[Nepean]

I have been reading several stories like the one below in the press recently. It makes me wonder what impact this could have on the various development projects in the pipeline in Ottawa. Coupled with impending job cuts in the federal public service, as well as another global economic slowdown, and we may see some projects put on hold.

What do others think?

IMF casts nervous eye on Canadian housing market

kevin carmichael
WASHINGTON— Globe and Mail Update

Canada’s average home price is about 10 per cent higher than models suggest it should be, posing a “vulnerability” to the country’s economic outlook because a drop in prices would be a blow to already highly indebted consumers, the International Monetary Fund warns in a new report.

With household debt at about 150 per cent of disposable income, the domestic spending boom that helped Canada weather the financial crisis already is at its limits.

A collapse in housing prices would be a serious blow to the economy because of the link between consumer demand and household wealth.

The IMF, in its annual report on Canada’s economy, estimates that a 10 per cent decline in housing prices could result in a 1.1 per cent drop in personal consumption, excluding durable goods, which would correspond to loss 0.5 per cent loss in gross domestic product.

“Adverse macroeconomic shocks, such as a faltering global environment and declining commodity prices, could result in significant job losses, tighter lending standards, and declines in house prices, triggering a protracted period of weak private consumption as households reduce their debt,” the IMF says in the report. “The effects on economic growth could be exacerbated by weaker external demand and slowing construction activity.”

This isn’t the IMF’s base case for Canada. The fund is laudatory of the policies of the Finance Department and the Bank of Canada, and predicts the country will continue to manage relatively well in a turbulent global economy. The IMF predicts Canada’s economy will slow to annual growth rate of about 2 per cent next year from 2.2 per cent in 2011 due to weaker demand for exports.

But it’s the IMF’s job to point out what could go wrong.

Canada’s position in world trade has weakened, the primary evidence being a persistent trade deficit after years of enjoying a trade surplus. This is primarily the result of weaker demand for automobiles and lumber in the United States, but the country also is paying the price for doing too little to enhance productivity and seek out new markets, the IMF said. Canada’s growth prospects over the near term are limited as a result, the fund says.

The IMF’s warnings on the housing market and household debt echo those of the Bank of Canada. The fund’s report amplifies the stakes by quantifying what could go wrong if the housing market slips. An external shock such as an abrupt drop in commodity prices that triggered a decline in house prices by 15 per cent, accompanied by a severe downturn in construction, could result in a 2.5 per cent loss in GDP over two years, the IMF says.

Policy makers should continue to watch developments in the mortgage market closely, the fund says. Lending for homes has slowed, but still is a growing at a “robust” pace of almost 7 per cent, the report says. Finance should be read to take stops to slow borrowing further if home lending continues to expand excessively, such as larger down-payment requirements for mortgages and demanding lower debt service-to-income ratios, the IMF says.

[Nepean]

Here is another story, this time from the Vancouver Sun:

Housing boom levelling off: report
By Tracy Sherlock, Vancouver Sun
December 21, 2011

Canada's real estate market is strong compared with its global counterparts that are struggling, but the boom has lasted longer than in most other countries and shows signs of waning, a Scotiabank report said.

"The Canadian housing market remains an outperformer among advanced nations, with real home prices up 4.8 per cent year over year in [the third quarter]," Scotiabank's Global Real Estate Trends report said.

"While the sector's continued buoyancy is impressive, monthly data through November suggest prices have levelled off since the spring, with conditions in the majority of local markets in 'balanced' territory."

The report credits "ultralow" interest rates with continuing to attract buyers, while economic uncertainty and some recent slowing in hiring are possible dampers on demand in Canada.

Canada is at the top of the 10 countries included in the Sco-tiabank report.

Five countries - the U.S., the U.K., Ireland, Spain and (to a lesser extent) Italy - show average house prices significantly lower than their peak values, while the other five countries - Canada, Australia, France, Sweden and Switzerland - still show average prices at or near record highs. The cycle of rising real home prices is long, lasting on aver-age 12 years, according to the Scotiabank report.

"Italy's boom was the shortest at eight years, while Ire-land and Sweden count 15 years. Canada's ongoing housing boom is in its 13th year," the report states.

Canada's house prices did not rise as steeply as those in other countries, with inflation-adjusted average home prices up 85 per cent since 1998, according to the report.

"Canada's residential real estate boom started several years later than many of its counterparts, with the economy still feeling the effects of the deep recession of the early 1990s and weak labour markets through mid-decade," the report states.

[reidjr]

Nepean
I think it will have a impact in ottawa however even people who get let go for them goverment many will still be in good shape as alot should have a fair amount of money put away so no overall in this area i don't think there is a reason to worry to much you could have some work part time in terms of a contract etc plus while some jobs maybe cut that does not mean some will be out of work as they could find another job in the goverment or just retire.As for prjects beeing put on hold no i don't think so if anything i think we could see a even bigger condo boom as some may want to downsize and move from the burbs into the core and with the lrt that will help as well.

[KHOOLE]

Nepean,

An economic downturn will certainly affect Ottawa as a city but not necessarily Ottawa as a government town. Even if 10% of employees are laid-off, there will still be 90% of the others working full-time at full-pay.

Ottawa is primarily a single-industry town but it is not the same as, for instance, a paper mill town or a chocolate factory town where production is cut in half and all the full-time employees are kept working half-time at half pay and earning half as much.

What happens, as in the 1929-1939 Great Depression, is that the cost of living goes way down and the cost of production also goes down because employees are not paid as much.

It’s a shell game and the successful entrepreneurs are those who are able to bluff and outsmart others. Wolfe Shenkman (Bill's grandfather) was building in the early 30’s (e.g. the Trafalgar apts) and probably was financially stable because of lower costs (my guess!). The Rockefeller Centre, the Empire State Building and the Maple Leaf Gardens were all built when the world economy was in dire straits. So, who knows?

My guess is that new starts (Lansdowne Park?) will be put on hold or cancelled until the economy picks up again which, from past Canadian and world experience, should be in 5 to 10 years from now. Don’t forget that our present economic downturn started in 2008 with the greedy made-in-USA sub-prime realty nonsense with the present domino effect on European countries. Nobody is saying anything at the moment about how the USA will pay the 100’s of trillions dollars debt to their creditors (treasury bills).
(higher taxes or less social benefits?)
But that shoe will be dropping soon.

Canadians have to pay their mortgage and credit cards on time. They can’t create or borrow money like countries are doing. So they will spend less, buy less condos, less houses and the building boom may slow down considerably in the country.

In Ottawa? May not be so bad!

Unless some departments are farmed out to less fortunate cities! Political parties do that!

Stay tuned. We’ll know more in a month or two or three.

[McC]

I know there are boosters around here who scoff at such talk of doom, but perhaps that's all the more reason to recommend reading this (long) piece from Macleans arguing that the condo (and by extension, housing) bubble in Canada has already popped, and that we'll be seeing some pretty sever effects emerging soon, possibly as a double-whammy with falling global demand for our resource exports. ouch! While the emphasis is rightly on TO and VanCity, the author does not think Ottawa is immune.


Great Canadian real estate crash of 2013

The housing bubble has burst, and few will emerge unscathed
by Chris Sorensen on Wednesday, January 9, 2013
http://www2.macleans.ca/2013/01/09/crash-and-burn/

[KHOOLE]

I know there are boosters around here who scoff at such talk of doom, but perhaps that's all the more reason to recommend reading this (long) piece from Macleans arguing that the condo (and by extension, housing) bubble in Canada has already popped, and that we'll be seeing some pretty sever effects emerging soon, possibly as a double-whammy with falling global demand for our resource exports. ouch! While the emphasis is rightly on TO and VanCity, the author does not think Ottawa is immune.

You are so right about falling global demand for Canadian resources. Last month, there was a $2B negative differential between imports (mostly electronics) and exports (mostly natural resources).

http://www.cbc.ca/news/business/story/2013/01/11/business-trade-deficit.html

On a national scale, it's a bit like spending more than we are able to earn.

Economically, it means higher borrowing costs for the country with ensuing higher taxation and lesser operational costs like social benefits and defence expenditures.

Locally, there may be a slowdown in the housing market and the condo building boom as well as with retail sales in general.

There may not be too much of a ouch! factor in Ottawa but that may change if a department, like Health Canada, is moved (entirely or partially) to another Canadian location to stimulate a local economy. That's what happened with Veterans Affairs with their Canadian head office now being in PEI and their Ontario office in Kirkland Lake.

We may be in for a rough ride...or maybe not!

[Dado]

It's fascinating that these housing stories are always always written from the perspective of existing homeowners who stand to "lose" a bit of their unrealized capital gains. They're getting overexcited over a few percentage point reductions off of all-time highs. In other words, the housing market would be back to where it was two or three years ago. I mean get a grip.

Never is the other side discussed in any detail: those, often younger, who are priced out of the housing market. There's usually a passing reference to "affordability" but that's about it.

But housing affordability requires either a large increase in incomes for those who are currently priced-out (without a corresponding increase for those already in), or a drop in house prices.

The likely result of any housing price crash will be a flood of new buyers who can now afford to buy in.

If houses actually start going empty *after* substantial price reductions (like they have in some places in the US), then I'll start to worry. Until then, this is just the usual real estate hyperbole.

[Capital Shaun]

It's fascinating that these housing stories are always always written from the perspective of existing homeowners who stand to "lose" a bit of their unrealized capital gains. They're getting overexcited over a few percentage point reductions off of all-time highs. In other words, the housing market would be back to where it was two or three years ago. I mean get a grip.

Never is the other side discussed in any detail: those, often younger, who are priced out of the housing market. There's usually a passing reference to "affordability" but that's about it.

But housing affordability requires either a large increase in incomes for those who are currently priced-out (without a corresponding increase for those already in), or a drop in house prices.

The likely result of any housing price crash will be a flood of new buyers who can now afford to buy in.

If houses actually start going empty *after* substantial price reductions (like they have in some places in the US), then I'll start to worry. Until then, this is just the usual real estate hyperbole.

Good points.

If a homeowner has no plans to sell in the immediate future why worry if the value goes down for a couple years? The only people who should worry are those who recently bought and are trying to sell a year or two after.

As someone who's never owned a house, the prices dropping a bit is music to my ears as I'll be better able to afford it.

[McC]

Dado's right to a point, but there are other circumstances that would be in trouble:
- you lose your job (as part of a wider downturn) and can no longer afford your current home, but can't sell it either
- you bought a number of condos as investments, which are being rented out at a cash flow loss, but they have been appreciating in value, until the value tanks
- you work in any sector related to real estate or construction/development
- your customers tend to work in any sector related to real estate or construction/development

...etc.

[eternallyme]

I doubt Ottawa will be hit too hard. It may flatline or drop slightly, but I think Toronto and Vancouver (especially) will take most of the extremely hard impact. It could be especially catastrophic in southwestern BC.

[KHOOLE]

I doubt Ottawa will be hit too hard. It may flatline or drop slightly, but I think Toronto and Vancouver (especially) will take most of the extremely hard impact. It could be especially catastrophic in southwestern BC.

Chris Sorensen of the Business section of MacLeans magazine just wrote an interesting report on the present housing situation in Canada and what we should expect in the coming months. Sensationalism perhaps? We'll see!

http://www2.macleans.ca/2013/01/09/crash-and-burn/

[phil235]

Chris Sorensen of the Business dept of MacLeans magazine just wrote a factual eye-opener on the present housing situation in Canada and what we should except in 2013 and 2014

http://www2.macleans.ca/2013/01/09/crash-and-burn/

I'm not sure "factual eye-opener" is an accurate description of what Maclean's does. Sensationalist fear-mongering probably a little closer to the truth. For evidence of that, have a look at Maclean's insightful treatise called "Yes, it's time to panic!" from about a year ago, or "The Canada Bubble" from a year before that.

I'd tend to pay more attention to those who actually work in the area and have looked at the whole market, rather than a journalist who cherry-picks a few statistics to make for a good headline.

I don't think that anyone doubts that a correction of the market is likely, but Canadians tend to have a lot of equity in their houses and there is no chance of a huge number of people walking away from mortgages, as happened south of the border.

[KHOOLE]

I'm not sure "factual eye-opener" is an accurate description of what Maclean's does. Sensationalist fear-mongering probably a little closer to the truth. For evidence of that, have a look at Maclean's insightful treatise called "Yes, it's time to panic!" from about a year ago, or "The Canada Bubble" from a year before that.

I'd tend to pay more attention to those who actually work in the area and have looked at the whole market, rather than a journalist who cherry-picks a few statistics to make for a good headline.

I don't think that anyone doubts that a correction of the market is likely, but Canadians tend to have a lot of equity in their houses and there is no chance of a huge number of people walking away from mortgages, as happened south of the border.

I agree with you and I have modified my previous comment accordingly.

I also agree that a journalist is generally not the best source of information in terms of economics and we should rely on other sources of information, such as the Bank of Canada's Tiff Macklem's recent speech at Queen's University, in which he concluded:

" housing activity is beginning to decline broadly in line with our expectations. Canadian exports are expected to add to GDP growth, but continue to be restrained by weak foreign demand and ongoing competitiveness challenges".

http://www.bankofcanada.ca/2013/01/speeches/regearing-our-economic-growth/

Macklem's words are restrained and bureaucratic but the message is there nevertheless.

Home equity or not, what has happened since 2007-2008 is that Canadians have taken on a much larger debt load (164% of disposable income) with very little room to manoeuvre if the economy takes a dip. There is much speculation in the condo market, just like the stock market.

"buy low, sell high" works for condos also.

[NOWINYOW]

I really believe we're witnessing a ticking time bomb in relation to our unsustainable low interest rates.

The rates aren't low because we have low inflation. The most recent federal and provincial budgets are adding far more than 2% for general operational spending.

The bank of Canada states inflation is less than 2%. Why then are governments citing higher operational costs? (Fuel/transportation etc)

We're being lied to. Inflation is well above 2%. I'd say it's closer to 5 or 7%. Buy gasoline lately? How about groceries. Notice how prices have either risen, or products have smaller portions.

The reason for low rates is simple. Fake economics. If government really adjusted interest rates in comparison to inflation, our economy would falter. Plus the HUGE debts of the provinces and feds would become even more burdensome with having to pay higher interest fees. It's a vicious circle but the time isn't far off when rates will have to rise and homeowners who are stretched with debt will begin to foreclose, plus Governments will have to drastically reduce public spending to simply carry the debt load.

[McC]

The rates aren't low because we have low inflation. The most recent federal and provincial budgets are adding far more than 2% for general operational spending.

The bank of Canada states inflation is less than 2%. Why then are governments citing higher operational costs? (Fuel/transportation etc)

Short (but mostly true) answer is that health care and other costs associated with an aging, sedentary population are increasing at 3-4x the rate of inflation, and are quickly taking over disproportionate shares of government expenditures. Remove those and government budgets are pretty flat, increasing at less than inflation.

[Capital Shaun]

Short (but mostly true) answer is that health care and other costs associated with an aging, sedentary population are increasing at 3-4x the rate of inflation, and are quickly taking over disproportionate shares of government expenditures. Remove those and government budgets are pretty flat, increasing at less than inflation.

Our governments have known for decades that the babyboomers would eventually all get old, retire, require more healthcare and other social services.

But planning 20 years ahead doesn't get you votes so we really aren't ready for any of this.

[phil235]

I really believe we're witnessing a ticking time bomb in relation to our unsustainable low interest rates.
...
It's a vicious circle but the time isn't far off when rates will have to rise and homeowners who are stretched with debt will begin to foreclose, plus Governments will have to drastically reduce public spending to simply carry the debt load.

From the CBA:

•68 per cent of all household debt in Canada is made up of residential mortgage debt, while 20 per cent comes from lines of credit and only five per cent is credit card debt
•Canadians with mortgages have significant equity in their home, averaging about 66 per cent of the home’s value
•National mortgage-in-arrears numbers remain very low, at less than half of one per cent

We simply don't have a significant number of mortgage holders under water, as was the case in the U.S. before the crash, where tax policy encourages people to hold large mortgages. It would take a massive drop in housing prices to result in a significant number of foreclosures. That seems unlikely, unless the U.S. economy drops back into a prolonged recession and drags Canada with it.

[McC]

Our governments have known for decades that the babyboomers would eventually all get old, retire, require more healthcare and other social services.

But planning 20 years ahead doesn't get you votes so we really aren't ready for any of this.


Sure, but even with perfect planning, it still costs more to deliver more services to more people; which is the phenomenon we're facing all over the developed world. Just looking at primary health care delivery: there are lots of ways to keep people out of hospitals, group practices with extended hours and wide spectra of services so you can see a nurse or GP essentially on-demand; home care; hospice care; telehealth; death councils;* video-links for remote communities; etc. But all of these are still expensive, they're just less expensive than hospitals.

Even if through good planning, we had all of these options in place and fully utilized (which, I agree with you, we should have been planning for), usage of these services/facilities would still be increasing faster than general inflation because our population is getting older, fatter, living longer, popping more Rx pills, etc., leading to health care spending increasing at above-inflation rates. Governments as a result have to pare back other budgets to keep overall spending in check. This problem would less acute if we'd been planning better, and had a more robust system in place with more low-cost options available to people (and hey, maybe more high-cost options too, like private MRI and surgical clinics where patients can pay full freight for on-demand care, a controversial option that I'm not advocating for here, but noting that it has been done elsewhere with positive results in reducing wait times, and costs, for fully-insured services), but it would still be a problem. We know this is the case, because Northern European countries that have these more robust/diverse/flexible systems in place are still struggling with unsustainable growth in these budget line items.

* kidding!

[NOWINYOW]

Short (but mostly true) answer is that health care and other costs associated with an aging, sedentary population are increasing at 3-4x the rate of inflation, and are quickly taking over disproportionate shares of government expenditures. Remove those and government budgets are pretty flat, increasing at less than inflation.

Not true. Department of Defense has taken a big hit, partly for austerity and greatly because of inflationary operational costs.

And you can't remove the aging and sedentary population, so those costs will continue to rise.

The world leaders are hiding inflation costs as much as possible, but this can't/won't last.

[NOWINYOW]

From the CBA:

•68 per cent of all household debt in Canada is made up of residential mortgage debt, while 20 per cent comes from lines of credit and only five per cent is credit card debt
•Canadians with mortgages have significant equity in their home, averaging about 66 per cent of the home’s value
•National mortgage-in-arrears numbers remain very low, at less than half of one per cent

We simply don't have a significant number of mortgage holders under water, as was the case in the U.S. before the crash, where tax policy encourages people to hold large mortgages. It would take a massive drop in housing prices to result in a significant number of foreclosures. That seems unlikely, unless the U.S. economy drops back into a prolonged recession and drags Canada with it.

They're not under water yet because we have unsustainable low interest rates. If interest rates can go down, they can also go up. Public debt, plus consumer debt isn't being paid off in any significant manner. Governments can only continue to print money for so long before the value decreases.

It's economics.

[McC]

Not true. Department of Defense has taken a big hit, partly for austerity and greatly because of inflationary operational costs.

And you can't remove the aging and sedentary population, so those costs will continue to rise.

The world leaders are hiding inflation costs as much as possible, but this can't/won't last.

I don't understand. You asked why government budgets were increasing faster than inflation, I explained why I think that this is the case. you said "not true," then gave two examples which support my argument: cuts to another budget line item even while overall spending is increasing, and agreement that the costs associated with an aging and sedentary population are increasing inexorably.

[phil235]

They're not under water yet because we have unsustainable low interest rates. If interest rates can go down, they can also go up. Public debt, plus consumer debt isn't being paid off in any significant manner. Governments can only continue to print money for so long before the value decreases.

It's economics.

Those are pretty generic economic principles you are raising. I think that the actual situation is a little more nuanced than that.

On the household side, I don't think that your logic holds - how would a rise in interest rates mean that mortgage holders would suddenly be underwater in large numbers, when most have significant equity in their homes? Only a massive price drop could lead to that result, and a interest rates going a few ticks upward is not going to do it.

Yes, household debt is high in Canada, but that is a very blunt measure of financial standing. The debt-to-equity ratio is far more useful in judging whether households can sustain some sort of external shock. The problem in the US was that a large proportion of mortgage holders had little to no equity in their houses, and when payments went up, they owed more than the value of their houses, and millions walked away, impacting the entire market.

That situation simply does not exist here, as Canadians have an average of 66% equity in their homes and most are well positioned to withstand a rate or price shock. Certainly a rapid rise in rates would likely affect the arrears rate, but that rate is so low at the moment that it would take a massive increase in the short term (which is very unlikely) to significantly impact the market.

As for government borrowing, have a look at Canada Savings Bond 30-year rates, which are largely influenced by the market. Government borrowing costs are anticpated to be reasonably stable for a generation or more. If this rate shock that you are predicting occurs, governments are going to be the last to feel it.

[phil235]

I don't understand. You asked why government budgets were increasing faster than inflation, I explained why I think that this is the case. you said "not true," then gave two examples which support my argument: cuts to another budget line item even while overall spending is increasing, and agreement that the costs associated with an aging and sedentary population are increasing inexorably.

Perhaps he mistyped and actually meant "true".

I do think there is also some confusion between inflation, and rising costs associated with a particular budget item, which are related to increased service demands and may have little or nothing to do with inflation.

[Kitchissippi]

An increase in interest rate above that of the the US rate would hike up the Canadian dollar and seriously hurt a lot of industries especially what's left of Ontario's manufacturing. If it weren't for oil revenue, we could probably raise the rate, so blame the Alberta oilsands.

Try building a house from scratch. Not the DIY kind but by paying carpenters, electricians, plumbers, etc fairly, and buy materials at regular price. Discounting the cost of land which varies from the desirability of location, you'll find that the value of most homes in Ottawa are not far off from replacement value. Vancouver and Toronto are/were overvalued, however.

The problem we face is credit discipline. The minimum downpayment should be higher and credit rules need to be tightened. But this is where banks are getting their money, and if drastic steps are taken, you'll find that new development will grind to a halt for a few years until the market balances up to the tougher rules. Building stuff won't get any cheaper so developers will have no incentive with rock-bottom profit margins.

If this city had balls and was concerned about housing affordability and smart growth, it should address the property tax system and make it more equitable. I find it difficult to accept that a two bedroom condo downtown and a 3,000 sqft home on a half acre in exurban Manotick can pay the same amount just because they are valued the same, despite the latter costing the city a lot more to service. Condos handle most of the utility distribution between units and centralize garbage and sewage collection using their condo fees and should get huge tax breaks.

[phil235]

If this city had balls and was concerned about housing affordability and smart growth, it should address the property tax system and make it more equitable. I find it difficult to accept that a two bedroom condo downtown and a 3,000 sqft home on a half acre in exurban Manotick can pay the same amount just because they are valued the same, despite the latter costing the city a lot more to service. Condos handle most of the utility distribution between units and centralize garbage and sewage collection using their condo fees and should get huge tax breaks.

I agree entirely. The best way to promote smart growth would be via a change to the tax system (though it would have to be done on the provincial level). A property tax system based on the size of lot (or a condo's fraction thereof) would be a far more equitable way of approximating the cost of servicing that property.

There is zero political will to make that kind of systemic change at the moment, so the best we can hope for is some minor tweaks to the current system in the way of credits etc.

[Dado]

I agree entirely. The best way to promote smart growth would be via a change to the tax system (though it would have to be done on the provincial level). A property tax system based on the size of lot (or a condo's fraction thereof) would be a far more equitable way of approximating the cost of servicing that property.

There is zero political will to make that kind of systemic change at the moment, so the best we can hope for is some minor tweaks to the current system in the way of credits etc.

Hey now, stop copying my idea ;)

[McC]

yeah, the last thing a policy proposal needs is more support!

[Ottawan]

I agree entirely. The best way to promote smart growth would be via a change to the tax system (though it would have to be done on the provincial level). A property tax system based on the size of lot (or a condo's fraction thereof) would be a far more equitable way of approximating the cost of servicing that property.

There is zero political will to make that kind of systemic change at the moment, so the best we can hope for is some minor tweaks to the current system in the way of credits etc.

I think the most fair system (at least for residential property taxes) would be a hybrid: size of lot and unit + number of occupants + user fees.

Size of lot and unit (add the square footage of the land or percentage share thereof to the square-footage of the unit - still gives a huge advantage to condo tower-dwellers, but not as astronomical a one) would pay for servicing the land, transportation, etc.

Specific fees should be put in place for things like garbage collection (pay by the bag) and water.

Number of people would account for all those other benefits the city provides (libraries, cultural funding, economic development, social services, etc.)

[phil235]

I think the most fair system (at least for residential property taxes) would be a hybrid: size of lot and unit + number of occupants + user fees.

Size of lot and unit (add the square footage of the land or percentage share thereof to the square-footage of the unit - still gives a huge advantage to condo tower-dwellers, but not as astronomical a one) would pay for servicing the land, transportation, etc.

Specific fees should be put in place for things like garbage collection (pay by the bag) and water.

Number of people would account for all those other benefits the city provides (libraries, cultural funding, economic development, social services, etc.)
True, a hybrid system would likely be the most fair. But it wouldn't do as much to promote smart growth, if that is your objective.

I'm also a little leary of tying taxes directly to services used, because then you get this retail model of government that leaves no room for the endangered concept of the collective interest. That leads to more dummies saying things like they shouldn't pay eductation taxes because they have no kids in school, or they shouldn't pay transit tax because they don't take the bus. And when they get really old, they combine the two and complain that they shouldn't have to endure school buses driving down their adult lifestyle street!

[phil235]

Hey now, stop copying my idea ;)

I find that I get most of my best ideas that way.

[Schattenjager]

And when they get really old, they combine the two and complain that they shouldn't have to endure school buses driving down their adult lifestyle street!
My parents were going to live there if not for it already being sold out. They did get a house from those that were available for that community but it was built on another street.