that they aren't allowed to play this game.
Both scenarios make it look like the game is rigged.
Why can't people rent to other people like it was done in the past? Why aren't regular people being allowed to play this game? Or is it such a bad game to play that no one wants to play it, except those corporations?
Even if it was a bad game to play, they're still taking houses away from those who want to buy and not rent. So they're ruining two markets: the rent and the buyers market.
Again, I see no add value that couldn't be created by any other player other than big corp.
Else you'll be here in 20 years saying the same thing, with a minor diference: "these corporations are bringing SEVEN FIGURE housing access to FIVE FIGURE renters"
Why would I model a serious transaction as a "game" with achievements?
> they are playing with funny money
YES YES YES YES! Negative real interest rates are pretty damn funny! We should have ended them long ago. We are now beginning to pay the price. You have identified a key way to help end the trends that you do not want to see.
> People's income is so crushed
They are being crushed by inflation! Another blow against ultra low interest rates! RATE HIKE! RATE HIKE! RATE HIKE!
> Why can't people rent to other people like it was done in the past? Why aren't regular people being allowed to play this game?
You're totally allowed!! Go buy a house, and rent out the house. You will probably need money for a down payment, but you can still get a mortgage at negative real interest rates — and if it is in the US and it is a conforming mortgage (<$647200) you will benefit from an interest rate subsidy from the quasi-public mortgage-buying entities, Fannie Mae and Freddie Mac. It might be a great investment! I am buying a house (for myself) and have locked a rate; with current inflation numbers I can expect $2000/month in return simply from inflation eating away at my debt!
The main contraindication here is that you will experience risk, and you may be intolerant to that risk. Your investment could end up underwater, and it's hard to diversify because it's such a big asset relative to your income. This may explain why corporations are better able to do it these days.
> Even if it was a bad game to play, they're still taking houses away from those who want to buy and not rent.
It's true! Existing home-owners are not required to sell to another aspiring home-owner, and are free to sell their property as they see fit. This means that aspiring home-owners must compete with renters (and the people who renters pay, corporations). The renters (and the corporations they pay) may be willing to offer more! The existing home-owner benefits, while the aspiring home-owner does not!
There are lots of ways to use the law to strongarm people into dealing with a politically favored class, at the expense of a politically disfavored class! Some of them are discussed in these threads! I'm not a fan, myself, and believe it will harm the nation and its economy by distorting the economy into doing different things that make less sense and leave the nation overall poorer as a consequence with less money to spend on things that are more meaningful, but if you would benefit maybe you would be a fan!
You may notice that the US population has grown, and continues to grow, and the abstract group comprised of "people who rent homes" continue to grow, and to need more to rent. Corporations happen to be the ones filling this need now. Of course there is nothing that says they have to, or that it has to be corporations, nor is there any special noble virtue that we should ascribe to them beyond that of a prudent investment, nor is there some special reward beyond what they can earn in commerce. It is also possible that significant new construction, falling home prices, or general prosperity could make members of the group of renters leave the group, in favor of ownership.
Renting something bought by an individual (or a very small corporation) was possible and remains possible. But if there was enough of this happening, the corporations who rent might have serious difficulty finding a profit.
It is worth noting that, in a major shift, major home builders expect 50% of their business will soon be in built-to-rent neighborhoods, up from something like 6% today. This is an illustration of how prices are a signal used across the economy to determine what gets done. (Taylor Morrison Home's numbers, from this recent article: https://www.wsj.com/articles/built-to-rent-suburbs-are-poise... )
I refer to the US because it is closer to me. I understand that Canada experiences similar trends.
> You may notice that the US population has grown, and continues to grow, and the abstract group comprised of "people who rent homes" continue to grow, and to need more to rent.
"People who rent homes" aren't some special type of consumer that isn't interested in buying a home. While there are situations where renting is preferable even if it's possible to buy, many renters only rent because it's not possible for them to buy a home. Any potential benefits to renting are generally outweighed by the fact that you're not building any equity, and have limited control over the place they live.
Massive corporate landlords aren't providing a service to meet a demand. They're actively creating demand by driving up the cost of home ownership, and limiting the amount of properties available to buy. A potential homeowner has no chance of competing with a massive corporation when buying a home.
Obviously there's a huge amount of factors that got us here. Housing is hugely complicated, and no single group is responsible. But corporate landlords are one of the factors making the North American housing market worse, and are one of the things we need to address if we're ever going to decrease the cost of living in this country.
> Massive corporate landlords aren't providing a service to meet a demand. They're actively creating demand by driving up the cost of home ownership
This accusation would make a lot of sense if the corporations in question are either (a) a monopoly or (b) an illegal trust, colluding with each other, and through (a) or (b) the corporations enjoyed sufficient concentration of the housing sector that they had pricing power — the ability to restrict the supply and raise prices to make money.
This is not the case. The housing market is fairly competitive, and many different buyers, sellers, homeowners, and home-builders participate and compete with each other. Prices are rising for other reasons: a reduced number of homebuilders, in the aftermath of the 2008 crash; various political land-use, zoning, environmental, and similar homebuilding restrictions; a reduction in the overall labor pool, which impacts the labor in new home construction; labor and other supply chain impacts on the availability of components that are used in new home construction; and a significant pandemic-induced shift in real estate usage patterns (almost everyone wants more space now).
This explanation hides the actual problem in a way that almost feels like gaslighting. Yes, their ability to buy homes allows people who don't have money to live in them.
...except that their greediness of wanting to own everything is precisely what made houses explode in price in first place.
Blaming corporations is a cute meme, but it's not the problem. Corporations in this market are NOT monopolistic price-setters, they do not have remarkable market-concentration, and they are not colluding with each other to limit supply. They are competitive price-takers.
If you want to fix housing prices (or if you just want to screw over these corporations for funsies, which is fine) then you want to increase the supply of homes: that is, you want homebuilders to build, build, build, build, build, build, build — and where necessary, you want to drive the political reforms that make this possible. All the evilcorps™ are betting that you won't — and I'd bet that too, given where you're focusing your attention and efforts.
This can improve the situation, but I'm not sure if it would truly solve it. I believe the proper solution is to simply ban buying non-commercial buildings as an investment. If you're not living on it, you can't own it. I can't see why one would be against this aside from greediness.
I guess single-family housing will be a privilege reserved to the people who can afford a down payment! That's a pretty sneaky way to do class warfare: cloaking it in the language of justice. I'm almost impressed!
We have a history of similar measures to draw from. In the 1950s lots of people believed that banning single-room occupancy buildings was the proper solution to a lot of problems - they were small! they were inhumane! they are associated with crime! New York City lost about 100,000 units, mostly converted into two-bedroom apartments, occupied by good people™ who belonged in families. "Consequently," said activist George McDonald in the wake of this policy, "people sleep on grates outside."
Maybe your laws won't quite achieve this! But to the extent they enjoy success in influencing housing prices, they will be harming those who cannot afford homes.
I think grandparent is not quite so cruel! If apartment buildings count as "commercial" (which they would in the industry lingo, which differs from the SimCity lingo) then we can just quarantine the undesirables away into a bad part of town using our Zoning laws!
Stop zoning out multi-family homes and apartment buildings and this wouldn't be a problem. Believe it or not, there are many low-income people living in cities where these things are allowed, and they're not all renting single family homes.
As a renter, I preferred to rent from a corporation with predictable, reliable property management. I preferred living in apartments for exactly this reason. Houses managed by individuals were always way more annoying due to hit-or-miss management issues.
(I agree that corporations hoarding housing is a problem...but they do bring value in some specific areas, even if net value is negative.)
I don't have a problem with corporation managing properties. That's not the problem. For me people could even pay a premium if they want that assurance.
The problem seems to boil down to access to money and the destruction it causes, simply because we play by different sets of rules.
Housing used to be an asset class that was accessible to people, apparently it's a matter of time before it'll be yet another asset limited to a few bunch. They simply have to drive the prices up enough, and outbid people, which is whats happening.
So you have to level the playing field by giving everyone the same type of access to cash, or you make hoarding houses more expensive to the point of being unsustainable.
Technically you just need construction to outstrip people looking for homes.
One of the problems is people can move quite quickly from one side of a country to another, it's a matter of weeks. But from empty lot to new house is a matter of months at best, years at worst.
Immigration must be limited to the degree that construction can happen. Because it can be raised almost to an arbitrarily high degree it's very easy to overwhelm domestic home production.
> those who hoard housing should get a kick from a exponential tax.
Yes, but at the same time it should not be possible for them to pass those costs on to people renting the house; rents should be fixed, or based on things like floor space and amenities.
But personally I think everyone should have a way in to the housing market. Renting is throwing away money; it goes into someone else's pocket and it's gone. When you buy a house you pay off a mortgage on the one hand, and (in today's economy) your property appreciates in value. Combine that with the issue that over here, a mortgage is cheaper than rent, and you can see how it's a huge issue.
I've spent something like €50.000 in rent before I finally bought a house; part of that was because I didn't want any longer term commitments, part was because I couldn't afford a house because even then the price of housing was going up sharply already. That's a lot of money that I'll never see again.
Buying is throwing away money too, often just as much as the rent you were paying. Yes some portion of what you pay goes to principle and you eventually own the home but the following amounts are just lost money:
- interest on the loan
- utility bills
- property taxes
You also have to replace anything that breaks and are responsible for all repairs on the property. Many of these replacements and repairs don’t increase the value of the home.
At best buying a home is a forced investment plan. It forces you to take money above and beyond the cost of rent and put it into a savings vehicle that generally generates good returns. But if you’re renting you could just as easily put that excess money into the stock market if you have the discipline to not spend it.
You're missing a big point of buying with a fixed mortgage though -- its partially a hedge against housing cost inflation. Sure, property taxes will go up as property values increase, but taxes aren't really that large of the total housing cost of my home. Taxes could double and it still wouldn't be the majority of the cost of my house. Most of my monthly cost of my house is P&I, values that won't go up.
My mortgage, insurance, taxes, and savings towards repairs is now a good bit less than the current rent at my last apartment just a couple of miles from my house. But my house has over twice the square footage, a private garage, a private yard, etc.
But you’re sacrificing the flexibility of renting. While I agree the benefits of home ownership far outweigh long term renting, there are some trade-offs.
Absolutely. I'm not trying to point to buying a house as the answer for everyone. If you're not planning to stay in the area for at least a few years, chances are you'll be better served by renting. Everyone needs to do their own math on what they're wanting in life, there's no one-size-fits-all when it comes to housing.
> Renting is throwing away money; it goes into someone else's pocket and it's gone.
Holy shit this is insane. Do you actually believe renting has no benefits?
When you purchase a property you’re on the hook for that mortgage payment for the next 30 years. Buyers absorb an enormous amount of risk. Maintenance is time consuming and expensive.
Renters can leave whenever they like and have no long term financial ties to the state of the property.
I guess everyone needs someone to fight against huh?
They didn't say renting has no benefits they said it's expensive and has no ROI.
You position renting as easy and buying as a burden and an "enormous risk" so I assume you will be renting apartments and leasing cars for the rest of your life surely?
As you said in your comment there is a market for renting. I think in an ideal world, housing prices would not increase so rapidly. I remember a time where houses went up a lot more from quality renovations than just waiting a few months. A situation like that would increase the demand on rent and make it less appealing for slumlords and give them more incentive to keep quality tenants happy instead of viewing them as a space filler until you can cash out in a year.
They'll just restructure it so each house (or small group of houses) is held by smaller corporations or other entities. In fact even smallish landlords already do that now but I think it's because credit gets cheaper that way rather than for taxes.
Triple or quadruple property taxes after the 10th purchased residence in the state. Encourage tax breaks through high density development of condos with coop property management firms.
I've been thinking a lot about this, and I think to promote everyone's owning a house, and even small-size investments, but to avoid megacorps the ideal would be something like:
1 house - tax breaks
2 houses - same taxes as currently for 2 houses
3+ houses - incrementally more expensive with each extra house
Also there's a really nice law in Spain, born for the wrong reasons, that makes you pay more taxes if the house is empty vs if someone lives there.
Why should society be subsidizing home ownership more than they already do?
The real estate market already discriminates against people who cannot afford a deposit (an increasing proportion of people, since house prices are increasing so rapidly), and the design of North American cities encourages urban spawl which is unsustainable with current property tax rates. [1]
> and I think to promote everyone's owning a house
Why? Half of German households rent [2] and no one is wringing their hands about how people should be owning their home instead of renting.
As someone who has lived in Europe and North America, there seems to be a borderline obsession with owning a house in anglophone countries, and I don't understand why. If the rental market is sane (e.g. rent is approximately equivalent to a mortgage) then it's up to the individual if they want to purchase a home (e.g. to renovate how they see fit) or is comfortable just renting.
Why should I, a small time REIT holder, pay more proportionately in property taxes than a celebrity in a Beverly Hills mansion, or even my landlord who only rents out a few, million-dollar units for that matter? I think every individual should be entitled to 500k in preferential property tax (1 million for couples), and every dollar above that should be taxed a lot higher. In places where there is high demand, new housing can also be taxed at the preferential rate some number of years to incentivize development.
> Why should I, a small time REIT holder pay more proportionately in property taxes than a celebrity in a Beverly Hills mansion, or even my landlord who only rents a few million-dollae units for that matter?
To decrease the return on holding property indefinitely, which prevents renters from building equity to the benefit of small-time REIT holders. The outcome of this is an increase in home ownership which has a host of benefits to society. It also helps economic benefits to stay in the local area. Basically, Georgism tax policy - https://en.wikipedia.org/wiki/Georgism.
What benefits do you see REITs provide to a community, beyond increasing your personal wealth?
Also, a hard cap of, say, 10 homes without increase would still allow REITs to exist depending on implementation.
What is _not_ desirable is a large financial firm like Blackrock or JPMC siphoning off the liquidity of the housing market.
What's better for the housing market: someone who buys a $10 million home for themselves, or someone who buys 10, $1 million dollar apartments and rents them out? If anything, the former should be paying a higher property tax because they're constraining the supply buyer and renter markets.
Yes, I largely agree with Georgism, but I don't think incentivizing rich people to buy the largest home possible is within the spirit of Georgism. You'd also run into the problem of people pretending their apartment complex is really just a large mansion. They'd likely spend money on renovations that make the units less desirable to make it classify as a single home.
>What benefits do you see REITs provide to a community, beyond increasing your personal wealth?
What benefit does my landlord provide that a REIT doesn't? REITs allow me to be invested in real estate without exposing me to too much risk associated with a single ___location.
>Also, a hard cap of, say, 10 homes without increase would still allow REITs to exist depending on implementation.
No REIT can exist with 10 homes. That's way too much money proportionally spent on administrating it.
I don't think the pocketbooks of REIT owners justify keeping the status quo housing market. Commercial and industrial REITs can do fine with 10 properties. Residential REITs perhaps shouldn't exist, as residences typically aren't directly economically productive.
Business and investment models can adjust; management companies would fill the investment gap for REITs. So rather than direct ownership, shareholders can instead invest in publicly traded property management firms -- arguably what a REIT should do anyhow.
With fewer units, landlords have more incentive to keep properties in working order to keep up liquidity should they choose to sell. This helps offset the tax incentive to let properties go to ruin.
I don't follow your assertion that increasing taxes on larger ownerships would result in rich people buying the biggest property they could possibly afford. People do that anyway?
>Residential REITs perhaps shouldn't exist, as residences typically aren't directly economically productive.
Residential REITs and other institutional investors finance the construction of new apartment complexes. I don't think a landlord is that much more incentivized to take care of their property any more than a property manager who gets hired by the REIT or institution. Even if small landlords are better than REITs, I don't think that people who own 2-10 homes are necessarily any more productive landowners than institutional investors. There are plenty of people in the former category besides landlords: for example, someone buys a seasonal home that does nothing for most of the year or inherited property and are just letting it sit vacant.
>I don't follow your assertion that increasing taxes on larger ownerships would result in rich people buying the biggest property they could possibly afford. People do that anyway?
The point is to disincentivize this behavior? Same reason why you would increase property taxes/LVT in the first place. I'm not saying that institutional investing in property is great. I'm saying that there are worse behaviors that should also be punished. This is a particularly big problem in vacation destinations where the housing supply gets swallowed by non-residents.
Local small-time property ownership encourages land liquidity (that isn't our current issue, but is an issue). That model currently looks good up to a 4plex.
In a partial equilibrium I could see this, due to management company inefficiencies to scale for small clients versus massive corporate clients. But it would likely be offset by general equilibrium factors pushing down housing prices (demand limiting) which translates to decreased rental pricing (as well as potential for limiting rental supply).
I'm not sure how it would qualitatively affect the builder's market.
They think these taxes will simply be passed onto renters just like the nominal taxes landlords already pay now.
The reality is that there is no market for renters that could actually afford these supposed monumental price hikes. So instead landlords would simply be forced to sell their houses, increasing the market supply and decreasing the cost of houses.
The vast majority of houses are not going to foreigners or corporations. Some do, but it is only a tiny percentage. We need to build more housing, in the end housing costs are about supply and demand.
What percentage of new developments are going to foreigners?
I looked up some property tax docs of a new luxury apartment building (majority of units go for 2M+) in NYC and I was shocked to see something like 90% of the owners had chinese names.
I'm guessing that the majority of these are foreign buyers. I'm also guessing its unlikely that the NYC new development market is being dominated by asian americans?
The country is ruined for non owners and it will never get better. The only options left are moving to the prairies or living in a neo-feudal shithole. This is only being introduced so they can officially give up after pretending to fix anything.
Quality of life has almost nothing to do with income anymore so it’s impossible to work for a better future. Being born 5 years later is the difference between tax free, 6 figure equity gains every year, or renting forever. Boomer janitors are richer than a new Dr. will ever be. The system is broken.
You're spot on about the 5 year difference. I never thought I would see my shit box I bought a few years ago for more than I ever thought it was worth triple in value. It's literally the difference of 5 years as you said. I want to be part of the pray for the collapse team but I know good honest people who would be devastated by it. People who are just victims of the system.
This is well written and is something I noticed too during my own house hunt: houses owned by teachers, plumbers, and car mechanics were getting fought over by engineers, doctors, and lawyers.
A fun thought experiment is trying to imagine what career an 18 year old today should work towards if they want to own one of those homes. VC or Onlyfans? How can anyone plan for the future when prices might double between the start and end of a degree? They did for me…
I think the only option left is moving away. Everyone in tech is already doing it
Moving away is and always HAS been the response; the only reason Seattle is a hotbed of real estate activity is because of the huge influx of people over the last 30 years, escaping rising Californian prices. Currently Arizona and Texas are seeing influxes, and there are other areas, too.
It's not like major cities don't exist except on the coasts.
> It's not like major cities don't exist except on the coasts
Canada is a lot smaller. There are only 2 major English speaking cities, a few smaller cities in the prairies (200k to ~1M ppl) which are still affordable, and some dying rural provinces on the East coast with horrible economies. It’s more like moving to Nebraska when California is unaffordable.
Most people in BC and Ontario have no affordable cities within a few hours drive of their home town. The affordable cities are over a thousand kilometres away. At that point, it’s easier for most people to try moving to a nearby state across the border.
House prices are greatly artificially inflated by zoning restrictions, and this is seriously hurting western people going forward. However, a smart 18 year old can still work towards making $200k/yr compensation as a software engineer within a few years, even remote, where single family homes on an 8k sqft. lot are $400k across the US.
Essentially young people will probably need to migrate and start a fresh in some underdeveloped city. I'm a millennial and this seems like it will be the case for me too. The older generations essentially rode a big wave to prosperity, our generations will essentially be riding the wave as it is collapsing, while not quite as bad as the great depression generation, millenials, gen z, alpha will need to build a new. It is futile to compare our lives to boomers who essentially had it pretty easy.
I often wonder if we could start a movement of young people to start afresh elsewhere. We are the workers and the lifeblood of the cities we can't afford. Could we pick a city and move in on it?
yes as long as you don't need to stay where the old generation is order to access capital. I think in the future people will be able to secure capital even without meeting in person.
Having your housing stock bought up as holdings by nonresidents is not great. It hollows out the communities by having choice housing sit empty and it raises the cost of living for everyone who is actually there.
I'm interested to see how this plays out. It seems pretty heavy handed. Zoning denser housing or placing limited restrictions on square footage may proved smarter in the long term. That said, two years is pretty short term in this context.
Prediction: barely anything happens and problems continue to rise as population numbers have yet to peak and the people who are struggling most with this problem, the working class, continues to lose wealth relatively to the upper classes.
Almost every country with these problems has similar symptoms and the problem could've been seen coming from decades away. Tackling these things requires far, far more input from governing bodies. Input they aren't willing to give.
The problem is selling real estate as "Surefire gains that never go down" and people pinning their entire life to the value of their home.
This leads to people who rabidly defend the systems that increase their property value, and these people also tend to be the local voting majority, so they can shoot down anything that they don't like.
The solution is declaring emergency powers to use eminent ___domain to seize unused property and build medium to high density housing on it. Yeah we'll have a few 6-fig account managers handcuffing themselves to bulldozers, but eventually it will get through.
Before you do that you better make damned sure you're doing the right thing. You're literally kicking people out of their homes and forcing them to move. We did that to the Indians a couple centuries ago and the consequences for both sides were not great. We did that to Mexican migratory workers last century and the result was the almost complete destruction of a country that shares a large land border with us. We're only beginning to experience the consequences from that.
You're not kicking anyone out of anything. Uninhabited properties are bought by the government. Houses up for sale are gov purchased and turned into mutli-family.
Basically the government is turned into the sole buyer who can also ignore zoning and resident complaints.
Domestic population in developed countries hit their peak a while ago. The demand side here is all immigration and I wish people would talk about that before they talk about bulldozing neighborhoods.
Of course. But realistically, no one wants to deal with the inevitability of ageing populations having to either take the bullet and accept they were sold a bunch of lies, or causing the working class to crumble under the collective weight of all who depend on them. Most immigration and pushing for higher birthrates is just that, an admission by politicians they don't want to deal with the problem and passing it onto the next reigning party.
That said, it's nowhere near the sole contributor. Quite a few countries have very low immigrant numbers along with low birthrates and still face soaring house prices. Rampant individualism doesn't help, either.
I can see a resurgence of social democracy coming soon as the problems with things like real estate investment and unrestricted emissions come home to roost. We've already seen a little bit of that with Bernie Sanders.
I can't speak for the US, but here in NL, I don't see things changing very soon for various reasons.
Very few voters actually care to solve the issue. Home owners still far outweigh those who don't. Quite a few of the older generation bank on their property/properties to carry them through retirement. No one wants to see their house go under, even if they can realistically endure it without severe consequences. There's no incentive to increase interest rates, but banks obviously don't want to carry more risks, so individuals aren't getting the same mortgage-to-house price ratio as before.
"Figure it out" mentality. Even if there is a national or even global trend, responsibility to solve the issue is pushed onto the individual. Or worse, global mentality shifts to accept what is going on. "Yeah buying was normal back in the day, now you rent. Get over it."
Grandfathering and "empathy for the fortunate". Yes, I get it, you don't want your lucky uncle who worked a bad job for decades to lose his retirement. You don't want Mr. John in his McMansion on the other side of the road to lose his fortune. Almost no one wants to be the bad guy. Yet special ruling to keep the "haves" in their position continue to be placed at cost of the "have nots". No one wants to hurt anyone. As a result, the solution often seem to be continuing the same fruitless endeavor which changes nothing for the "have nots".
As mentioned before, population has yet to peak. Governments are still incentivizing people to come in or reproduce above replacement rate, despite it becoming evident we're just not capable of handling them. In theory we can handle way higher populations. In practice, there's no incentive to do so without severely punishing the working class further.
We're slowly normalizing a cyberpunk dystopia and most people seem okay with it. "At least you have iphones" is going to define gen Z and gen alpha at this point.
> "Figure it out" mentality. Even if there is a national or even global trend, responsibility to solve the issue is pushed onto the individual. Or worse, global mentality shifts to accept what is going on. "Yeah buying was normal back in the day, now you rent. Get over it."
This is a symptom of neoliberal ideology - the acceptance of any market outcome, no matter how negative, as "natural" and to be accepted or at least left unchanged. That's the predominant narrative, but I think that could change.
The reason I have some hope for a social-democratic turnaround is that the US has cultural hegemony, what happens there is broadcasted across the world through American media and other cultural exports. Currently, younger generations are engaged in a revival of left politics; this will almost definitely influence American politics in the coming years, and I'm hoping us Europeans (I'm from the UK) see some downwind benefit from that. There's already some smatterings of progressive politics in the UK, for instance - probably on a level comparable to 2012-2016 in the US. We even had our own Bernie in the form of Corbyn, and our far right resurgence is running low on steam thankfully.
At some point the market decides this, if inflation persists. BND (NASDAQ) is already down over 9% YTD and that's supposed to be the safe half of split stock/bond investing.
Despite how some people seem to view the Federal Reserve (and whatever the central bank of Canada is) neither country is a full on centrally planned economy, at least not yet.
Nothing will happen. All it accomplishes is reducing competition for local investors (which is probably why this is the solution they've chosen--local investors vote, contribute to campaigns, and make up something like 2/3 of our politicians). We have more than enough local investors with enough capital and assets to sustain the high prices and continue driving absurd growth.
They've tried similar (but less extreme) solutions in places like Vancouver. Huge taxes on foreign purchasers. Property price growth slowed a couple percent... for about 6 months, by which point it was back to doing what it was before even as the tax was expanded. The only thing driving the slowdown was probably uncertainty.
> Zoning denser housing or placing limited restrictions on square footage may proved smarter in the long term.
Perhaps, but Canada has no ability to enforce that. That would fall under the purview of the provinces, who have likely passed that down to the municipalities.
When ever this topic comes on people are like “ohh it doesn’t work”
Well it doesn’t matter if it doesn’t work. It’s stopping something that shouldn’t be allowed to begin with.
In NZ you could go on a website and buy a house despite the fact you had never set foot in the country.
Even if this is only 5% of all buyers they are ruining the market for 90% of buyers because they cause prices to go up when they pay above market rates because they are wealthy.
The irony of this is if you’re from Thailand, Japan, China, India, etc. you can buy property in NZ. But I cannot buy property in these countries.
Thankfully NZ put a stop to this. And I believe 2022 saw the first actual drop in prices. Maybe one day I can afford to buy a property in NZ.
Edit: someone replied pointing out you can buy property in China which is correct. If you live and work in China you can buy but you’re limited to 1 property and I believe you need to sell if you leave China.
Thailand you can kinda buy but it’s done by a company that buys for you and you pay them a fee so technically they own it.
Japan I don’t really know. All countries in asia are different but it’s all better than what was allowed in NZ.
It also sends a message and sets the tone. The west needs to become much more economically hostile to countries that do not share our values or reciprocate from a policy standpoint. Why should the west make it easy to export work to countries that use defacto slave labor and have horrible human rights violations? We should also make it painful for companies wanting to do business in these places. Maybe if there were more pain involved on the other side of the equation they would take the environment and human rights a little more seriously.
I would like governments in countries with housing crisis to do something different - soft limit how many properties can a person own by inducing taxes that drastically increase with each new owned property. Most people just want to own a roof over their head without getting into debt for life, but because some people treat housing as an investment and buy properties in bulk - which results in prices skyrocketing - they become unaffordable for an avarage Joe who has no other choice but to rent forever and just make the landlords richer.
for that you would have to know who (as in a single person) owns everything. Great against corruption, great for democracy. Not so great for our ~oligarchs~ ahem, democrats
I love Canada - but our government has always been idiotic. The ban is against 'foreign investors'. But the thing is, Canada has a corporate designation called CCPC: Canadian Controlled Private Corporation. Directors of said corporation have to be > 50% resident Canadians.
A corporation can be created for the purchase of this property, with a Canadian controlling, and being the director. This will literally do nothing other than add about $300 to the cost of an existing transaction. Shareholders can pre-execute a sale of shares at the existing value - to be executed later. This is completely legal.
Canada would have to reform the various types of corporate entities. That's simply not going to happen.
Technically the ban isn't on foreign home buyers, the ban is on foreign capital coming into Canada to buy homes. This indirection may make enforcement more difficult, but the intent won't be hard to figure out if one is caught.
If the CCPC has >50% resident Canadians as directors, how does that protect the buyer - what prevents the directors from deciding that the assets are to be used for their benefit instead of the foreign investor(s) funding the corp? Can the CPPC have different voting rights, or the ability to remove directors and undo prior actions?
But yes, this does look like a loophole through which one could easily drive a building...
I think this will me largely ineffective but I’m glad it’s happening. Why? Because it’s acknowledgement that there’sa problem.
Housing should he first and foremost by the locals for the locals.
On the owning side, treat any owners as tax residents and tax their full worldwide income.
S much as people hate landlords, someone needs to provide rental units. The solution isn’t for everybody to buy. Not everyone wants that. Not everyone is in a position to do that.
But you can give landlords the same treatment: treat them as tax residents and tax their worldwide income. If they’re already local this is no different.
Property tax should he based on assessed value. There should Mee no caps (eg Prop 13). If you want to aspire seniors not to be forced out of their homes (a common defense that results in Dismey’s property tax bill in California being straight or if the 60s) then you can carve out exemptions and rebates rather than also including the Larry Ellisons of the world.
Second and subsequent properties should have much higher property taxes. Having a property without a beneficial owner should be illegal.
This is really, really stupid. It reeks of economic illiteracy.
If you think foreign investor cause harm, just estimate how much harm it is, and tax them accordingly. Why would you ban them?
Taxing is almost always more economically efficient than banning.
You can even pay out (part of) the tax take to the people you think are harmed.
(In general, a land value tax for everyone would be a good idea. But if political reasons dictate that only foreigners should be taxed, so be it. Still better than a ban.)
Exactly, and I honestly wish there were measures to fine owners that have empty homes as well. Many people would disagree with me, but to me it's not about economics. We need a way to fight the idea of hoarding homes, a basic human right, as being an "investment".
In Norway a kommune (local authority) can institute a boplikt, a duty of residence. This means that if you purchase a house in that area it must become your principal residence.
I would advise against specifically fining empty homes, because then you have to define what an empty home is; and that will have lots of weird grey areas.
That being said: fining/taxing is still better than banning.
If there was enough supply there wouldn't be a problem. No one hoards cars, boats, airplanes or anything else because they think that they can corner the market and raise prices. Housing is only special because not enough is built. It's only possible to "hoard" because every 1 off the market is less for everyone else. A fixed pie. Like bitcoin. If the bitcoin supply was infinite no one would think about collecting them.
You can't have enough supply of housing, because for housing ___location matters a lot.
There's only so much room in the center of the capital, and making more costs a titanic amount of effort. Even that runs out eventually, as you can only build so high.
Otherwise, why would we be having a problem? Move to Serbia and buy an apartment for $40K.
* Speaking the language -- in some places they don't speak much English, and certainly don't do official paperwork in it.
* Local laws
* Safety
* How much stuff you need is going to be nearby
* Internet access
* Local culture
* Employment
* Friends and family
Like, I don't know much about Serbia (just looked up where housing is cheap), but from what I hear I could get a pretty good deal if I moved to Russia -- they're desperate for tech workers and offering some very good perks regarding mortgages and so on. But on the other hand, is living in Russia that good of a deal right now? I don't think so.
They've got a bad government, slow and very restricted internet access, a not terribly pleasant society overall in my impression, and the economy is circling the drain due to all the sanctions.
some nitpicking: internet in Russia is very fast and stable. But you are right when you say "restricted". The retarded government tries to ban some websites.
Generally ___location, services and availability of work... Might even have services, but no work... That is for Finland. Like I see 32k€ for 3 bedroom house, with relatively big plot. 2km from "town" center... What explains it is area losing population.
It's easier and cheaper to produce more cars. Boats are irrelevant since they're not a necessity, a house is, a car is in certain cities.houses being already scarce, and hoarding them makes it worse, because it makes them even less affordable.
Years ago, before BC brought in it's foreign buyer tax it was a problem. Local builders were literally opening up sales offices in Taiwan, Hong Kong and other major cities in Asia.
We know it was a significant issue because the government actually shared the data, and it showed some alarming trends.
What is remarkable here in contrast is that the Federal government hasn't shared any data at all. (Ironically when they were elected in 2015 they promised "evidence based decision making" ..haha)
I would not try to immigrate into a country in which I don't have a place to live, so this essentially is an anti-immigration, "Canada for the Canadians, Foreigners out" policy in my book.
Is it really? I would imagine that many immigrants don't buy homes outright before immigrating. Most immigrants I know rent out the first few years and start saving.
Would taxing do anything in this specific case? Foreign investors are already willing to pay millions in a single home just for it to lay empty, from what I read in this thread. Why would some fixed (even if progressive) tax on top of that change the demand?
It should be possible to make home purchases economically irrational for undesirable purchasers. For example, you could impose a draconian property tax on all non-owner occupied residential properties.
Financial investors and money launderers look at homes as illiquid, stable assets. They expect that they can extract their millions with a few week’s time, perhaps with gains from continued inflation. If they lose a significant portion of that value over the duration they hold the asset, it stops making sense.
A punitive tax like this should be pegged to some other “safe” asset. Perhaps a basket of national bonds from the G20. Ensure that taking residential inventory off the market produces a substantially worse return than those other options.
If you don’t want to kill domestic land lords, make it trivial for a citizen to apply for a waiver. Just know that the investor types will be motivated to subvert this system. Strongly recommend you have real jail time penalties for doing so. Financial folks hate real prison.
Presumably if it was high enough they would move onto other investments that are comparatively more profitable when accounting for the tax. It would have to be a heck of a tax to keep up with how Canadian house prices have been inflating recently though.
First, as you mention, taxing clamps down on demand.
Second, taxes bring revenue.
You are worried that the first effect won't kick in. But that's not a problem at all: just keep jacking up taxes either until it does kick in, or you can afford to make everyone in Canada a billionaire from the second effect.
(Incidentally, this is very similar to worries that a central bank won't be able to create inflation.
That also is a good problem to have: keep purchasing assets with newly printed money until you either have the desired inflation, or you managed to buy the rest of the world for the cost of some ink and paper.)
Hypothetical example: Tax it 100,000,000%. Turn a $1 house into a $1,000,000 house. Do you think they'd still want it? That's the power of taxation to change behaviour. (of course a real tax can be whatever is needed to "get the job done", it doesn't need to be ridiculous).
If you don't want empty houses, tax empty houses (though as a distracting aside, the idea that empty houses is a big problem has also been fairly thoroughly debunked, but that's another discussion that it's important rn)
Other than an ideological argument of preferring taxes over outright bans, I feel like the effect is the same. If foreign investors are indeed the ones pushing price up orders of magnitude above inflation, they clearly don't care about prices increasing tenfold. So it seems the tax would have to be insanely huge to actually achieve the same effect.
And honest question: why do we want foreign investors buying homes anyway? I understand buying commercial locations, but not residences.
> Other than an ideological argument of preferring taxes over outright bans, I feel like the effect is the same.
Taxes also provide revenue.
And they allow people to make their own choices.
If you think that having a foreign investor own a house causes Canadians to feel a collective 1 million CAD of pain per year, then it's only fair to give the foreign investor the chance to pay off the Canadian pain.
(Also gray areas around bans are annoying: you have to draw the line of eg who qualifies as a foreigner and what qualifies as owning somewhere. And there's bound to be some weird corner cases and loopholes that people with expensive lawyers can work around.
The reward for finding the loopholes is immense, because there's a discontinuity in the law.
If you have a tax, you have a finer grained instrument. So you can eg charge people in proportion to how much time they spent out of Canada. Instead of going 51% out: you are banned to 49%: everything is fine, the tax can vary gradually.)
The tax could be an "empty house" tax, so there would be an incentive to get a tenant.
Alternatively, the tax could be targeted at negating profit from value increase, so that you pay higher tax on profit from sale of property (possibly with a deduction you can apply when buying another one within some reasonable timeframe, so that normal homeowners aren't affected).
I would advise against 'empty house' taxes. They just create lots and lots of grey areas.
Also don't tax transactions: you don't mind if people are buying and selling property. What you mind is foreigners (or others) _holding_ property. So tax that.
Transaction taxes are economically inefficient, because they impede the re-shuffling of assets to the best use.
Explain how would you tax them effectively then, since they are foreign.
Every time I talk about taxing the rich, I'm stormed by people calling me economically illitterate and telling me it's impossible as the rich will always find a loophole.
So if you think they can find loopholes on the ban, why couldn't they find loopholes on new taxes? They do already and very effectively.
As an aside, bans are also very exploitable. Can't buy cause you're foreign? Put it in your cousin's name. Buy or start a tiny company that will technically own it. Get some kind of visa, maybe one that you can get because you have lots of $. etc.
A % tax on the cost of the property would be pretty simple. Can't buy without paying the tax up front. It's usually the more complicated taxes that have exceptions to rules that are exploitable. It's hard to find exploits in simple rules.
Btw, I would _not_ charge a transaction tax. Charge them every year for holding the property. (Eg charge whoever holds the property on New Year, the market will do the rest.)
I mean yes but then you'd also hit your population, unless you restrict the tax to non-citizens, but then foreign investors can still use some sort of a front man or other loopholes.
BC brought in a speculation tax that was effectively an empty house tax (you avoided the tax if you rented your house). In its first year, beyond whatever monies it made, it also added about 8000+ units to the market. Now you only get that surge one time, but hey that's not nothing, and beyond that the market seems to have reoriented slightly toward less development of apartments for sale, and more purpose built rental apartments.
That's why I am suggesting not singling out foreigners in the first place.
Use the tax you collect to finance local goods and services (and to reduce other local taxes).
So local pay the tax and get something in return. Non-residents pay the same tax, but don't get the local goods and services; just because they aren't there. And all without any complicated rules.
The root cause in Canada is that a lot of the older generation, existing home owners, have put their investments in buying second or third homes as income properties, and for a lot of Canadians (I read that 1/3 of Canadian home owners have one or more additional properties) that's the nest egg now.
For years now homeowners have used HELOCs (Home Equity Line of Credit), to effectively 100% finance an additional home purchase by using the HELOC for the downpayment, and a mortgage for the rest.
This puts a lot of people in (very self-inflicted) financially precarious situations where they are counting on interest remaining low and the value of their investments going up in order to stay ahead of the payments.
Regardless of how we got here, due to this situation no government will screw all those people over just to "fix" things for those who haven't been able to get into that market yet.
It's a lose-lose.. Leave things the way they are, and you continue to price out an entire generation, which is a huge problem. Make a large corrective change to address this and you potentially force a huge amount of existing owners to sell investments at a loss and face financial distress, another huge problem.
Some folks say "too bad for them for getting so leveraged" but all they did was follow the advice given to them by the market, and follow the rules that our government put in place.
Anyways, it's a complicated problem. Foreign ownership certainly contributes to the problem but it's not the major factor. This is 100% a "for show" measure.
> For years now homeowners have used HELOCs (Home Equity Line of Credit), to effectively 100% finance an additional home purchase by using the HELOC for the downpayment, and a mortgage for the rest. Banks hate this, but it's legal.
If banks actually hated it, they would simply not write the loan. Why do you think they hate it?
I say "banks hate this" as unsubtle shorthand here. Obviously they don't hate it enough to refuse people additional mortgages (it's all secured by tangible assets at the end of the day) but they certainly aren't as happy about it as if people had a 20% downpayment in cash rather than pulling it from a line of credit.
Yeah I guess I am not trying to provide a super in-depth explanation of how finance works here, since that's not the topic we're discussing.
I am not a financial expert, but I have been told by professionals, and read in credible publications, that financing entities are not thrilled about the idea that people can effectively 100% finance additional home purchases using HELOCs, rather than having a cash downpayment.
That's the point I was making. My apologies for drawing an incorrect conclusion on the unrelated details.
100% financing is problematic mainly because the "owner" has zero incentive to not walk away if the house goes below purchase price even if they could afford to keep up the payments.
This puts the "bank" (read: bank and the investors the bank sold the loans to) in a precarious position, as a slight downturn in the market could result in a large percentage of loans defaulting.
> all they did was follow the advice given to them by the market
The market doesn't give advice, it's risk and return. Don't take more risk than you can handle is investing 101. In any case, if the market is unsustainable (non-productive assets appreciating several times inflation is indeed unsustainable), these people are going to get screwed regardless. Either completely later, or almost completely now.
Maybe in the future, after the smoke settles, governments will be more wary of moral hazard. Probably not, but one can hope.
> For years now homeowners have used HELOCs (Home Equity Line of Credit), to effectively 100% finance an additional home purchase by using the HELOC for the downpayment, and a mortgage for the rest. Banks hate this, but it's legal.
Banks don’t care, they just sell the loan. If they cared, they wouldn’t write the loan! Cmon now.
I forget how pedantic HN can be.. You're the third comment to latch onto that one phrase in my overall comment, and it's not even that relevant to the topic being discussed.
My fault, I really should have phrased that differently.
From what I've read before, the issue isn't foreigners buying the homes to live in, it's foreigners using it as a way to move cash out of their own country to hedge against devaluation/government blocks. A lot of the houses don't even end up being rented out, they just sit vacant.
This. Too many canadian homes are sitting empty. Those who dont live in the country are less likely to actually live in the homes they buy. It is a hamfisted approach but at least they are trying something direct to address the vacancy issue, something other than moving money around.
This. Root cause is crappy city planning and design; and emphasis on single family housing development. Many cities across North America are designed with urban sprawl and car centric travel in mind. Pedestrian and alternative forms of transportation are a second class citizen despite the ability to move people more efficiently than cars will ever do.
Don’t get me wrong. Cars have their in place in society but their current role is overstated and NA city design shows it (massive parking lots, expensive housing).
The root cause is a handful of cities winning and experiencing unreasonable growth they were never designed for. Winners grow at up to 300K people a year while losers shrink. Governments need to do more so that their national economies aren’t centred on a small handful of success stories. If there were twenty good cities in Canada, Toronto would be growing by 30K a year instead of 300K a year (pre-COVID).
This is literally nothing to do with it. It's to do with wealthy foreigners buying properties and leaving them empty basically to use as an 'asset' rather than a home.
London has this problem more than anywhere. Blocks full of purchased and empty while locals can't get a sniff.
That is by no means the entirety of the housing problem in Canada. Foreign ownership is a very small part of the Canadian housing market, and with no other measures, Canadian investors will happily scoop up foreign owned properties. I doubt this by itself will make a significant dent in the market.
What we need is foreign ownership taxes / bans combined with heavy taxes on ownership of multiple single-family dwellings and townhouses.
Being from Vancouver and having witnessed with my own eyes mainland Chinese investors in suits on one-day visits driving around in tour buses and buying everything in sight - yeah, this clusterfuck is absolutely rooted in a torrent of Chinese money being parked in Canada.
The ban won't do much, obviously, but the cause is the foreign investments. 100%.
For the hottest market in Canada, Vancouver, the hottest communities had single digit foreign ownership. That doesn't explain why Halifax, Nova Scotia has double in price.
But regardless, not sure why travel restrictions would matter. You don't need to see a house to buy it.
If any foreign buying stat looked single digit it was only because the metric was so broad so as to include areas where there was zero foreign buying interest.
The week the BC Liberals brought in the foreign buyer tax they had data in hand that showed foreign buying in Richmond and Burnaby was (going from memory here) between 15-20% of sales that period. Worth noting that at the time those areas were building lots of new builds so possible that the trend the government was concerned about was new build condo purchases being dominated by foreign capital. That's my speculation only. CoV proper I think was around 11%.
Globe and Mail articles on this issue from around 2016 call out some of the data and there are some startling numbers that make it clear why the government acted. Perhaps its available on some government website too I dunno.
They never started collecting actual citizenship/residency data on house sales until a year or two ago. I remember one analysis out of UBC that assume foreign owner if they has a "foreign sounding name".
From what I've seen, some neighborhoods are high, but it's at the margin. Canadians snorfing up massive amounts of debt in order to acquire more property is a bigger driver.
Yes around 2016 they finally started gathering real data and it was so remarkably high in certain areas they brought in the foreign buyer tax. It only took like a month of data before the government, which btw long dismissed that there was any problem, was convinced that there was a real problem.
Not at all, you can buy property remotely and you can in vest in clmpanies which buy properties on your behalf.
Trouble is that restricting foreign buyers is meaningless unless you also reign in corporate 'investment', as endless shell conpanies obscure the end benefactor
What you have to do is reign in buying houses as an investment by people who have no intention of ever living in them.
Here are some suggestions for improving housing affordability
- Land value tax. This incentivizes more efficient land use, such as building denser housing units (eg. apartments) and less wasted space like giant outdoor parking lots
- Tax on non-primary residence
- Tax on foreign home buyers
- Build more housing. I'm not familiar with Canada, but the U.S has many issues with overly restrictive zoning laws preventing the building of affordable housing. Also public housing gets a bad rep, but it works pretty well in Singapore, Korea, Japan, etc.
Of course, this would absolutely dilute and depreciate houses as an investment over the long-term, but people would just funnel money into stocks instead. Why would corporations be against this?
US zoning is a complete shitshow that’s ruining our country and fostering inconvenient suburban sprawl.
It could be that there is a sufficient amount of housing (built or being built), but that it is often not occupied on account of just being an asset in a wealthy person’s portfolio. In this case it could be seen as wasteful to build more, and too much of an oversupply could lead to an economic collapse if it’s on a big enough scale.
The other possibility is that they are building more homes, and want them to be purchased by people who will live in them.
Note: not a Canada expert and tbh the “they” in question is a bit undefined here
Because, depending on local regulations, it can be a PITA to deal with tenants. Receiving rent can also be considered as income, so now you have to deal with the tax authority.
If the main goal is to park the cash somewhere outside the person's country, they presumably have "enough", so they don't want to deal with all this.
With a 20% market increase in a year, you don't have to rent it. Renting a property out always comes with hassle. Many countries have tenant's rights that kick in after a period of time.
I live in Barcelona, and the rental market is crazy. Technically I should be allowed to sign a contract for 5 years, but because of the rights that kick in after 12 months, there's a ton of landlords that only want to offer 11 month contracts.
> I live in Barcelona, and the rental market is crazy. Technically I should be allowed to sign a contract for 5 years, but because of the rights that kick in after 12 months, there's a ton of landlords that only want to offer 11 month contracts.
Same situation in India.
The rental yield is low, taxes are high, compliance is time consuming, and there is lack of legal framework in cases of disputes.
A court case will take a decade to resolve if the tenant claims the property.
The only solution I can see is government provide incentives and security against tenant for landlords or government gets into business of renting by building houses.
If market increases 20% a year clearly there isn't enough being build. Housing really shouldn't be appreciating asset, maybe stay in line with inflation and improved quality, but 20% a year is unsustainable.
Beats me. But I see it everywhere in my home town. I’m actually vaguely acquainted with the agent responsible for the bulk of it. His specialty is selling homes to absurdly rich Chinese. They typically buy sight unseen, his daughter (friend of mine) arranges for some half livable furnishings to be put in place, and maybe 1 week a year tops they’ll visit.
I believe the people are rich enough that the logistic overhead of even having a property manager rent it out isn’t worth it to them. Better to keep it in pristine condition and flip it however many years down the road.
If the property itself is valuable enough? Renting the property out might not actually be worth the hassle. A single bitter tenant can cost a lot of money, from eviction to repairs/damage.
Because they can make a far greater profit by selling the property at a moment's notice, than say renting it out for an year.
I mean, a place where your rental profit is 3k/month, might sell for 100k more than you bought it for, to the next wealthy person who thinks they can make another 100k profit by holding and selling after an year.
Not really. Rents in my current area are in line with my mortgage. So perhaps they're getting better deals than if they had to sell a house and buy a new one every year, but, it's a much worse deal than if they were able to buy a condo and live in it.
It could also be because the on paper rental value is higher than the actual market rate of rental. By renting out you decrease the on paper value which limits your ability to use it in collateral for further property loans. It's why in some city's some commercial property will sit vacant for years without the owner decreasing the rate to get tenants in.
This the answer. The rate of population growth in major cities like Toronto isn't keeping up with the housing supply. Our cities should be building more high- and medium-density housing, and public transit to support this population.
Where? The farmland boom, which began in 2007, has priced residential sprawl out of the market. That's why the urban areas on arable land have been feeling more and more heat in the city limits, not being able to affordably grow like they once were able to.
There are plenty of markets in Canada where the price of homes have been on the decline for the last decade, namely where agriculture is nowhere to be found, but for someone reason people don't want to live in those places.
A tax on empty homes that started increasing after some grace period (say 3-12 months or whatever) would be amusing because at some point the vacancy owners would start paying people to live in the house so as to avoid the tax.
And if prices were going up enough, it'd be worth it.
Toronto and Vancouver (and surrounding cities) do build quite a lot in comparison to other places, but given how much immigration the Feds are allowing they have to be building even more.
The fact that there is so much development and change going on, and that it's still not enough to lower rental vacancy rates (or prices) is something that I think contributes to people feeling like maybe adding supply doesn't help and there's other problems.
Canada has comparable housing supply with many other places that don't have the same skyrocketing unaffordability. Most parties are advocating for increasing supply, but it's definitely not the entirety of the problem (particularly when additional building carries it's own problems like sprawl and destroying farmland / ecological preserves).
Also the federal government doesn't have a ton of jurisdiction into increasing supply, that's largely a provincial concern.
This. The only real solution is to implement policies that make housing prices not appreciate so it's not tempting as an investment in the first place.
Current attempts to fix the problem are doomed to failure because they are trying to avoid 1) significantly increasing the supply of housing and 2) decreasing the value of houses for people who already own them, but those are the things that are actually causing the problem.
Trying to block foreign investors is just a bandaid and it will make no difference. Housing needs to be a depreciating asset.
Ironically it's the government stepping in with regulation and zoning that is preventing people from building more housing (that low and middle income people can feasibly afford). The cost of building a new home on an empty piece of land can be astronomical and so builders would rather get the massive sums of initial capital from outside investors, build a luxury building for high income earners and cash out instead of using their own funds to build more modest homes for modest returns. The cost of bringing in utilities/licensing to a luxury condo with dozens of units isn't O(N) to the cost of a single family homes utility/licensing so the economic incentive is to build high end buildings that don't do much in the way of bringing down prices.
How it used to work is that the new houses would go to the richer people with money, and the older houses would end up cheaper (because why would you buy an older house for the same price as a new one).
Once supply dries up or the influx of new people is greater than new supply, the people priced out of the market are at the bottom.
It's similar to how you can't build used cars - the used car market is dependent on the new car market.
Canada has more housing supply per-capita than the US and many other western countries, but housing prices that are multiples higher (when adjusted for household income).
Many analysts have pointed out that Canada in general does not have a housing supply problem. Or not a particularly bad one.
What we have is a more generalized housing market problem: bad or badly regulated realtor practices, excessively low interest rates, and excessive speculative investment.
Foreign investment does not appear to be the cause, but it's a nice strawman if you want to win elections.
That's become markedly less so in the last two year. Alberta and Saskatchewan, yes, were cheap because oil prices were so depressed for the last 7-8 years. But the rest of the country, even economically beat down areas like the maritimes, have risen drastically. Rural Ontario has skyrocketed. Forget about anywhere in BC. Nova Scotia prices have almost doubled.
There is net migration out of Toronto and Vancouver. Prices have risen highest in formerly depressed areas like Hamilton, etc.
Sure it can, you just need the investment return part to come from the (rent - costs) and not from property price increases. If I have a property where the rent returns 8% after costs, I don't need the property value to increase to make that a good investment.
There are countries which prohibit foreign ownership of real estate. However capital controls typically prevent money from leaving, rather than entering. It will be interesting to see how this trend plays out.
Interesting indeed - to have gone from a capital starved era that led to the fetishisation of direct foreign investment to an era where there's so much capital seeking returns that it gets turned away. A strange inversion if ever there was one.
It fits with the theme of declining globalization and increasing protectionism. Still it seems strange for an allegedly free and open capitalist nation to turn away capital.
I suppose the political alternative would be questioning why the real estate market was managed in such a way to restrict supply, or disincentivize renting some of these foreign owned properties. Always easier politically to point and blame the external actors, the othertribe.
If this latest measure proves ineffective and taking responsibility for domestic mismanagement is off the table, what comes next? Nationalization or a bail-in of foreign held properties seems extreme, but how far can this go?
Yeah - there's a line in the article about an exception for "permanent residents", which makes sense. I don't see how one could defend not allowing workers living in Canada to buy a house.
> The Canadian government will ban foreign homebuyers for two years, AP reported Monday.
What does "foreign homebuyer" even mean? If I, as a foreigner, register an LLC (or the Canadian equivalent) in Canada, can this LLC then buy real estate or not? What if that LLC is entirely owned by another Canadian LLC which is then maority-owned by me?
Homes are being used as investments by institutions and nonresidents, in the West broadly, because there's a widespread belief (especially among homeowners) that homes should have a large ROI rather than being more of a consumption good, and so policies have slowly gravitated toward furthering that end -- NIMBYism and restrictive zoning laws, basically, but various other stuff too.
Call me optimistic, but perhaps if more voters appreciated that "homes should be a good investment for the people owning and living in them" and "homes should be a good investment even if you're not living in them" and "the rent should be too damn high forever" all describe basically the same state of affairs, absent exceptionally well-designed policy that makes those not the same state of affairs, we'd see a slow drift over time away from this regressive nonsense.
When British Columbia brought in its 15% Foreign Buyer tax (later raised further) it was at the end of a long campaign by activists to simply collect data on foreign buying.
The government shared this data as they were collecting it, and it was only a few weeks before they were so shocked by some of the buying trends that they brought in the tax. In certain municipalities, foreign buying was approaching 20%.
So all that experience has me wondering, why hasn't the Feds shared their data? Where is the troubling foreign buying trend?
The fact that they haven't done this makes me feel like maybe there is no foreign buying, that BC and Ontario's taxes have pretty much done the job, and that this is a disingenuous attempt to make it appear that they're doing something relevant around housing, while still fundamentally maintaining the status quo approach that has been ineffective for years and years.
I remember friends squatting in foreign bought apartments in downtown Vancouver 15 or so years ago. Like, floors of luxury buildings empty because it was all a parking space for cash. I have no idea if this will have a significant effect, but, it was so bizarre for me (I'm originally from Detroit) to see these basically empty luxury buildings. It was such a topic when I started University in Vancouver, I can't count the number of times it came up. I personally think the city looks depressing, and Toronto isn't far behind. This is just a personal opinion based on my experiences, but it's so strange when a "dense" area is empty, it feels like a ghost town, like the amount of residential space in Vancouver and the way the streets felt was just so bizarre to me.
I see the "{place} should be affordable for anyone who wants to live in {place}" folks are out again.
I'm pretty sure that there are at least 100k, if not 10M, people who'd like to live in Yosemite Valley. Should they be accommodated?
Okay, that's transforming "pastoral" to "urban" and they don't mean that.
I'm pretty sure that there are 10M more people who'd like to live in London (current metro population 14M, London city is 9k, with 500k workers) and at least 2M more people who'd like to live in San Francisco (current population under 900k).
Should those people be accomodated?
I ask because whatever it is that makes London and SF "good" will likely change significantly with the addition of that many people.
Why are the current residents obligated to accept that change?
> Why are the current residents obligated to accept that change?
They're not. They just need to admit they want to turn their city into a giant gated community and have-nots be dammed. Then we can have an open and earnest dialogue about it.
Of course, the greatest irony is that many of these cities are heavily progressive so they won't acknowledge the hypocrisy. Instead they'll hide behind environmental regulations or "won't somebody think of the children" or some other nonsense.
As a funny anecdote: I've noticed that in the suburbs of my city the incidence of BLM and "In this house we believe..." signs increases with the socioeconomic exclusivity of the town. Seems that progressive ideals are great as long as you don't have to inconvenience yourself in the slightest to achieve them.
> While I'm perfectly happy to criticize "progressive communities", there's nothing hypocritical about not wanting to live in a London with 25M people.
Yes, there is. If you live in London now it's probably because you or someone in your family benefited from a system that now excludes anyone not already in it. We ditched the landed gentry a few hundred years ago, I'm not super excited about bringing them back.
Wanting to be landed gentry is not hypocrisy. ("want to be landed gentry" is your interpretation, but I'll stipulate it for the purposes of this response.)
Note that a significant fraction, probably even a majority, of the 10M prospective Londoners would much rather live in today's "only 14M London" than the "25M London" that you think should happen.
Are these prospective Londoners wanna-be landed gentry hypocrites?
It can be difficult to disprove residency, especially if you can say you travel a lot for your work. I've uh...heard of people that are residents of Nevada for tax purposes. They have a tiny furnished apartment and their car is registered there, and they're registered to vote there, but let's say they aren't home very often.
Well it will not solve everything, but two things:
- It will make it impossible for people without permanent residency to buy property.
- It will prevent people from owning multiple homes in the country.
You could also define a minimum number of days a year where they had to prove that they occupied the property, maybe at least a quarter of a year.
In economics, in general it's usually better to tax than to ban.
In this case, you could just tax foreigners for owning property. Or you could tax non-residents for owning property.
A land value tax would be a good idea in general. But if it's politically necessary to restrict that to people from far away, that's still better than a ban.
The people who buy these properties are often looking to put their money somewhere safe from government seizure (i.e. 100% tax). A tax is not going to be much of a deterrent unless it is really very big.
There is a difference between a foreign investor, and a foreign resident. I would be furious if my right to buy a home in the country of my residence was influenced solely by the fact i'm not a citizen.
It's interesting how housing in some countries is seen as a store of value (mostly the anglosphere) whereas in others it's seen as primarily a utilitarian purchase (continental europe and japan)
If I had to choose between the 2 models I'd probably pick the euro/japan one, just out of the logic that you need a house to live and hoarding them for wealth generation seems to have a lot of negative externalities on the economy. It's not really a productive use of capital.
> The government will also impose higher taxes on people who sell their home within a year.
Why would they raise taxes on people who decide to sell? Raising taxes on sales will decrease the number of sellers. If the goal is to decrease the price of housing, they should want to increase the number of sellers (partly by reducing taxes on sales) to increase the supply of housing.
The goal is to dissuade flipping, the same reason we have short and long-term capital gains.
Nobody should be buying a house intending to sell it within a year, so the sellers affected are those already affected by some external influence (assuming they weren't trying to flip it).
The only way to increase sellers by reducing tax is to make it obvious it's a temporary reduction - if you say "anyone who sells in 2022 will do so with no capital gains" you'll create a lot of sellers, but most of those will just buy similar houses nearby.
You need to increase sellers without also increasing buyers, which you do by getting more houses to sell (developers as sellers), or getting people to move away (they sell but don't buy), or by having people sell without buying (they die or move in together, or rent, etc).
The problem with housing costs going up, is that they need to be permanently higher or it will have a bubble burst like effect. Imagine if the state of California did something that cut the real-estate prices down 30%... Well now people who bought when real-estate was 10% lower than the original value are upside down and will panic sell.
This is the quintessential government problem these days - try to deflate the housing bubble without causing a housing crash, but because of how it runs hotter each time even slowing down itself becomes the instigator of the crash.
We have how many foreign investment agreements? Banning foreign investment is not possible at all.
The data is public as well, foreign investors aren't the problem. To say you are doing this would not only be punitively not allowed. So you're literally telegraphing that you intend to do nothing. Or for that matter try to make things worse.
CPTPP ensures that investors from the Asia-Pacific receive fair and non-discriminatory treatment. This means they must receive the same level of treatment as Canadian investors and any third-country investor in similar situations.
This is mostly for show, it won't do much at all. Nimbyism is Canada's only true national ideology and is strongly supported by all major parties across all levels.
Here the feds want to be seen as doing something, but have little actual power so this is a good way to say the did something. Ontario is ruled by a conservative government that's up for reelection this summer. There was a big housing affordability task force that recommended building more houses (shocking!). The government will not be implementing any of its substantial recommendations, but will fiddle around and say they're "cutting red tape". Municipal governments like Toronto are obsessed with controlling development, from suburban conservative councillors trying to outlaw rooming houses, to downtown progressives decrying gentrification. Any correction will come despite all these efforts.
There's a housing crisis in Canada, and Australia, both vast countries. Oh, and also the US coasts, and well actually in the Midwest prices also doubled. And the whole of Europe, including low density eastern Europe.
...and still, surely the problem for all of this must be in some local zoning law, or "foreign investors". If only we tweak a little tax or policy here and there and defeat the boogeyman "NIMBY" all of this goes away.
Except that it won't. You cannot keep adding boat loads of people to a tiny 5% "hot" area of any of these countries and think it will fit. Any amount of (typically small) new supply is immediately in use, and what about next year? And the year after?
> “Perhaps these foreign homebuyers don’t understand how easy it is to set up an anonymous shell corporation in Canada. Perhaps they stubbornly refuse to spend the extra ten minutes it would take to do so. Perhaps they just don’t like the word ‘shell’,” Trudeau explained. “But rest assured, for this incredibly tiny fraction of international homebuyers, the party is over.”
Banning all foreign home buyers does not seem too smart, especially for a country that wants to massively increase its population. Also, what happens after those two years? Are they expecting foreign moguls to vanish into thin air?
We need this so bad in the Netherlands right now!
Listing price of a house in Amsterdam 525K, bidding price 641K, someone else with 660K comes and takes it away.
Cries in pain after 10th bidding war lost :(
I don't know about the Netherlands, but in Canada, where you see the same scenario play out regularly, it's common to underprice the listing to attract attention (it's an advertisement, after all). The home is selling for fair market value. It's the listing that is misleading.
The federal government announced they "intend to propose" a bill on the issue. They haven't proposed anything yet and there's currently no date to do so.
Perhaps this is an attempt by Canada to keep the American's out? Any investor that believes in climate change has got to be looking at the areas of the world that used to be colder and seeing opportunity. The closer someone lives to the equator the more desirable northern properties are going to look. It's not just the bugs, plants, and animals that are shifting north, the people are also.
> Some exceptions will be made for permanent residents
With how easy it is to get a permanent residency while on visa in Canada, this is a fair way to keep immigrants happy.
> Some exceptions will be made for foreign students.
Isn't 'Chinese investors buying canadian property and enrolling their children in schools there' why vancouver's housing market is broken. Allowing foreign students to buy houses will let the big loophole continue as is.
Their whole approach is asinine. If foreign buyers are the level of problem they suggest then removing them from the market is less likely to depress home prices and more likely to convince people they shouldn't put their homes on the market because they can't get top prices.
In the end I expect this to have no impact as it seems more likely this is just government attempting to deflect attention away from problems they've created.
Good idea. It'd be great to see this in the US, along with very limited speculative (no intent to dwell-in) purchasing of second homes until the market for first-time home-owners (and the demand) shrinks dramatically.
The use of homes as gambling chips ("investments") has to be stopped. The economic and social costs are egregious, inhuman, self-destructive.
But it hasn't always been 40% Additional Buyer’s Stamp Duty (ABSD), the government will ramp it up and down to control the private market.
It hasn't seemed to had that big of an impact. A small, 2bed condo on land with a 99-year lease costs S$1.6M ($1.2M USD) outside the central business district.
But if you really wanted to gain control of home prices and development, just adopt Singapore's 99-year lease policy of land. Once the 99 years is up, it goes back to the government you get $0.
Singapore isn't old enough yet to truly see the ramifications (plenty of people are betting they'll get bought out), but the government has said they will stick to it and have stuck to their word in a recent situation where there were 60 year old leases.
"All 191 units at Geylang Lorong 3 have been vacated and ownership of the 60-year leasehold land has returned to the State, said the Singapore Land Authority (SLA) on Friday (Jan 1)"
That land will be cleared and then auctioned off for another 99-year lease to private investors who will build new housing. It's a semi-Georgian policy where the Singapore government captures all of the increased land value and then turns around and uses it to subsidize new public housing or other public benefits.
The 99 year lease is kinda functionally equivalent to a 1% a year property tax, and somewhat more honest.
If I could deed my land to the local government a hundred years from now in exchange for 0% property tax, I'd very likely do it (but the government would probably be sad because they need the cash flow now not later).
The take away seems to be that if you are already in the 0.1%, Canada is a great place to get a passport so that you can travel to where you really want to be.
That's good but not good enough. Because many foreign buyers are Canadian in name only. So the measure will not succeed.
The Astronaut families(1) need to be cut out of the housing market. An Astronaut family is a privileged family where typically the husband works in Asia for high income and low or no tax, while the wife and children live in Canada. They don't declare their foreign income (2).
>A revealing new “super-diversity” website created by a University of B.C. geographer, Daniel Hiebert, shows nine of 10 recent Chinese immigrants arrive in Metro Vancouver with enough money to immediately buy homes. But only half hold down jobs during their first five years in Canada, while four of 10 report they’re surviving on low incomes.
They are eligible for low income benefits, free healthcare, subsidized education at world class universities (3). They make money in a low tax, low social safety net jurisdiction and live in a high income tax high safety net one.
They are taking advantage of an income/tax arbitrage that needs to be closed.
Many disadvantaged POC immigrants want to come to Canada to improve their lives and the country. But the privileged families take away their spots, increase housing prices, segregate themselves, and contribute little.
Good. Yet, prices also accelerate because of ever increasing regulations. Maybe that's a good thing, but we have to make sure that housing is also affordable for everyone. After all it's a basic necessity.
This is a false step. You can still purchase a home through a shell, which literally negates this law entirely. Most of the people who are the issue, are using shells with purchases like this. zzzz
No one talks about the fact that we focus development on the core cities only. Between Calgary and Edmonton there is Red Deer and small towns. No one city half the size of YEG.
I appreciate an effort, but how can a student afford a house ? Is it possible that a rich parents can invest in properties through their kids on a student visa?
Even before all the housing craziness it was often worth it (if you had the money) to buy a house in a college town for your kid(s) (especially if you had more than one going to the college) and then sell it when they graduate. The cost of ownership over those 4+ years would be cheaper than renting/dorm life, and give more options.
It would become even MORE worth it if you rented the other rooms to other students.
> Is it possible that a rich parents can invest in properties through their kids on a student visa?
Yes, I’ve met many people who do this. The father works in China and sends money to their kid (and sometimes wife) in Canada to buy real estate. Then since the family in Canada is technically low income (no job) they maximize every possible government benefit as well.
What's a foreigner to a country that allows more than 1 citizenship? What's a foreigner in a country that has a "foreign" royal as head of state? Why were foreigners allowed to buy homes in the first place?
Most importantly, why does a country with a population of 35 million and a landmass stolen from the natives the size of china have problem housing their population? Certainly, even if much of canada is tundra, they don't lack the land/resources/etc.
If they are having problems housing their population, why are they increasing immigration?
Thats doesn't solve much of the problem tbh. They need to build more homes. Much like the problem in the UK also. But in the UK we need to push back on normal people wanting this property empire and massively over leveraging themselves
> The government will also impose higher taxes on people who sell their home within a year.
Why build more homes at enormous expense (both financial and environmental), when most countries have way more than enough homes in total?
The problem is two-faced: vacant properties sitting around empty because of money laundering and speculative usage on one side, and on the other side the usage disparity because rural areas have been left behind by modern infrastructure - particularly high speed Internet, mobile phone coverage, public transport and services of everyday living (healthcare, basic shopping).
> vacant properties sitting around empty because of money laundering and speculative usage
I don't have the numbers but I find difficult to believe that there's enough properties used for money laundering to move the prices.
> usage disparity because rural areas have been left behind by modern infrastructure
That's the problem. There are empty houses but too old or in places where people don't want to live. So to low the prices more houses need to be built there where people want to stay.
Another solution would be improve the communication channels between cities and rural areas.
> I don't have the numbers but I find difficult to believe that there's enough properties used for money laundering to move the prices.
In London, up to a third of all properties (depending on the area) are left empty. At that point I don't care if it's money laundering or speculative usage, but London's nickname "Londongrad" more than hints that an awful lot of Russian oligarchs used London real estate to launder stolen money [2].
Personally, I'd be fine to ban all foreign investment into real estate in hot housing markets no matter the country, with the sole exception of primary or secondary residence.
Canada's housing market is a destination for capital flight from other countries. Imo, the market is completely financialized and not producing actual homes.
That money is also made in countries without the same levels of taxation Canada has, and that puts citizens at a huge disadvantage in their own market. Why should a 21yr old from North Bay or Timmins in Ontario have to compete for bidding on a house with the someone in the top 10% of earners in Hong Kong, Delhi, or Tehran - let alone their REITs? I'm a huge believer in positive sum economics, where people can be trusted and bet on to find a way and create new businesses and value, but that only works when there is a diversity of markets based on geography and not a single zero sum managed global one.
Whether one calls this "nationalism," or just a government being responsible for the people who elected it, the dynamic is clear. Canada's economy has been hollowed out by two decades of globalization, whereby all that "empty space" is not economical to inhabit because we can import everything people could produce in that new town at higher volumes and cheaper from asia. There is nothing "local," to be produced or manufactured for export that would facilitate growth, and therefore no incentive to build new housing to serve that local market. Precisely due to Canada's theory driven agricultural supply management laws against entrepreneurship and smallholders, there are no local markets either.
Even though I don't trust this govt to implement the rule in an effective way, it's the bare minimum necessary to mitigate a crisis. If millenials and gen Z and beyond do not have homes, they aren't going to have kids (after losing 2+ years on that path to covid), and the govt is using this policy to try and mitigate an imminent disruptive population bust. Boomers are coming to terms with the fact that generally, they aren't getting grandchildren (unless you count "fur babies"), and now Gen X is about to experience the same. As a signal that your society is damaged, consider that the only time any creatures on earth cease to have kids is during war or famine, or in captivity. The greater issue of the culture being broken and physically dying off isn't going to be stopped by banning foreign ownership, and unfortunately it may keep the people responsible for these policies in power even longer to do even more harm, but it's a sign they apprehend the disaster they have caused, imo.
Haven't they already? As a resident of rural Canada, the price of the average home here is up over 100% since early 2020 when the people of Toronto started moving here.
That is one part of the problem, the second problem is that foreigners know that once you buy the property the govt is not going to seize it, so if you want to hide your money from the foreign govt, it makes sense to park it in Canada.
public housing will probably have to be the major accomodation provider.
Since the economy is a scam, expecting it to house everybody in a decent and sane way is just utopia, no better than communism.
I heard about Singapore (80%?) and Vienna (65%?, Austria), I am unable to check that or find other places: this information is really tough to get. In my country, it is extremely opaque and _very discret_ (secret?) in the fear of massive abuse from foreigners.
This is virtue signalling from the Liberals. It is a known fact here in Canada that the foreign buyers have anchor proxies as international students who drives Porsche buying up a lot of homes in Canada so that they can "study in peace and quiet of a detached home". Toronto, Montreal and especially Vancouver. This ban is not going to fix anything.
Foreign investors jump into the housing market because the current system ensures that the supply of housing is limited so it is an attractive way to park your wealth.
But that is not the root cause.
The root cause is the system that is geared to keep houses always appreciating via supply constraints: aggressive zoning, discretionary permitting, NIMBYism.
Until we liberalize zoning, legalize building, and reject the idea that houses have to be appreciating assets, the issue will continue.
As it is often the case, politicians go for the headline with the highest electoral ROI, rather than tackle the real issues.