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Comment by llm_nerd | Hacker News Reader

Canada is currently entering catastrophe levels, but because of lagging consequences people don't realize how much of a disaster is before us. There is a collective delusion that has sustained some profoundly self destructive policies. The toll is coming due.

Almost all of Canada cannot qualify for a home at current housing prices. Either to buy or to rent. The rental market is currently at the level of parody where the requirements filter out almost everyone. The bottom 50% of Canada, income wise, is in the precarious situation where if anything happens to their current housing, they will be homeless. Slowly social assistance and related programs are going to have to start resetting and the costs are going to be enormous.

https://archive.ph/4xWtC

This is a problem created by multiple governments over various parties, and at this point I don't see an exit that isn't enormously painful.

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>Almost all of Canada cannot qualify for a home at current housing prices.

How are you quantifying this? If this is true, how is it not reflected in some manner in prices? In other words, who are are the buyers propping up prices?

I'm not trolling, because if what you're saying is true it suggests that there is something fundamentally fraudulent about the Canadian housing market.

Canadian housing market is full of fraud at all levels, from people falsifying incomes, to real estate agents, to money laundering [0].

[0] - https://www.reca.ca/consumers/financial-considerations/money...

The buyers are foreign to Canada (investors), so the effects don’t affect the Canadian economy as directly as you might expect.

I don't have a source on me but I've read plenty about wealthy people in other countries buying large amounts of Canadian real estate as a store of value, even if it sits vacant. Mostly people in countries where there aren't so many great places to invest. But I don't know off hand if that's just a drop in the bucket compared to other things or what.

That is just vanilla racism/xenophobia.

https://news.westernu.ca/2023/01/expert-insight-canadas-ban-....

Data that tracks foreign buyers and owners in Canada are scarce and patchy. The Canadian Housing Statistics Program shows that non-residents only own about two to six per cent of Canadian residential properties in 2020.

Edit: Those numbers are in line with the US. Why is the US real estate market not that crazy then?

Hmmm...2 to 6 percent of a market can be more than enough to make a difference, even a sizeable one, if there is already a shortage. Now, there is still the question of why there is a shortage, but 2 to 6 percent in an already tight market is more than enough to spike the prices.

Of course, China shows that you don't need outsider investing to create a ridiculous property affordability situation.

No, it is a fact. The same happens in the US.

Real estate is, at worst, used for sanction evasion and money laundering, and at best, as a loophole for citizens of restrictive countries to extract more of their money from those countries.

All of these create an incentive to overbid on real estate.

Where I live, this is a known issue. In fact, the top real estate companies specifically try to attract foreign investors, and have stated so publicly.

Look at the chart in the article. Home prices plummeted in 2022, when the Canadian government enacted a 1% Underused Housing Tax (UHT) on Canadian residential property that is considered vacant or underused.

[0] https://sgp.fas.org/crs/misc/IF11967.pdf

[1] https://www.brookings.edu/articles/the-impact-of-treasurys-p...

[2] https://www.reuters.com/world/us/us-set-unveil-long-awaited-...

[3] https://gfintegrity.org/press-release/new-report-finds-u-s-r...

[4] https://www.faegredrinker.com/en/insights/publications/2023/...

[5] https://lewisbrisbois.com/newsroom/legal-alerts/foreign-inve...

> No, it is a fact. The same happens in the US.

Then why is the Canadian real estate market so much f'ed up than the US market?

Because it's smaller and more concentrated. With fewer cities containing a larger portion of Canada's population, the demand is focused more intensely.

Wait, if we are talking same percentages, why should that matter?

Also any data on "the demand is focused more intensely"?

Even in the US, the population and desirable RE for investment is focused in a few cities on the coasts.

True cause is Canada is facing a supply gap but politicians find it easy to blame foreigners.

https://www.linkedin.com/pulse/canadas-housing-supply-gap-tr...

Does the demand side of the equation just not matter to you? It’s not “blaming foreigners”, it’s blaming politicians who come up with the policies that affect both the demand and supply side of the equation.

There likely was a great deal of this at some point before 2015, but in 2015 BC finally started tracking who was buying homes and brought in a foreign buyer tax and since there there's been only ever more scrutiny on foreign buying, and from everything I've read foreign buying has fallen off a cliff.

Because there was no data tracked before 2015, whether or not there was indeed a significant amount of foreign buying remains speculation and theory but there are some signs that support the notion that it was important.

For example major luxury condo builder Westbank has significantly reduced their operations in Vancouver, pivoting away from super luxury homes explicitly marketed as pied-a-terres and in the pages of Monocle magazine and are now building increasingly in the USA and even Japan. Some of their projects in Vancouver changed from being condos to rental. That this all happened post foreign buyer tax suggests that foreign buyers were a critical part of their business plan and they needed to remarkably change it after foreign buyers went away.

The R/canada subreddit had a good breakdown last week

Essentially 92% of Canadians can't afford the average home based on the average income.

I think if you do "top" of the last month it'll be near the top.

My household is in the top 1% of income earners. We cannot afford a house in our exurb. 20 years ago, with this level of income, it would have been trivially affordable.

Yes, I rent for $4250 a home that you can buy for $1.7M. The distortion here is beyond ridiculous. The equivalent mortgage would be something like $7K before property taxes and maintenance.

Because you can’t imagine government moving fast enough to change policy, the only way out is likely a sudden and shocking collapse in home values caused by the bond market failing to continue its belief that Canada is sound.

I was renting a $1.4m home for $2200/mo in Vancouver. Something like a $10k/mo mortgage payment for 25 years at current rates. But they had bought it like 6 or 7 years before so _their_ mortgage was substantially lower.

We haven’t even seen the full brunt of this—every time one of these properties changes hands at this point as the current owner cashes out, we’re going to see one more of these “affordable” rentals off the market in one way or another. (Either they hike the rent to the point of unaffordability, occupy it themselves, or leave it sit empty to just store or accumulate value.)

And just to put it in some perspective—to afford that shitty run down house I was renting, you’d need to be making somewhere around $720k/yr pre-tax to pay the mortgage and maintain the “1/3 toward housing” ratio. People in Canada do not make $720k/yr.

Absolutely this. A friend considers herself too poor to afford a house in Vancouver. Her company makes $10M a year and she peels off 10% net profit. Only in Vancouver…

And here's me escaping the west along with my neighbors escaping China, none of us have had a rental price rise in 4 years. We live only a few hundreds metres from the beach and even closer to vibrant national parks.

What would you all pay for such a thing? I'm ashamed of how little it actually costs, you can't even rent a car park in my old city for the same amount.

If this really is hacker news then you can either find somewhere good to live with a bit of searching or you aren't particularity good at hacking the basics of life.

Where did you move?

I don't answer that question anymore because I know the exact response it entails.

All that matters is that I'm happy as a migrant from the west, I go home to visit family/friends regularly and who are always stressed with long commutes and up to their necks in debt in cities that are overflowing with population growth. I truly worry for my nephews and nieces there, we've created a rough world for the kids. There's plenty of good things from my home country that I appreciate but for the average person life isn't that great considering their net worth on global scale.

When suicide rates are on par with Japan it's somewhat comical to see the city I grew up in on the "top ten greatest places to live" stats that come out every year.

If you took the median house price from where I'm from and put it into a basic savings account you could have $60k USD annually. That goes a very long way across most of the planet, is the house actually worth that much or is it a mass delusion? Know plenty who have gotten out while the going is good.

Do you have children?

No but many of the other transplants here do, they seem to survive fine. It's very strange to see a 12yo kid who was born in the anglosphere being able to speak 3 languages fluently.

Where are you? Southeast Asia?

Why does it matter?

> This is a problem created by multiple governments over various parties, and at this point I don't see an exit that isn't enormously painful.

Isn't Canada's housing problem caused by a supply crunch? Other than the Canadian government going into the real estate business and start building medium and high-density appartment blocks, what role does the Canadian government have in this mess?

Also, please note that this issue is plaguing basically the whole European housing market as well.

The supply crunch is caused by wealthy Canadians owning multiple homes, most of which are empty. There are some relatively new speculation and vacancy taxes, but they are trivially easy to evade - just have your adult child “rent” your vacant cottage and suddenly it’s occupied.

During the pandemic period, low interest rates caused home owners with plenty of house equity to go on a virtual binge of home buying. I know of people who bought four extra houses in 2021 just because they could. The bank gave them free money. Why not?

> The supply crunch is caused by wealthy Canadians owning multiple homes

Is it, though? I mean, that would drive up demand, but what happened to supply? If your hypothesis had any basis, wouldn't real estate developers rush to profit from that demand by building more homes? They wouldn't turn down all that free money, would they?

And more to the point, why is that a government problem?

> but what happened to supply?

Insufficient labour. Anyone who builds houses was booked up for years. It looks like this is finally starting to turn, but that doesn't help right now. You need to build houses in the past to be able to live in them now.

With the strongest labour market possibly ever seen in Canada, you didn't find anyone going to build houses because they had no other work. So you throw more money at workers to try to compel them away from the work they were doing and into housing work, but that just... drives up the cost of housing.

> Insufficient labour.

I'm not sure that explanation is plausible.

Canada's housing stats show a drop in total investments in building construction, and a drop in housing starts.

https://www150.statcan.gc.ca/n1/daily-quotidien/230818/dq230...

https://www.cmhc-schl.gc.ca/professionals/housing-markets-da...

If supply was catching up with demand to ride that gravy train, we would see in the very least an increase in investments. Why would anyone refuse to invest in a venture that's handing out free money?

Also, labour costs don't account for more than 30% of the build cost, which is far below the current real estate prices. Even if they doubled salaries of construction workers, selling apartments in today's market would still be very profitable.

> Canada's housing stats show a drop in total investments in building construction, and a drop in housing starts.

Hence why the labour issues have started to turn...

> If supply was catching up with demand

Demand has backed away because an increasing number are not willing to take the risk on housing now. High interest rates and a lot of increased pressure for governments to do something means that a coming crash is highly likely and nobody wants to be the bag holder.

Same reason rents have skyrocketed. If you can rent, why on earth would you buy a house right now? Indeed, housing tends to be highly sticky, but it's almost certain they will cost a whole lot less in a year or two. The downward trend is already quite visible, with average price in most markets peaking in 2022.

I’m sure the supply side is constrained by various things that aren’t uncommon in other places. NIMBY zoning, terribly slow permitting, etc. But the demand side has been lit on fire by cheap money.

It’s as if Canada is a country that pulls resources out of the ground, takes cash from foreigners, lends it out to boomers, and then buys houses. That’s all there is in the country now.

In the late 60s and 70s when Canada was building the most amount of homes, the Federal government was deeply, deeply involved in housing not just by financing and building publicly owned below market housing and coops, but also huge tax expenditure to heavily incentivize and help finance market housing.

All that ended in 1993 with the Jean Chretien austerity budgets. Feds stopped participating in social housing, incentives ended, transfers to Provinces were scaled back, and Provinces responded by pulling back themselves.

Accordingly basically nil non-market housing was built for decades.

Market housing financing became harder and creation slowed and shifted toward a sort of condo product marketed toward the relatively wealthy. Creation of purpose built rental pretty much ended.

So at this point it's pretty clear that huge tax expenditure and investment from the Feds and Provinces in helping finance new housing creation both market and not market is required.

There's also policy work to be done here to try to stream line municipal rules to hopefully make it easier such that less government aid is required.

But yea just by looking at what we were doing in the 60s/70s and now there's a massive difference that suggests at what the solutions could be.

Your link was heavy on opinion and light on data, so I went looking for numbers on Canada to verify your assessment.

Median income after taxes: $68,400 [1] Median rent (2 bedroom): $2,300 [2] Average tax rate (single worker): ~32% [3]

If we apply the 30% rule (it's ok to spend up to 30% of pre-tax earnings spend on rent), your assertion doesn't hold up - well over 50% of Canadians are making plenty of money to afford rent. Of course, in expensive cities where rents have far outpaced wages things are going to be bad but that's true pretty much everywhere in the West these days. If anyone has better numbers, please share.

[1] https://www.policyadvisor.com/magazine/what-is-the-average-i...

[2] https://www.zumper.com/blog/rental-price-data-canada/

[3] https://www.oecd.org/tax/tax-policy/taxing-wages-canada.pdf

What is the purpose of your [3] link? Genuinely curious.

-Very few Canadians can currently qualify for a mortgage for an average home in most markets. The housing market has lost all rational basis.

-Canada has approximately 2 million apartment units across all of Canada [1]. The vacancy rate is currently at less than 1% across Canada, and in many areas is hovering around zero. Just as some context, the vacancy rate in California pushes above 5%. NYC is an especially tight market at 3.1%. In both cases the apartments per capita is dramatically higher than Canada.

-Landlords of apartments that do come to market have become spectacularly picky, because they can be. Perfect credit. Perfect history. No debts. People have been in situations where they've offered tens of thousands in deposits and a seemingly perfect application, to be denied.

It is fascinating how often data is shown that betrays that Canada is in a particularly terrible situation -- like this very submission -- yet people still retort with "oh well it's bad everywhere". No, it is nothing like Canada.

Canada is a fully saturated market like nowhere else on the planet. And this government is squeezing a hundred thousand more a month into an already full container, with zero indication of a letup.

[1] - As some fun context relative to the 2 million apartments across the entire country, Canada currently has >900,000 international students in Canada, a number that is growing by leaps and bounds.

My point about the 30% rule for rent is that you calculate that based on pre-tax income. I provided median post-tax income, so to get pre-tax you need to know how much people are paying in taxes.

I really don't understand your point here since it truly seems more emotional than data-based. Why are you focused on mortgages / home ownership as opposed to being able to afford to live somewhere? What do vacancy rates have to do with affordability? Why don't you provide a single concrete example of a majority of Canadians being unable to afford rent or being "filtered out" as you originally claimed? All your points here are tangential and don't support the argument.

"Canada is completely messed up" is a common refrain online these days, but I just don't see it either in the data or in talking to friends who live outside the Vancouver/Toronto popular areas.

"it truly seems more emotional than data-based"

The median Canadian has a credit rating of 650. The median Canadian cannot remotely afford a home in any Canadian market. Apartments -- the absolute last resort -- have vacancies below 1% in most markets, 1.7% nationwide. Canada is seeing an immigrant intake of approximately 130,000 per month.

If this isn't data to you, you are clearly not arguing in good faith and are either a contrarian, agenda-driven, or a troll. Or a mix of the three. The retort of "I talked to a friend in Canada" is so absurd that it confirms the prior.

Alright we're done here since you don't care about actual financial facts. Denouncing people as trolls when they provide data that goes against your opinion is a bad look. Credit rating has nothing to with anything. I already provided you hard data showing that median Canadians absolutely can afford rent in most Canadian markets, but you're just ignoring it. Now you're restating vacancy rates as though that proves something. It doesn't. You clearly have an agenda here and a belief set around that so I'm not going to convince you of anything.

You just repeated that credit ratings and vacancy rates don't matter regarding people's ability to find housing in an extremely tight market with demand dramatically exceeding supply. Your position on this is detached from any functional reality that yes, we are done here. Your opinion on this is uninformed.

Hi, Please take note that the listed median income is for a financial family. It does not reflect the aprox 32 000$ income of single workers. It does mean that most people cannot afford to be alone.

Yep. I've been thinking about this a lot. It's... very very very not good.

The US may be in a more or less similar situation. We have a lack of affordable housing in every state, have underbuilt for decades, etc.

I don't want to underplay the housing crisis in the US; the problems are serious. But the situation in Canada is like taking all of that and tripling it.

There is a problem in many parts of the world right now, and the same housing problem can be cited in almost all of the West.

The scale of the problem is dramatically different. In the US, like much of the world, there are the expensive areas and then the less expensive areas, and people migrate accordingly. Gentrification happens and people have to move further afield, etc. I see listings for extraordinary homes in various towns in the US for prices that are absolutely dreamy (not like ghettos, but nice little towns). In a remote world, the US has astonishingly attainable options throughout the union.

In Canada, far-flung garbage towns have million dollar bungalows and $3000 rents. There are no inexpensive options anywhere, no matter how far out you're willing to move just to have a place to live. The country literally has politicians telling people to loan a bedroom. Yet in the face of actually falling home building and recurring disasters, the governing party has doubled down on an immigration rate that exceeds every other developed country (and I'm not talking about per capita, I'm talking about in absolute numbers!). It's unbelievable.

I was homeless for nearly 6 years. I was willing to relocate to anywhere in the western US to make my life work and get back into housing and spent a few years researching my options.

I'm not convinced the "affordable housing" people imagine is available if you go far enough out in the US is as available as is popularly presumed.

I don't have to imagine anything. I can pull up Zillow right now and find some incredible homes priced at what would be considered very cheap here almost anywhere in the US. Even San Francisco is looking pretty economical! Outside of the major centres homes are amazingly inexpensive.

Obviously this doesn't mean everyone in all situations can find a home, but the scale of the problem is just dramatically different.

I had this same argument with people over and over on HN while I was homeless. If you want to actually move there and live there, looking into those "cheap" homes frequently is a case of they aren't actually livable and need many thousands of dollars of work, among other issues.

You are predicating this entire discussion on your own personal experience. I have no idea what your income, credit rating, job, etc is, but as mentioned obviously people fall through the cracks and have trouble anywhere, at literally any time in human history. I mean, you mentioned that you looked for six years, yet even the US notion of a lack of "affordable" (which again, is a relative term) housing is a recent phenomena.

No, I'm not looking at teardowns. Many of these are absolutely gorgeous, extremely well-appointed homes. This is more than just touristy noise at this point: I am seriously considering relocating to the US because of what is happening in Canada, and have looked in depth at available homes across the nation.

You've basically said "my personal firsthand experience trumps yours" when my personal firsthand experience includes living in multiple places in the US and yours apparently includes living in Canada and looking up info about the US online and concluding life here might be better for you.

I wish you luck in finding your bliss, but this seems like an unconstructive discussion.

PS: What's on the internet is not necessarily a comprehensive and accurate picture of reality on the ground.

> I was willing to relocate to anywhere in the western US

The western US is a lot more expensive than the rest of the US.

https://cdn.nar.realtor//sites/default/files/documents/ehs-0...

I have a serious medical situation. For me, that makes the eastern US vastly more expensive.

I'll leave this here: https://www.centuryinitiative.ca/

Interesting to think at 100M inhabitants, indigenous issues wont' be a major issue anymore... tiny squeak in the dark.

IMO the cost of living US kind of averages out these days. House price gradient is pretty slim, and the large metros typically have less expensive services due to local competition/robust economies, vs the rural areas where medical care can be extremely pricey, food prices are outrageous, and no local competition to sustain more than one option for most staples.

Thank you for coming to my TED talk on location-based compensation is wage theft.

The big equalizer is the opportunity cost of not being able to find an income stream if you lose your current one, or the cost of not being able to find better income streams.

Call it volatility, and it is not easily calculable as a number. I can get a job move to cheap Topeka, KS, but how much does the volatility cost me if I lose that job or I get laid off, etc.

>rural areas where [...] food prices are outrageous

How? How can rural people afford it? Are you talking about rural places that are tourist locations? Do you have any data on this? It seems wrong to me.

Stuff like UBI sounds less insane if that's your alternative, and if it's truly as bad as you're suggesting it is. I wouldn't know the Canadian market well enough but based on armchair knowledge of list prices, paired with the knowledge of lower wages, it doesn't seem too far off.

I don't see how UBI helps. It would help if home prices were low enough such that builders aren't incentivized to build, but high enough that people can't afford them. But that isn't the scenario. In the current scenario, UBI or any other form of rent subsidy is just going to go almost directly into property owners bank accounts.

UBI would simply increase housing costs. The only way it wouldn’t is if UBI was funded from a land value tax, but even that would require enough housing in non desirable areas.

Unless there's in increase in housing supply, UBI will simply increase what the market can bear. That is, in due time, the UBI "advantage" will end up in the pocket of landlords.

> This is a problem created by multiple governments over various parties

Why blame "government" and not capitalism? Canadian Gosplan didn't conspire to set housing prices at insane and rising levels. It was the market mechanism doing its own thing.

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