Housing absolutely should be a profit center. Home and multifamily builders should be unleashed to build as much housing as they can. Let them be greedy; let them get rich. It’ll make housing more affordable for everyone.
High housing costs aren’t a failure of the free market - they’re a failure of central planning at every level of government.
You only end up with that if that is what sells, i.e. that is what homebuyers want. If the average Canadian didn't want that, the developers would build something else.
Your real problem here is with the preferences of the people who buy new homes, and you aren't going to change those preferences by regulating housing developers.
Basically replicate the pre-car environment that the world's greatest cities were designed and developed during.
The only things being built in Toronto are either single family homes, or giant 50 floors condos. It takes YEARS of consultations to build anything in Toronto so developers only bother going through that process for very very high buildings. It's not worth it for the type of higher density apartment of 3-4 stories.
It's called the missing middle, there's a good podcast/article here: https://99percentinvisible.org/episode/the-missing-middle/
Zoning laws are an expression of preferences by the existing homeowners who want their neighborhoods to retain their current characteristics.
Look at the history of how this happened. The suburbs did not magically appear out of nowhere after WWII against the wishes of the population, and they were not legalized into existence with zoning laws. They were built, people liked them and bought houses in them, and then they passed zoning laws to keep them.
In Japan people are far more reliant on the conscientiousness of their neighbors to maintain a peaceful and quiet environment than people in Canada and the United States are. They also have a low crime rate and safer, cleaner inner cities.
Obviously an entire population lives this way, and it works well for them, but that kind of housing situation would be a hard sell in North America.
However the ZONING codes could be adopted to much benefit. The BUILDING codes, I still maintain we need to spec even higher, so that I can have a refuge of solitude from the sounds, smells, and presence of Wheaton's Law failing humans.
If builders in Canada have to build high density housing to a more costly specification then it’s justified that they won’t find it cost effective even if given the chance to do so.
In effect, the low cost of Japanese housing could be from both the zoning code and the building code. (As for culture, those two affect culture and are affected by culture so it’s hard to distinguish.)
The property tax rate is the same for a whole municipality whether you are downtown in high density housing or in the burbs.
You need more roads/public transportation/water mains/gas mains/buried cables etc to serve fewer people in the suburbs.
Make property taxes proportional to the infrastructure required to support a neighbourhood.
Public transportation in suburbia? Does it really happen in Canada? In the US suburbia subsidizes public transportation without using it.
Not only that, but tax funds are typically funneled from denser, more sensibly planned areas of cities to the more well-off sprawled suburbs. So people who aren't even involved in the process of participating in the market for sprawl built houses will pay for the resultant externalities created by the need for maintenance.
Low-density sprawl is a result of local governments banning medium and high density building, not the free market. 80% of Austin is still single family homes despite a massive influx to the area. This is not because single-family homes are the most profitable to build, but because they are the only thing that you can legally build.
Because of well-organized opposition from busy body homeowners. City governments aren't captured by business-interests the way state governments and the federal government are.
>especially if they choose an area far enough out that there are few neighbors to complain.
There are always enough people to complain about anything to kill it. A lot of people oppose anything new in their city entirely- not just in their neighborhood.
Not necessarily high rises, but certainly apartment buildings, yes. This is the development pattern you see in places like Austin, Texas.
Listen to this recent podcast from 99% invisible (or read the summary), it explains it very well. Most of the territory of Toronto excludes apartment buildings.
Same zoning problems though
On the other side, letting housing to be crazy expensive, with few people capable of getting a new house, will always be profitable.
Yeah, and you probably also learned a laundry list of caveats which lead to the principle you're describing being non-applicable. Real estate is not a fully commodifiable good because it is non-fungible. A house in the middle of a city is not the same thing as a house 2 hours out of the city core. There is a limited amount of under-developed land to repurpose, and a limited amount of construction crews and machinery available at any given time to perform the work in question, so building production does not scale linearly with capital investment.
Construction has ALWAYS prioritized high-margin upscale dense construction where possible - if you own a block of rundown downtown shacks, you put a tower on it the moment you can. This isn't the issue - no one's complaining about Canadian Real Estate's ability to build a Class 1 commercial building or a high-end condominium complex. Toronto has been literally the number one city by crane count by a MASSIVE margin for years. The issue is how we can get widespread construction of low margin projects, Low-rise residential complexes, affordable housing, etc.
Because the margins are higher and you can't put up infinite towers.
>if they weren't focused on profit
They are.
Ah, but that's the thing about the free market. It doesn't care, for better or worse. If the barriers to building new houses are low and demand is high, new houses will get built and prices will drop until an equilibrium is reached.
>On the other side, letting housing to be crazy expensive, with few people capable of getting a new house, will always be profitable.
You seem to have conflated a free market with one consisting of too few people with a great deal of regulatory capture, where the criticisms you've mentioned here apply.
Technically houses are cheaper to build than in the past, knowledge and building materials are more plentiful, and capital markets are more efficient with more banks offering mortgages. So by multiple measures housing should be less of a problem, not worse.
This is the reality we've built by choice, people act like they don't know how we got here. If you go on Reddit they think if we all just became unionized and have more $$ we'd go back to the 1960s and all have houses again. But that problem with housing supply won't go away until we fix the root cause, throwing more wages (or gov money) at it without expanding supply will just increase prices further.
Some places have more or less run out of land. For example Vancouver is limited in it's north, west and south expansion by mountains, ocean, and an international border respectively. I believe there are similar issues in San Francisco, Seattle, New York, etc.
Indeed, higher density is the answer... I'm just pointing out that the increase in regulations is not the "only" thing that's changed.
No, the only difference is that a metric fuckton of money which used to be parked in productive equity investments ran out of productive uses because the taps were never turned off and started to slush into the real estate market via REITs.
The price of Toronto RE, for instance, has not tracked with regulatory costs - it has shot up shortly after the aftermath of 2008, when global capital watched Canada have one of the most stable real estate markets skip the fallout of the subprime mortgage crisis. Paired with the rock bottom cost of money, Canadian Real Estate was viewed as a particularly stable investment class, prompting both Foreign Investors and REITs to dump capital into the market. The value in the market is the fact that it WAS better regulated that the competition, but it's now a toxic asset class. No study that I can find indicates that the volume of regulatory costs associated with the Toronto or Vancouver housing markets can be attributed to the specific inflection points associated with our current pricing environment.
Wages cannot support the volume of leverage in the Canadian housing market. The numbers on display as reported by RBC yearly indicate that the average house in Vancouver costs more than 100% of the gross wages of the average worker in the city. This number is typically 30-40% in most functioning RE markets. So if consumer demand literally cannot create the numbers we're seeing, then we need to look at other systemic changes in the demand profile for the asset.
And it's pretty easy to see what's going on if you spend 2 hours calling brokers. Toronto condos aren't sold to people to live there; they're pre-marketed to block investors aiming to purchase groups of units for rentals and finance their purchases with rental cashflows - condominium sales come with rental guarantees for 3-5 years - even if the rental market crashes, even the speculative investors won't feel it until developers start to display counterparty risk issues to increasingly large groups of block investors. So why not leverage yourself to the tits? The entire market has to crater for your investment to fail to produce a return. The underlying cashflow supporting development of these units, rental dollars, don't actually need to exist for the investments to pay off (which makes sense, because they literally cannot as per the income/financing ratio described above).
Beyond this, REITs have a tax advantaged position in respect of other cashflow positive investment classes
The idea that regulatory burden is the cause of cost increases of this magnitude is lunacy.
People can only 'let housing be crazy expensive' when they can prevent others from supplying the market, which is only possible by wielding power, usually through the government. Which is what we have now.
Why aren’t they building these homes? How are they being stopped? Typically the thing that is stopping homes from being built is governmental restrictions on how many homes can be built (ie zoning laws).
Yep. This is pretty much how all the existing housing stock got built. It was a gold rush for housing developers building entire subdivisions at a time. People seemed pretty happy about it at the time, too -- and now that it's harder to build, housing gets more expensive and it's the youngest generation that suffers most.
As much as I agree with you, I don't think people who are left with expensive mortgage payments for a house worth 1/2 the original purchase price are gonna consider that policy to be the affordable option.
If we had a truly free market up and down the supply chain then perhaps that would alleviate the problem. But that scenario simply does not exist today. Additionally, the market may even correct itself; but not withhout a day on the order of years or decades. Long after those affected will have made decisions as abrupt as perhaps ending their own life.
The thing about Canada is that we have basically pushed all our industry and manufacturing out of the country. To get EV cars built in Ontario we basically had to pay significant money to bring them here. Which is the opposite of what government should be doing. You want to collect $ not give $ to corporations.
So what we have left is oil industry, the government is actively trying to destroy, and real estate. The government's actions are all about keeping housing from blowing up and that means less and less supply, more and more demand by mass immigration, and meddling with regulations that will certainly make the situation worse.
So if you think the housing market is bad, the government is not your friend.
We have a real issue since the federal funding of affordable housing got cut by the federal government many years ago. Thus current owners/landlords are having issues keeping the prices affordable, then when they can't sustain the building anymore, they end up having to sell, and agencies with lots of money gets to scoop them up. So we are losing 15 affordable housing units for each one we build to real estates sharks.
So I expect the answer to your question to be "they are still available, but at a rent higher than $750".