The Housing Crisis: We Must Tackle Property Wealth Inequality
jacobin.com
jacobin.com
I always laugh at how politicians and media ignite the culture war as if it’s not all part of the design. Keep everyone distracted over things that don’t ultimately matter while a very small segment of the society essentially plunders and loots the wealth and already asset owning and well connected part of society keeps owning bigger and bigger share of the pie. Under the surface, the entire last decade since GFC has been a class war waged by the elites. Upward mobility is dead and with it the whole “American dream” or “Canadian Dream” or “immigrant dream”. Welcome to the age of generational wealth and wealth transfer much like Europe a century ago.
What's the cause, specifically? I recall reading somewhere that the current Canadian government is pursuing a "Maximum Canada" policy to grow the population through immigration, but they're not building the housing required to meet the increased demand.
If that's the cause, it's seems like it would be pretty oppressive to do what the OP is advocating for: increasing property taxes. It seems like it would just lead to people losing their homes: government policy causes home prices to rise out-of-control, then the less well-off get kicked out of their once-affordable homes because they can no-longer afford the tax bill.
Home price gains that have far outstripped inflation or the average wage all have the same cause wherever it happens in any developed country. It's entirely self-inflicted, on one end by policies that favor home ownership by privileging it above other kinds of assets (mortgage interest deduction, etc.), and on the other by policies that deter simply building more, whether to fight gentrification, preserve the character of the neighborhood, or reduce environmental impact.
So, what specifically is happening in Toronto that's driving this (e.g. causing demand to go up, up, up)?
Edit: I think I found the article I was referring to earlier: https://www.noahpinion.blog/p/maximum-canada-is-happening. It says Canada's population has increased by 15% over the last decade (35 million -> 40 million). Apparently Canada has one of the fastest population growth rates in the world, all from immigration since it's birth-rate is sub-replacement. US population only increased 7.5% over the same period.
Canada is a developed country with a lot of natural resources; by a lot of metrics, it is one of the top 10 countries with the most natural resources per capita. It should easily be able to increase its housing stock by 1.5% a year at at a national level.
It looks like Greater Toronto went from 5.7 million in 2013 to 6.4 million, ten years later in 2023[0], for a slightly lower rate of growth than the nation as a whole. A cursory search didn't reveal any sources for the number of dwelling units in the GTA over the same time period; but I'm willing to bet that if you combined that plus the expansion in the supply of Canadian dollars, you'll explain most of that growth in home prices.
The money supply in Canada alone more than doubled in the past 10 years[1] vs. the 15% growth in population; so all else equal, you'd expect houses to transact for roughly 74% more CAD in 2023 than in 2013. The Toronto housing price index went from 154.36 in July 2013 to 360.78 this past July, at a 134% growth over the same time period. Most of that difference may be explained by a lack of building in Toronto. I'm sure some of it is other socioeconomic factors (increasing centralization of wealth in cities, etc.), but I don't think any of them are particularly unique to Canada.
If anything else, due to its abundance of open land (granted, not all of it is economically valuable) as well as its natural resource advantages, Canada should be much better suited than other developed countries to be able to handle its housing challenges. The fact that it's not is mostly due to policy choice, which I posit are choices similar to those made in other developed countries.
[0]: https://www.macrotrends.net/cities/20402/toronto/population
haha yes the latter statement a very important inclusion.
Despite being the second largest country in the world there's very little viable, good land in Canada and a housing crunch was inevitable.
Enormous swathes of Canada are sheer mountain, muskeg, and tundra. Lots of nice flat parts that are dramatically more important for feeding the world purposes than McMansion development.
All the good places to build are where the cities currently are, and they're running out of land. The era of razing a forest at the margins and building more suburban strip malls is over.
There are a multitude of reasons for high housing, but the strongest one is general anti-housing policies for decades, governments being completely asleep at the wheel and running into the end of easy suburban sprawl which has resulted in a game of musical chairs as people realize the era of the single family home is coming to a close.
We're at the inflection point where new development must come through redevelopment and intensification instead of greenfield development. Other places (ie. Europe!) got here decades and centuries ago, but Canada is still in the denial stage.
Canada's economy is 70% services (meaning, to varying degrees detached from the land) and as of May 2023, one in five Canadian workers were still working from home[0]. Surely some of those people could stand to build a city in the tundra ;-)
Hailing from a country that is literally 1/100 the size of Canada yet is much more populous, I find arguments that Canada is out of land uncompelling. You are right, of course, that it could build up vertically a lot more than it has so far.
[0]: https://www.benefitscanada.com/news/bencan/percentage-of-can...
https://www.centuryinitiative.ca/why-100m
Canada recently passed 40M this year:
https://www.statcan.gc.ca/en/subjects-start/population_and_d...
This inevitably happens as a society grows to the point where it values stability and maintenance over freedom and growth. The chaotic nature of individual liberty encourages both creation and creative destruction, which makes wealth change hands often. When government steps in to save the people from themselves, you get stasis, and it becomes increasingly harder to make your own lot in life, whether upwards or downwards.
> Upward mobility is dead
At least in the US, this still isn't nearly as true as a lot of people think it is. Sure, someone on their first job isn't going to be able to afford a house in any one of the most desirable cities in the world (let alone the country); but in vast areas of "flyover country", people make a living, buy homes with yards, and raise children.
2) buy houses
3) lobby govt for more immigrants saying "diversity is our strength"
4) Hire PR firms to say "diversity is our strength"
5) Immigrants need to live somewhere so housing prices go up because of demand
6) Profit
If you use Google there is plenty of research disproving you from Canadian sources that pander to both Liberal and Conservative readership.
I'll give you the benefit of the doubt, like the saying goes "the road to ruin is paved in good intentions".
The “missing middle” is what we should be building.
And while we're at it, let's implement a Georgist land value tax, so that gains in the value of the land itself, which nobody affects directly in a vacuum, does not inure to the landowner, be it BlackRock, The Rock, or your average Joe.
But a third of all Americans own homes[0], and I guess by now everyone is used to having the full faith and credit of the United States government be a tailwind to their own labor-free enrichment.
More importantly for a Georgist LVT scheme vs. regular property taxes is that with the former, you're only taxed on the unimproved value of the land, vs. the value of the lot plus the improvement (i.e. housing) on it. It's arguably the most economically efficient as well as the most socially just form of taxation, as that which is taxed is the thing that nobody created or made valuable.
Tenants always pay for the land value. If a new train station opens up and the costs of an apartment have not changed, you better believe the landlord will raise prices given the raised demand from the new value associated from the train station. The monthly payment that a tenant pays has nothing to do with costs.
The effect whereby taxes are passed on happen because when you tax something you get less of it, and with less of it it moves along the supply and demand curve and so prices rise. Since the supply of land is fixed, this does not happen with land taxes.
The question then becomes do you pay the value to the landlord, or do you pay it to the community?
This is the precise point, and thank you for elucidating it. With an LVT, the value of a highly-desirable piece of land inures to the community as a whole, and not whoever holds the title to that land. If the landowner wishes to come out ahead of this taxation, they are forced to improve it, whether in the form of tilling the soil, mining the minerals, or (most relevantly to our discussion) building a house or apartments on it.
As a side effect, it prevents the absurdities you see in many North American cities where there's a huge surface parking lot smack dab in the middle of a dense downtown area.
I buy a house. The government pegs interest rates near zero. I realize I can buy a much more expensive house for a similar monthly payment. I buy a more expensive house. Millions of others respond to the same incentives. Prices rise. Somewhere a leftist sheiks, "stop plundering me bro!"
> Upward mobility is dead and with it the whole “American dream” or “Canadian Dream” or “immigrant dream”.
This is nonsense. The home ownership rate is above the historical average and trending up.[0] Median household income is up ~50% since 1970.[1] The only possible way to argue that the 'American dream' is dead is to cherry pick data and/or hot-swap the actual American dream (of building a reasonably prosperous, middle-class life for yourself and your family) for some handwavy progressive analog.
[0] https://fred.stlouisfed.org/series/RHORUSQ156N [1] https://www.pewresearch.org/social-trends/2020/01/09/trends-...
Hemmingway has done good work in the last few years in exploring this and suggesting policy that could make things work a bit better.
His fifth suggestion of a Land Value Tax is a trendy one that has pulled in support from both the right and the left. I think a LVT would be a more fair way to tax land than a property tax, and would have an additional upside of incentivizing more efficient use of land (ie. apartments). The downside is that a simplistic implementation would be an enormous giveaway to very wealthy mansion owners, as they'd see a big chunk of their property tax bill vanish (the luxurious mansion part) to be paid for by lower income land owners elsewhere. I think for this reason a LVT implementation would be best balanced out with some of the other progressive property tax ideas Hemmingway suggests here, so that the ultra wealthy aren't getting a free ride here.
When the USSR or Warsaw pact countries imported temporary unskilled labor they build housing blocks for those folks --they had a plan.
Compared to Canada's relatively small population, a huge number of foreigners are bring brought in each year, and this has been going on for a long time now.
Keep in mind that it goes well beyond just economic migrants. It also involves foreign "students" and so-called "refugees" and "asylum seekers", among others.
This unnatural influx has introduced some significant economic distortions, with the cost of housing being just one of them.
This is controlled by the Federal government.
Housing is controlled by Provincial governments and municipal governments.
What immigrant is going to move to Cranbrook, BC when there's no jobs there and no community that speaks their language or government support services that help such people integrate into Canadian life. Those immigrants know better and hence go to the bigger cities.
There’s a particularly pernicious problem with increasing housing prices though which is that it creates a large number of winners as well as losers and somebody could be absolutely ruined if they buy a $1.2M house that they sell later for $400,000 and in turn the banking system would be imperiled so there are strong pressures to not take decisive action to stop property price appreciation or reverse it.
These units don't get built at all without immigration since that's where much of the labor pool is coming from.
The problem isn't immigration, the problem is that the US housing stock is designed to satisfy the desire to live in a sitcom style/hgtv flipped mcmansion.
There are plenty of countries with negligible immigration and without housing crises, so this is clearly false: https://en.wikipedia.org/wiki/List_of_countries_by_home_owne...
This is a common argument - anything done by immigrants is assumed to be only achievable with immigrants, despite numerous countries offering counterexamples, usually even the same country a few decades ago. The same population that built the country is assumed to be incompetent at any task they hand over to immigrants.
Why not? If there's predictable increases in demand that is being unmet by suppliers, surely the policy/factors leading to the shortage are a major part of the problem.
I thought though HN had a lot of people who liked Georgism (can’t say my bread is buttered in that side because I own a farm) but everybody is talking about immigration instead…
Of course people can have secondary homes, maybe to a lower tax and rented appartment would benefit from a reduction if rental price moderate.
Wouldn’t this just solve any speculation and make investments from « unequal« parties uninteresting?