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Comment by __derek__ | Hacker News Reader

> The central bank defines an investor as a buyer who took out a mortgage to buy the property while maintaining a mortgage on another home.

In the US, a lot has been made about large investment companies buying up houses, but this is something different entirely:

> This category represents homebuyers with multiple mortgaged properties. This means investors are homebuyers who either:

> * purchase an investment property while maintaining their primary residence, or

> * purchase a new residence to live in while converting their existing residence into an investment property

Specifically, "investors" excludes anyone who didn't use a mortgage to purchase (e.g., all-cash buyers, any buyer with alternative financing). AFAICT, it would even exclude someone with a paid-off house who bought a new investment property with a mortgage.

[1]: https://www.bankofcanada.ca/2022/01/staff-analytical-note-20...

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It seems like it would also include people who are buying a new property to occupy as owners that will be mortgaged, while planning to later sell their existing, also-mortgaged, owner-occupied property.

Those people are not investors by any useful English-language definition, but would be counted as such by this method. This is exactly the situation we were in when we bought our current home, and anecdotally, is not uncommon when people are moving in together from previously separate, owned properties. Sellers prefer zero sales contingencies over one sale contingency and prefer one over two.

I believe those would be called repeat buyers under the Bank of Canada methodology because the Transunion data should connect their new mortgage with the discharge of their previous mortgage.

If someone had a house with a mortgage, bought another house with a mortgage in May, and discharged the original mortgage in October (or the following February), were they a repeat buyer or an investor? Plain English would say "repeat buyer", but I can't tell definitively how they'd be treated in the data.

The one clear reference in the article strongly suggests they'd be categorized as an investor: "The central bank defines an investor as a buyer who took out a mortgage to buy the property while maintaining a mortgage on another home."

I don't know. There's no link to the Transunion data set, so it's not possible to dig in. Even the sentence you quote is ambiguous because "maintaining" indicates an ongoing active state. Assuming that the dataset is a point-in-time snapshot, there are probably some repeat buyers classified as investors because of timing.

If there’s an affordability housing crisis at the level of Canada, where home prices are so wildly out of whack relative to median incomes, it’s IMO entirely reasonable to ban the purchase of investment properties in the single family homes market for anyone. This will never happen because of the political backlash, but housing as a speculative asset is fundamentally insane and corrosive to societies. Housing affordability is directly tied to all kinds of broader social outcomes, from crime to public health to educational achievement and it makes zero sense to sacrifice these on the altar of “fuck you, I got my house(s).”

Too many people get hung up on the “house” being the thing rapidly appreciating when in areas like major Canadian metros it’s the _land_ sitting under the house that is becoming more and more valuable as the Canadian government is importing more and more full grown adults who need housing _today_ in those major metros.

Okay, then do Georgism or some other form of land value tax. Distinction without a difference. Destroying your society for the benefit of real estate speculators is insanity, is my point.

It's funny because LVT would reward multi family investment properties while raising taxes for single family home owners.

How is that "funny"?

The continued proliferation of cookie-cutter detached single family homes with useless lawns is big part of several problems we currently face as a society.

Incentivizing denser housing is a good idea.

It is funny because people always pitch it in threads about investors. Investors are who will build more housing if zoning laws are changed. An LVT basically encourages investment in the land.

I am in favor of this but it doesn't stick it to who everyone is complaining about here, it benefits them.

Investors (financial speculators) are specifically the kind of people who shouldn't be involved with housing.

Would reward mansion owners even more.

The biggest losers of a LVT are SFH owners living in a humble old near worthless house on relatively valuable land.

The biggest losers of a LVT are SFH owners living in a humble old near worthless house on relatively valuable land.

No, because those folks can sell their property to a developer and earn a nice return while moving to a cheaper area.

The humble house owner can already do that now under the current property tax regime (where they would pay less than under a LVT regime). The only change here is that their taxes go up and they're thus "encouraged" to sell. Seems bad from their POV!

The LVT would zero the tax on improvements, and accordingly the tax on land would have to increase to compensate.

A mansion owner for example may have 40% of their bill be related to the expensive mansion building. Some regular humble house owner may only pay 5% of their tax based on the value of the house. So when the portion of the houses are eliminated and the land tax between them normalized, the mansion owner now pays less and the humble house owner pays more.

Listen I like a LVT I'm just pointing out that it's a big time giveaway for the very rich if it's implemented in a very basic way.

The net result is relatively poor homeowners are shoo'd out of their homes and forced to capitulate and move due to high taxes, while mansion owners get a tax cut.

If we want to bring in a LVT then we should also be bringing in some progressive property taxes on the wealthy.

I don't see a problem whatsoever with someone building a mansion out in the country to save money on taxes. LVT is not about that. It's about taxing the luxury condos downtown, and those definitely are more progressive than property taxes.

While you're spot on, let me know when you can easily pick up a home and move it to cheaper land. It's just not practical to separate the two.

A person I know of outstanding moral character (has adopted 3 kids) boasts about voting against any development in his area. I don't know what it'll take for people to see what you are saying

I don’t think people with moral character can be reasonably expected to always have moral views on every subject matter. Not to be political but this is what people mean when they talk about intersectionality. For example a women’s rights advocate might unintentionally exclude disabled women, or be harder on black women they work with than white women for being ghetto or ratchet.

You are being downvoted but you are right. It just depresses me to see that people I look up think this way. I have met others who also can't see that building is the solution because of more exotic reasons: those who want to impose price controls because they think this will somehow finally allow them to own that coveted flat in the center, those unwilling to allow the mass building of lower quality stock because who cares about poor people's houses, etc

A multitude of entitled opinions that in a democracy hinder the construction of houses for the future generation

I think the problem is that people have a vote. Most people would like things to stay as it is around where they live. I feel in my country there is not so much tools for NIMBYism as people are not listened to so much. I can support better infrastructure on a city level but can’t really do much if it is decided that the train needs to run over my house.

Yes, people who currently live somewhere get a say, while others who want to move there do not.

Yes, the same people that agree that there’s a housing crisis and that their city should in general have more affordable housing, just not in their specific neighborhood.

Often laws passed by the federal legislature or provincial legislature that, in practice, only effects people living in a small area. I don't see why decisions related to housing can also not be made at larger level.

To put it another way, it often happens that people will vote for candidates at the provincial/federal level that support increased immigration and/or population growth, and simultaneously vote NIMBY at the local level.

Kind of like people in developing countries who want to move to developed countries.

California seems to be forcing zoning changes onto cities that have not allowed enough new housing to be built (things like expediting approvals for allowed development, also allowing R3 to replace R1).

I assume that their politicians were worried about all the people leaving.

It makes sense to set a lot of zoning policy at the state level, where all people are represented, so that incumbent local property owners can't selfishly micromanage everyone else.

Japan is an example of a place that does a great job with this. Housing there is more affordable and convenient. Residential side streets are off-street parking only, and each property can be a triplex, with one unit allowed to be a low-impact business, off-street. These side streets connected to larger roads with denser retail/apartments leading to planned high-rise areas that are allowed to grow when/if the population grows. Industrial areas are separate, on the other side of town.

In this proposal, who gets to own the houses that are rented?

I suspect the complexity with this approach, is these "investors" are also the source of the majority of rental inventory in the country. As far as I know we don't build rental buildings anymore, it's all condos with 30-80% of the units going to investors who then rent them out.

Also there are situations like, the buyer who buys a run down house to rebuild or do major renovations that would need accounting for in any sort of ban. Or the condo developer who spends millions buying 3-10 houses and turning them into a condo tower for hundreds of people to live in.

Honestly I think that owner occupied homes should count as investment homes too. There is scant difference between the economic interests of a landlord and a homeowner.

Which is what lets homeowners buy a second home so much more easily than younger people. The asset price inflation of homes in Canada has been remarkable at concentrating the productive labor of working Canadians into the idle hands of homeowners.

So this includes all landlords too? If I buy a second house, do it up, and rent it, I am an “investor”?

While I can see how the delta in this metric is suggestive, it is not clear how it affects the available housing stock (rent+buy).

What I think people actually care about is unoccupied investment properties, where someone buys and leaves it vacant. Apparently a lot of Chinese capital is parked in this way due to their capital controls preventing cash from being freely moved out of the country, though to be clear it’s not unique to China.

Or if these properties are being flipped, perhaps that has a short-term negative impact on available housing stock as properties are taken off the market while being renovated. (If the marginal second bidder would have moved in to the house as-is, then the winning bid renovating and selling is reducing supply / increasing demand for housing.)

As you note, a whole other kettle of fish around REITs that won’t use mortgages. In the US, REITs are a major contributor to new construction for example.

> ‘So this includes all landlords too? If I buy a second house, do it up, and rent it, I am an “investor”?’

Of course. The second house is purely an investment to you.

I don’t imagine anybody particularly loves being a landlord. It’s sometimes messy compared to owning a stock. If you could get a better return with less risk from some other investment, you’d put your money in that instead. But residential real estate in cities happens to have an appealing risk/return profile that’s not directly correlated with stocks, so there are good reasons why both small and large investors buy housing.

Yes, you are an investor. You do not live in the home you purchased. You rent it to earn money, i.e., an investment.

This creates a huge problem. Rental properties have different regulations in different places. My brother-in-law was not given a lease renewal amnd was forced to move (within 30 days) while, where I live, that is illegal unless there is cause for eviction. It creates instability. Also, my rent increased $550/month in just two years. Who can afford that? This creates a tenuous housing issue. Thankfully, I was able to move and buy a very small condo so I have a set monthly payment and no longer need to worry about losing my home every year when my lease ends.

There is a huge difference in how I can plan for the future knowing I am not going to be, potentially, homeless every year.

Housing would be (much) more difficult if nobody could rent and everyone had to own the homes they lived in, not easier.

There are more options beyond "own a house" and "pay someone else's mortgage without getting any equity"

Could you give some examples?

Within capitalism, we could have some kind of system to provide equity to tenants. They are effectively already paying a mortgage (just not their own).

Outside of capitalism? Many more possibilities.

> we could have some kind of system to provide equity to tenants

This sounds interesting. Is this hypothetical? How does that equity get transferred/slowly leaked to the next tenant? How does one liquify it?

I don't know how such a system would work exactly, but I know it would require that we stop treating houses like speculative assets and start treating them like a basic need (shelter).

It would work better if people were forbidden from living in homes they also owned, or at least taxed extra for doing so.

Could you, please, give more details. This seems very unintuitive, to me.

In Switzerland they tax imputed rent. If you buy a house and live in it, you are paying extra taxes for the privilege. For strongly related reasons the rate of living in a home you also own is only about 35% in that country.

If no one ever bought houses to use as investment properties then demand would be a lot lower, making houses cheaper and thus more affordable to families. There are plenty of places in cities in Canada where the cost of renting a house today exceeds what it would have cost for a mortgage just a few years ago. Investors buying houses for rental income (and appreciation returns) compete with family home-buyers to drive up prices in desirable areas, especially near schools.

How does an investor who is renting drive up the cost of housing? Barring certain oddities (e.g. college towns tend to have higher rental costs than purchase due to the transient nature of the populace) rents and mortgages should obtain parity very quickly, especially for families looking to stay longer than the transaction cost of the loan.

Because real estate prices are highly location-specific. People looking to buy a home in a nice, safe neighbourhood with a school in walking distance are forced to compete with investors buying houses and turning them into Airbnbs. As the article says, 30 per cent of home buyers are investors looking to grow their portfolio, not people looking for a place to live and raise a family. If those investors put their money into the stock market instead then that would free up the limited resource of homes near schools, causing prices to fall and making it more affordable to start a family.

Imagine what life would be like if we let billionaires buy up all the lakes, rivers, and other freshwater reservoirs. Water prices would shoot through the roof and we'd all be forced to pay the "water barons" whatever they decide to charge. It would be a dystopian nightmare and absolutely toxic to society. If you're curious, this is the premise of the classic sci-fi book Dune.

AirBnB is not the same thing as long-term rental, it’s a major oversimplification to bucket all types of rental properties together.

I spoke to the owners of the last 3 Airbnbs I stayed in. All of them were converted from long-term rentals. The landlords in all 3 cite much higher profits from Airbnb as the reason for conversion.

That's fine, but isn't evidence that short-term rentals dominate the rental housing market. They don't. Short-term rentals make up less than 1% of the housing stock.

Obviously, the housing that short-term rentals use has to come from the housing stock somehow, so it's not interesting to point out that Airbnb's cannibalize the long-term rental market.

(Over the medium-long term this is a problem that'll be solved by a combination of more construction, which is desperately needed anyways, and ordinances regulating Airbnbs, like NYC just passed.)

If there were absolutely zero investment homes, then the price of a typical small home right now would be 150k.

Can you show your working on this assertion?

Far less demand.

> If I buy a second house, do it up, and rent it, I am an “investor”?

Clearly yes.

Under-occupation is a separate issue; it's tempting to argue for an unoccupied homes tax, and politically attractive, but it has to be fairly small otherwise at the margin some houses in poor condition get demolished so the land can sit empty and accumulate value.

It doesn't have to be small for that reason. Tax that land just as hard.

Yes of course. That is an investment property; the sole reason for ownership is generating a financial return.

A much better term is "speculators" since a second mortgage is purely a leveraged investment.

> it would even exclude someone with a paid-off house who bought a new investment property with a mortgage.

That is called an investor, since they purchased an investment.

Right, they're saying those wouldn't be counted under the article's methodology.

I wrote "AFAICT" because that's my inference of a counterintuitive result of this methodology.

Almost as if the large companies would like those unable to buy homes to misdirect their ire.

The large companies just don’t account for very many homes. Once you control out for homes under construction, that just isn’t the issue. The issue is that we dramatically restrict how much housing anyone can build, specifically, upward.

The city I live in isn't restricting it. Condos are going up as fast as they can be built and the parks are still filling up with tent cities and rents are still doubling. Something just doesn't add up. I'm in Canada (don't want to give exact city, sorry).

Well, without specific numbers and statistics, it's hard to know if demand for housing are being met.

I’m on King on a 504a right now. It’s massively restricted. You just can’t tell by looking. “Lots” isn’t a measurement.

I don't know if you've looked at Canadian housing news in the last few days, but do you really, really think that "condos are going up as fast as they can be built"? Because if you do, I think you're very misinformed.

Yes that is an issue. There isn’t only one issue. As an extreme illustration, think about trailer homes and trailer parks as an example.[0]

[0] https://www.nytimes.com/2022/03/27/us/mobile-home-park-owner....

Zoning hurts, labor shortage hurts, speculation hurts, sprawl hurts, etc.

We don’t really need to look for a single cause. All of these things are happening and interacting with each other.

In general - zoning causes the sprawl and the speculation, and worsens the labor shortage. It is the only root cause.

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