Canada bans foreign home buyers for two years
axios.com
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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.
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.
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a small "town" whose businesses amount to a liquor store, some off brand shopping market, a burger joint, and a 20 year outdated public library.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
* 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.
The right answer is probably a blend of those.
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.
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.
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.
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.
And often the density of “rural” areas is comparable to the big cities as even in rural areas most of the population is in small cities.
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).
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.
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.
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).
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.
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?).
5 stories. Perfect height.
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.
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.
Also, https://noparkinghere.com/
And I wonder how much space is lawns
But there are acres and acres of single family homes in both urban areas that could become mid rise apartments.
The developing world has even denser examples [1], e.g. the #2 entry of Manila is about twice as dense as Paris.
[1] https://en.wikipedia.org/wiki/List_of_world_cities_by_popula...
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.
It is true that many cities have filled in shorelines to create more buildable/usable surface.
It is not true that cities do this all the time.
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.
https://estuarypress.com/hrma-photo-post/filling-the-san-fra...
https://priceonomics.com/what-parts-of-san-francisco-are-bui...
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.
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.
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.
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.
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.
Sprawl is only bad in big cities. In a city of 250k, it's not really a big deal.
The waste of time, energy and the resulting pollution are mind blowing.
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
It shouldn't be. That is describing the demand side of the equation.
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.
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
EDIT it's been three years and not two
https://www.scmp.com/economy/china-economy/article/3012312/c...
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.
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.
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.
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.
[1] https://ideas.repec.org/p/fer/wpaper/146.html
[2] https://www.dropbox.com/s/oplls6utgf7z6ih/Pennington_JMP.pdf...
[3] https://docs.wixstatic.com/ugd/7fc2bf_ee1737c3c9d4468881bf14...
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.
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).
There have been many articles written on this topic by many publications that you can find, but here's one citation: https://www.ft.com/content/023562e2-54a6-11e6-befd-2fc0c26b3...
Tokyo metro area is 14,034 km2.
Meanwhile LA is 14% parking lots or so I’ve heard.
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 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 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.
In which dense cities in Canada (or the USA) did this work, resulting in a desirable dense city with cheap housing?
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.
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.
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.
> 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.
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
They also conveniently target people who can't vote, much like big taxes on out-of-province housing purchases that are very popular within Canada.
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.
Or at least not bolstering the mortgage market. Fannie and Freddie practically caused the extreme leverage mortgage phenom in the US.
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.
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.
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.
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.
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.
(a) National zoning
(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.
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.
It should not be illegal for such housing to exist.
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.
> 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.
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.
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.
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).
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.
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.
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.
That sounds tremendously wasteful. All housing will have to be built new now?
> (d) Not very open to immigration at all, have a decreasing population.
This is probably the biggest reason housing is depreciating in Japan, especially outside of Tokyo.
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?
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
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?
Being in a 200 year old house already puts you WAY into the far outliers - the median US house is 37 years old.
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.
In many places tear down and rebuild is cheaper than remodeling, especially when energy costs are taken into account.
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.
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.
Why yes, indeed, it is!
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.
>(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.
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.
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.
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.
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?
Canada's population has increased around 4 million over the past ten years, so I don't know if that velocity of closer to million tracks.
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.
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.
There are Twitter accounts dedicated to calling out multi-million dollar homes in Vancouver and Toronto, owned by "students".
https://www.scmp.com/economy/china-economy/article/3012312/c...
https://www.canada.ca/en/employment-social-development/progr...
What prevents you from just building more housing in all that extra space you have? Zoning laws and nimbyism.
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.
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.
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.
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.
Talk about distorting statistics in bad faith to further xenophobia…
The 10 year visa is a non resident visa that allows temporary enter into Canada during that period.
It doesn’t let people work, and just because someone has the Visa doesn’t mean they’re currently living in Canada
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.
> 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.
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 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.
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.
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.
some do, others just want to safely park capital away from their own government reach (China/Russia/various *stans/corrupted countries).
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)
https://www.scmp.com/economy/china-economy/article/3158048/c...
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.
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.
But that's unnecessary. If developers build more luxury housing, that'll reduce the price of existing housing, such that it becomes affordable.
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.
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
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.)
(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.
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.
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.
The market will not do that.
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.
Ha, did not know about the three year ownership requirement, classic CA NIMBYism. Still progress.
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.
What is happening in Dallas which has no zoning rules? (Or am I thinking of Austin Texas?)
I do not know, but it would be useful for this debate
Houston is booming I hear.
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.
In any case, all three have rampant HOAs which serve the same purpose as zoning.
So I guess it works.
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.
Oh it’s already inflated away 30% in less than a year. It was 30% of my income.
I was defending a "planned intervention".
Not really: Say there's one free acre of land in town. You could build one mansion on it, or a highrise with 100 apartments.
Building the mansion isn't going to move the needle on any existing housing at all, as it's just one unit.
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).
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.
That's fine, it still provides housing for someone. And there are people who actually prefer to rent, so it's good to have rental units available.
Problematic is when they hold on to it and keep it empty, thus occupying space but providing housing for no one.
(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)
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.
And do they want to live in that mansion surrounded by multi-unit buildings built by developers buying the nearby acres? Also seems unlikely.
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).
(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)
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.
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.
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
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).
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.
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!
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.
According to this reasoning, if Ferrari builds more cars, Fiats will get less expensive.
I don’t think that’s how it’s supposed to work.
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?
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?
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.
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.
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.
Most people aren’t selling. So they haven’t lost.
And how would you limit the effect if housing dropped for the many other reasons prices drop?? You don’t.
Not quite true. It would be truer if they have no debt.
But having a large debt, and negative equity, makes a family very vulnerable economically.
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.
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.
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.
The quality of the building is determined by building codes
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 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.
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.
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.
Alternatively, provide a dedicated asset class for that, so they can put their money in something other than housing
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
https://www.scmp.com/economy/china-economy/article/3012312/c...
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.
SF has notoriously strict zoning.
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.
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!
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.
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.
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.
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.
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.
Communist until you get rich
Feminist until you get married
Atheist until the plane starts falling
Critisizing NIMBYism until you own the house.
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.)
That's foreign money coming in to USA.
Technically, that's a good thing for the country as a whole.
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.
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.
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).
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.
>> 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.
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!
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.
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.
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.
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?
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.
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.
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.
It's certainly the case that the agent who knows that a particular bidder is the highest/most attractive offer is working for the seller.
You can have an agent working on behalf of the buyer, but my experience is that’s a minority rather than majority arrangement.
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.
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.
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 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.
I have no idea why there are regional differences, but I'm not really surprised they exist.
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.)
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”
If you are putting less than 20% then the stress test is even higher.
I doubt we will see 5-6% interest rates in the next 5 years.
“stretch yourself beyond any reasonable limits” means that you may not be able to pay your mortgage, it doesn't mean the bank won't offer it to you.
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.
For a $5,000 mortgage, that's a $5,000 a month buffer
Federal actual rate 16.5% (24% marginal)
CA State actual rate 6.4% (9.3% marginal)
Medicare rate 1.45%
OSDI rate 6.2 %
CA SDI rate 1.0%
Total:31.55% total before tax deductions and tax shelters
If your mortgage is ~40%, you have ~30% left over.
Per month, this is 4,000 for a mortgage, 3,000 taxes, and 3,000 remainder.
A 4,000/month mortgage covers a 800k loan on $1 million dollar home.
You don't get a lot of house in the bay area for 1 million, So if you are single earning this much, you are looking at condos.
If have two similar earners, you just double everything. E.g. 2 million dollar house with $6,000 per month remaining income.
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.
No bank is giving you this loan.
In a normal Dutch auction style situation you’ll pay $1 more than the second highest bidder, which is a bit more fair.
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.
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.)
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?
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.
> 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.)
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.
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.
Inability to coordinate due to lack of information allows the seller to maintain full control of the process.
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.
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.
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.
That's the wonderful part about lending - it's an arms race, where the lender always wins.
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.
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.
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.
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.)
Find it hard to believe anyone could say such a thing with a straight face. Every time these subsidies are announced the median price rises.
Negative gearing is a distraction that completely skirts the real issues regarding supply, density and infrastructure.
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.
If you bade your maximum already then obviously you’re out of contention.
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.
https://www.toronto.ca/wp-content/uploads/2017/11/97dd-cp-of...
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.
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.
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.
Hopefully this link works... https://www.google.com/maps/@28.3905172,-80.6008949,3a,75y,3...
That's a small single, with a small apartment block next door, with a slightly larger block two down.
https://www.google.com/maps/@28.3905172,-80.6008949,3a,75y,1...
Same spot, looking to other side of street, mostly duplexes, with a few singles.
According to their plan:
> 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.
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.
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.
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.
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.
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.
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.
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
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.
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.
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 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.
Suburbs are also the source of majority of tax revenue.
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.
But yeah, "cool spots". /s
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.
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.
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.
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.
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? :)
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.
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.
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).
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.)
Since agriculture industrialized, rural Canada has no work.
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.
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.
Between them and the banks that own all of those 30 year mortgages, that's all the political pressure you need.
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.
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.
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.
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.
But that's unlikely. A tiny blog post about this: https://blogs.cornell.edu/info2040/2019/10/22/why-arent-home...
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.
Trust only that they are a politician.
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.
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.
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.
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.
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.
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.
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.
> generally they will give you one chance to "improve" your offer
Of course, you have no idea what you're competing against, or if there even is a higher offer.
> in an open bidding system, you are literally in competition for who can/is willing to pay the most for the home.
This is true for blind auctions too.
> The ceiling is basically what you think is "fair". > in an open bidding system ... The ceiling is what you can/willing to afford
I don't see any reason why you couldn't set the ceiling to what you think is "fair" at an open auction.
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.
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.)
I'd love for a better solution to exist though.
"Hey, we banned those darned foreigners just for you, can we get some love now at the ballot box?
xoxo"
“If you like laws and sausages, you should never watch either one being made.”
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.
That is messed up…
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.
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.
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.
But they sure do like to tell you.
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.
It's the opposite, worked like charm. Your main voting base, powerful people, developers, banks want price of properties to increase.
Depends on what they hope to accomplish.
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.
I can't imagine how bad it'd have been with the Liberals (provincial) still in power.
- 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.
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.
The foreign boogiemen help deflect attention from this element of the argument.
> 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.
Toronto's population is growing at double the rate of Paris. And London, Stockholm, and Sydney's populations are growing even faster than Toronto.
No surprise that faster growing populations lead to worse housing supply issues.
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.
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).
Merci pour partager votre perspective!
Generalisations are like models. They're not necessarily 100% correct or applicable but they can still be useful.
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?
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.
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.
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.
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.
Source: https://www.statcan.gc.ca/en/dai/btd/othervisuals/other006
If the goal is affordable housing, why is immigration the one policy that must not be adjusted to meet that goal?
If Canada cut it’s immigration targets, it would have to somehow produce a lot more babies to pay for everything. More houses needed either way.
*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?
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.
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?
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
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.
https://betterdwelling.com/foreign-buyers-own-1-in-10-recent...
[0] - https://betterdwelling.com/over-a-quarter-of-toronto-real-es...
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.
https://www.thebeaverton.com/2022/04/canada-to-ban-foreign-h...
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.
Are the corporations buying for capital gain or for rental income?
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.
they tried doing this with wind turbines and it was shelved the next day because nimby’s didn’t want wind turbines.
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?
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 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.
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.
Because they are a fundamental human need, and in limited supply. Good land is fundamentally limited. You can't build more of 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.
All the places I’ve lived with growing populations recently have taught me they will probably do the opposite.
They could also bring in additional property transfer taxes for reach home, taxing people more for each additional property they buy. Singapore does this.
Otherwise hike the tax on real estate while reducing at the same time taxes on local residents.
It's a problem that needs to be solved on the supply side. Trying to solve it on the demand side is like trying to damn a river with a sieve.
Politics, particularly here in the west, is beginning to feel like exclusively this to me.
https://pm.gc.ca/en/news/news-releases/2022/04/13/helping-yo...
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.
Are you saying you don't know what to do with your money?
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.
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.
My $0.02, not an expert.
Example:
$1000 in net operating income, $500 in mortgage interest, 25% tax rate
Taxes paid = (1000 - 500) * 0.25 = $125
(I've been living in Sweden for a while)
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.
You can always make more LLCs to dilute your numbers.
Ultimately we need to weaken corporate ownership of real estate
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.
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.
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 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.
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.
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.
Nah, I was looking for a simple, reasonable bound was all.
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.
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.
>Basically, Georgism tax policy - https://en.wikipedia.org/wiki/Georgism.
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.
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 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.
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.
[1] https://www.youtube.com/watch?v=7Nw6qyyrTeI
[2] https://www.weforum.org/agenda/2021/04/global-percentage-ren...
Amusingly enough we have rent inversions in many markets right now, rental costs are below mortgage carrying costs.
Rent is gone to the owner, in exchange for one more month/two weeks/year/whatever frequency the payment is paid to the owner.
The opportunity cost between a mortgage and rent is not dollar for dollar (euro for euro, or whatever).
Because it's good for society if a large % of the population owns a home. I'm not advocating for more urban sprawl.
> "no one is wringing their hands about how people should be owning their home instead of renting"
What do you mean? People are desperate in e.g. Berlin, that they don't come here to HN and write in German about it doesn't mean that it's all rosy.
> "there seems to be a borderline obsession with owning a house in anglophone countries"
I'm a Spaniard living in Japan, not American, so not sure what you mean.
I'm not sure how it would qualitatively affect the builder's market.
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.
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?
How is that a good thing?
I’m not convinced it’s a problem.
Again, all roads point back to supply. Build enough homes and the issue is moot.
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.
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.
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.
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.
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?
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?
> I assume you will be renting apartments and leasing cars for the rest of your life surely?
No. I will consider my current financial and life circumstances like a rational human being. Do you understand how the world works?
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.
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.
"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.
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).
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"
> 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!
...except that their greediness of wanting to own everything is precisely what made houses explode in price in first place.
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.
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.
Try to dodge some IRS stuff and you'll see how efficient the government is.
(I agree that corporations hoarding housing is a problem...but they do bring value in some specific areas, even if net value is negative.)
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.
There's also the matter of new developments.
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?
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.
Pray for the collapse
I think the only option left is moving away. Everyone in tech is already doing it
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.
Well for men that's usually an easier decision
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.
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.
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.
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.
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.
Basically the government is turned into the sole buyer who can also ignore zoning and resident complaints.
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.
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.
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.
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.
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.
But yes, this does look like a loophole through which one could easily drive a building...
No, the Canadian people are stupid, as are people elsewhere.
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.
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.)
Even if it is not the best solution, is there any huge downside to that ban?
You're gonna penalize the local market as well.
Also if a company owns a house then make it pay the maximum penalty rate when it's empty. Subsidiary problem solved.
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.
https://bc.ctvnews.ca/11-000-condos-added-to-metro-vancouver...
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.
I'm on 1Gbps fiber, and can get 10G/10G fiber for cheap at my home right now, and just finished with the preparations.
Until we develop Star Trek teleportation I cannot replace my apartment with a cheaper one 1000km away.
That's why hoarding real estate is exploitation of people's basic needs.
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.
How much is this a problem?
Further, this does not (IIRC) apply to folks to have permanent residence status or folks here on things like student visas.
So how many never-set-foot-in-Canada people are buying properties?
Plenty of Canadian-born people rent.
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)
And honest question: why do we want foreign investors buying homes anyway? I understand buying commercial locations, but not residences.
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.)
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.
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).
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.
Look into 'land value tax' for more detail.
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.)
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.
Just use the tax take to finance local goods and service and to lower other local taxes.
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.)
That way you don't impede transactions.
And it's easy to implement: tax houses not owner-occupied very heavily.
If home prices haven’t fallen during pandemic, then the reason why prices are high is not because of foreigners.
The government is trying to point to a scapegoat rather than trying to get to the root cause.
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.
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).
London has this problem more than anywhere. Blocks full of purchased and empty while locals can't get a sniff.
What we need is foreign ownership taxes / bans combined with heavy taxes on ownership of multiple single-family dwellings and townhouses.
The ban won't do much, obviously, but the cause is the foreign investments. 100%.
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.
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.
For who? Banks don’t hold mortgages on their books, they sell them to investors. I don’t think you understand how modern finance works.
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.
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.
Banks don’t care, they just sell the loan. If they cared, they wouldn’t write the loan! Cmon now.
My fault, I really should have phrased that differently.
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.
It was shorthand for "everyone else is doing it and having success, so lots of people jumped into the same boat to also make money"..
Advice was the wrong word, maybe "signal" or "momentum" would have been a better shorthand.
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.
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.
- 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.
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
Why wouldn't that wealthy person rent the property out and get better ROI? Keeping it empty does not make sense to me.
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.
Is that something you want to change with governmental policy?
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.
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.
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.
No need to ban those 'evil' foreigners, just tax them so they can pay for what the locals want.
I suspect the real problem is low supply high demand + domestic speculation, which is why none of the blame the foreigner solutions work
And if prices were going up enough, it'd be worth it.
Also the federal government doesn't have a ton of jurisdiction into increasing supply, that's largely a provincial concern.
We have single family homes in ton of places where there should be low rises but zoning doesn't allow for it.
Indeed, the solution would be to take away zoning power from the city into provincial or even federal hands and let housing be more dense where the taxpayers already paid for rapid transit. Look: https://en.wikipedia.org/wiki/Edmonds_station_(SkyTrain) this is not even a particularly busy station and it has 4M passengers and these two https://en.wikipedia.org/wiki/Rupert_station https://en.wikipedia.org/wiki/Renfrew_station together has barely more than half of that.
We need them to be orange in a block or two radius around all Canada Line and SkyTrain stops. There's a smattering of that but not much.
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.
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.
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.
Fuck nimbys, the government needs to just step in an do it.
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.
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.
Even in the Vancouver and Toronto metros?
My understanding is that if you want to live in SK, yeah that's pretty cheap. But if you want to live around Vancouver or Toronto, you gotta pony up.
There is net migration out of Toronto and Vancouver. Prices have risen highest in formerly depressed areas like Hamilton, etc.
Most people's primary savings are the equity in their home. Governments are in for a real sticky treat.
"imposing a two-year ban on foreign capital coming into Canada to buy residential real estate".
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 other tribe.
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?
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?
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.
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.
In reality, foreigners invest in Canadian real estate because it is quickly rising in price. Not the other way.
It's hard to get causality directions right sometimes. Especially when xenophobia implies one direction.
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?
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.
Why do they "need" to do anything?
> they won't acknowledge the hypocrisy
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.
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?
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.
Taxes give you a behaviour change and revenue. If the behaviour doesn't change, you can jack them up to get more revenue.
- 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.
It's actually a moderately complicated thing to prove, even though it seems it should be simple.
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.
So backwards.
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 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.
Do these agreements say that foreigners have a right to buy houses in Canada?
For sure.
https://www.international.gc.ca/trade-commerce/trade-agreeme...
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.
https://apnews.com/article/business-chrystia-freeland-justin...
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.”
what actually needs to happen is to change planning laws in order to tackle the massive Nimby-ism holding down society.
good luck with that! every time a government proposes taking away some of those Nimby rights there is a massive backlash across the country.
so no politician will dare approach this issue because they’ll be out of a job.
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.
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.
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.
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.
https://www.straitstimes.com/singapore/all-191-units-at-geyl...
"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.
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).
> low wages Work remotely for US company or the 1% of Canadian companies that pay competitive to the US market
> high tax Social programs. The taxes get curbed through corp taxes if you're in the .1% - 0.01%. Can always earn and then move elsewhere.
> Terrible weather True, but can just escape if the other situations are solved.
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.
(1) https://en.wikipedia.org/wiki/Astronaut_family
(2) https://vancouversun.com/opinion/columnists/douglas-todd-how...
(3) https://www.narcity.com/vancouver/ubc-ranked-one-of-the-best...
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.
It would become even MORE worth it if you rented the other rooms to other students.
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?
Nothing adds up.
Because this housing crunch isn't coming from the 1% population growth the country's experiencing, it's coming from poor economic planning.
Actual outcome: higher rent
> The government will also impose higher taxes on people who sell their home within a year.
Nice!
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).
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.
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.
[1] https://www.bigissue.com/news/housing/how-many-empty-homes-a...
[2] https://www.deutschlandfunkkultur.de/england-london-oligarch...
For comparison, England apparently has 24.7 million "dwelling units" so that's about 1% sitting empty for more than six months.
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.
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.