How would you solve the housing affordability crisis?

[GlassCity]

Great thread idea.

#1. Ban foreign ownership. Immigration is not the issue, Canada has been taking in millions of immigrants for years without this problem. Immigrants settling in Canada produce way less demand than the never-ending number of foreign investors who buy property as if it were stocks. Vancouver (and I'm sure Toronto) projects are heavily marketed in Asia, often before they are here. This is the number 1 biggest fix. Don't let foreigners buy property if they're not going to come here and contribute locally. Prices will fall immediately.

#2. Bring back the government's role in social housing. The CMHC needs to go back to building social housing at the same scale that it did in the 1970s. Little individual projects and local social housing requirements are a drop in the bucket compared to what's needed. This may seem expensive, but if foreign ownership is banned there will be much, much less demand for housing and therefore the pressures on such a program will be much lighter than they would be today.

Densification is not the answer to housing affordability. We will never build enough supply to match foreign demand. It's impossible, it's insatiable. All we'd be doing is razing neighbourhoods and artificially altering the landscape of our cities just to create more units for foreigners to buy. Cut the problem off at it its source. Eliminate foreign ownership.

[Nouvellecosse]

But the thread isn't just about home sale prices, it's also about rental costs. Unless foreigners are buying up properties and kicking everyone out and keeping large swatches of the building stock sitting perpetually empty. But if foreign buyers are absentee landlords, that would mean that while their investments are increasing purchasing costs, they're not increasing rental costs.

[GlassCity]

Originally Posted by Nouvellecosse

But the thread isn't just about home sale prices, it's also about rental costs. Unless foreigners are buying up properties and kicking everyone out and keeping large swatches of the building stock sitting perpetually empty. But if foreign buyers are absentee landlords, that would mean that while their investments are increasing purchasing costs, they're not increasing rental costs.

But foreign buyers do leave many of their properties perpetually empty. So rental stock is diminished, plus people that in other cities would be buying property are renting instead which raises rents as well. Increased social housing availability would help make up the difference in rental affordability.

[milomilo]

Originally Posted by Nouvellecosse

I would agree with all the suggestions in the original post except I'd take issue with this one:



Wouldn't putting more restrictions on the size and type of housing stock provided actually increase prices by giving developers less flexibility and few options for new buildings? For the larger units, if there was higher or equal demand for them they'd sell at an equal or higher cost per sq meter making it profitable to build more without developers being forced, and if not the restrictions would cause the cost per area to drop and thus act as a subsidy paid for by people buying the smaller units - making them less affordable. And for the window requirement, forcing developers to add amenities or features to units and forcing consumers to pay the embedded cost whether or not they'd be willing to forego them to reduce cost, seems more like an issue of quality rather than affordability.

One thing that i would say, is that it's somewhat natural for there to be price fluctuations when you have big discrepancies in terms of some regions attracting far more newcomers - and thus growth - than others. If it was just from domestic migration, it would balance itself out more, since the areas that were attracting people for economic or quality of life reasons will also generate a repelling force as prices rise and thus offset the economic benefits and reduce quality of life. This would eventually reach an equilibrium. But with foreign immigration, the lure of being near communities of people with whom you identify is an additional (and powerful) attractor in some regions allowing prices to get much higher before that equilibrium is reached.

However, to a large extent the high prices are the solution, rather than the problem. High prices means that the market springs into action providing huge volumes of supply - which is exactly what we've seen in the highest growth markets - and this supply is much harder to come by when prices are low since large volumes of new construction needs to be funded. And considering these costs, restricting foreign money from helping to finance the supply may also not be the best option.

The suggestions that I agreed with are mostly aimed at reducing the restrictions around increased supply, while the ones I take issue with would actually place restrictions or complications on supply. But overall, if we want significant growth - particularly from immigration - then we need to accept that there will be growing pains, which in this case include a (hopefully brief) period of elevated housing costs. Some will argue that immigration should be reduced, while others will argue that the long term costs of low population growth and an aging population would be higher than the short term pain involved in accommodating new residents. My guess is that the latter is probably true and that this isn't much different than many other things such as infrastructure investment that are worthwhile in the long term, but pricey in the shorter term. And just as with those many other things, you'll never get everyone to agree.

The housing market doesn't follow normal free market rules, so it needs government intervention. Developers will only build just enough such that the price keeps increasing, and the supply of land is often limited too so land value takes up a big portion of the cost.

I don't know for sure if it would be the solution (I don't think anyone knows as there isn't enough data), but for sure ban foreign ownership (or tax much more heavily), at least in certain markets. Who cares if non residents have to rent? It's little disadvantage to the non-investor immigrant, but can only be advantageous to the people who actually live here.

[Nouvellecosse]

Originally Posted by milomilo

The housing market doesn't follow normal free market rules, so it needs government intervention. Developers will only build just enough such that the price keeps increasing, and the supply of land is often limited too so land value takes up a big portion of the cost.

In every other industry, product producers will create and sell as long as the price is high enough to create a profit even if their margins remain the same or get slimmer. On what are basing the claim that property developers will only build if prices are increasing?

[Nouvellecosse]

Originally Posted by GlassCity

But foreign buyers do leave many of their properties perpetually empty. So rental stock is diminished, plus people that in other cities would be buying property are renting instead which raises rents as well. Increased social housing availability would help make up the difference in rental affordability.

Wouldn't the best thing to do then be to put a tax or regulation on vacant units rather than base it on whether or not the buyer is foreign? If a foreigner wants to pump money into the Canadian real estate industry as an investment, that isn't a bad thing if Canadian residents are actually able to live in the units.

[Pinion]

Originally Posted by Nouvellecosse

But the thread isn't just about home sale prices, it's also about rental costs. Unless foreigners are buying up properties and kicking everyone out and keeping large swatches of the building stock sitting perpetually empty. .

They are absolutely doing that (leaving them empty). The wealthiest areas of Vancouver saw population drops in the last census. About 3% drop in West Van I think.

It's common for Vancouver condo buildings to be exclusively sold in China. Locals don't even get a chance.

Rental prices/availability only became a big problem here when Airbnb got popular, which I'd heavily regulate too.

[headhorse]

stop treating housing as a market to profit off of, and start treating it as a human right.

[cornholio]

Originally Posted by mistercorporate

I kind of like that idea. Instead of having a 5 year residency requirement for citizenship, make it an 8 years in a small province residency requirement (less than 2 million population). This increases immigration to provinces that need it most while simultaneously reducing overall immigration. Problem solved!

Behind the times. It is 3 years residency to obtain citizenship. Trudeau just recently lowered it back down.

Originally Posted by YannickTO

If we didn't have immigration, many stores and fast food chains would simply close their doors. Right now, in many parts of Quebec, some fast food restaurants are closed during the night (some McDonalds and Tim Hortons) because there's no labour to hire. Shortage of employees everywhere. Nobody wants to work at minimum wage (11.25$ in Quebec), and if it stays that low, it won't attract anyone born here to apply for these jobs. We need these newcomers looking for a headstart and a starter job. There's a shortage of students who apply to work on the weekends, shortage of newly retired workforce looking for a part-time job after their career, shortage of adults looking for full-time jobs (the salary and the benefits are not attractive).

It sounds to me that you are advocating for more working poor, or slaves. Not sure which one.

Originally Posted by GlassCity

Great thread idea.

#1. Ban foreign ownership. Immigration is not the issue, Canada has been taking in millions of immigrants for years without this problem. Immigrants settling in Canada produce way less demand than the never-ending number of foreign investors who buy property as if it were stocks. Vancouver (and I'm sure Toronto) projects are heavily marketed in Asia, often before they are here. This is the number 1 biggest fix. Don't let foreigners buy property if they're not going to come here and contribute locally. Prices will fall immediately.

#2. Bring back the government's role in social housing. The CMHC needs to go back to building social housing at the same scale that it did in the 1970s. Little individual projects and local social housing requirements are a drop in the bucket compared to what's needed. This may seem expensive, but if foreign ownership is banned there will be much, much less demand for housing and therefore the pressures on such a program will be much lighter than they would be today.

Densification is not the answer to housing affordability. We will never build enough supply to match foreign demand. It's impossible, it's insatiable. All we'd be doing is razing neighbourhoods and artificially altering the landscape of our cities just to create more units for foreigners to buy. Cut the problem off at it its source. Eliminate foreign ownership.

Of-course immigration is the problem. You could say its the only problem. Canada just raised the immigration quota by 20% and expanded many other programs that probably double that rise in real terms. Canada is not a early 20th century vast open land with little regulations and little standards where people lived to 60 and were building the country. Canada is a established already built country and that's why everyone who comes just crams into the handful of major cities. This offers Canadians nothing beyond increasing competition for housing, space, jobs, services, and overcrowding our infrastructure that we cant keep up with given current regulations and standards. Not to mention we are getting very different immigrants today then before, and most of the good ones don't stay but instead return home or go elsewhere. The solution the housing crisis again is simply cutting the immigration quota. Maybe to 200k. Maybe 100k. Maybe back down to 250k is good enough. Just have to hit the sweet spot.

I leave with one question for you and everyone. What is the appropriate immigration quota? 300k? 400k? 1 million? Unlimited? Also at what point does a number become negative and how can you tell? What happens?

[wave46]

Originally Posted by cornholio

I leave with one question for you and everyone. What is the appropriate immigration quota? 300k? 400k? 1 million? Unlimited? Also at what point does a number become negative and how can you tell? What happens?

I've not worked out the math - but I'd imagine a number that keeps the country's net growth rate positive over the long term demographic shifts that will happen in the next few decades will be optimal. The age pyramid in this country is loaded fairly notably to the Baby Boom generation. We don't want to cut immigration to the point where we end up like Japan or Germany demographics-wise.

Our fertility rate is below our replacement rate (~1.6 births per woman) so cutting off immigration will not be an effective solution.

We have lots of space - it is just that most of it is basically 'undesirable' to immigrants. Which is a shame, as I live in a community that could really use an influx of people.

Also, there is something to be said for the work ethic of those who are new to the country. The 'domestic' work ethic pales in comparison to those who are new here - they have an appreciation for any decent job as they've come from places that are no where near as pleasant as Canada.

[lio45]

Originally Posted by whatnext

Sacre bleu!

FYI, that isn't Québécois at all. Maybe try "Can't get McNuggets at 3 am? What a bloody nuisance!"

[lio45]

Originally Posted by Nouvellecosse

Wouldn't the best thing to do then be to put a tax or regulation on vacant units rather than base it on whether or not the buyer is foreign? If a foreigner wants to pump money into the Canadian real estate industry as an investment, that isn't a bad thing if Canadian residents are actually able to live in the units.

That's a good idea in theory, but I think if we made evictions much easier we'd have better luck convincing landlords who don't really need the cashflow to accept tenants. A compromise scenario would be to have the Vancouver Housing Authority renting empty units at discounted priced from Chinese landlords who always regarded the properties as steel-and-glass BitCoins, and renting it to tenants while doing all the work, and shouldering all the risk, themselves.

In any case, it needs to be super easy and zero hassle for the landlords, otherwise they won't be interested.

[GlassCity]

Originally Posted by Nouvellecosse

Wouldn't the best thing to do then be to put a tax or regulation on vacant units rather than base it on whether or not the buyer is foreign? If a foreigner wants to pump money into the Canadian real estate industry as an investment, that isn't a bad thing if Canadian residents are actually able to live in the units.

We already have that. It hasn't helped. As long as crack shacks continue to be sold for over a million dollars there won't be true affordability here and only a crackdown on foreign ownership can help that.

If a condo costs $500,000, the rent won't be affordable because the owner still has to recover their mortgage costs. The vacant unit tax is obviously a positive but it's not nearly enough.

[whatnext]

Originally Posted by lio45

FYI, that isn't Québécois at all. Maybe try "Can't get McNuggets at 3 am? What a bloody nuisance!"

I was going to use tabernac but the allusion was more effective with the other!

[GlassCity]

Originally Posted by cornholio

Of-course immigration is the problem. You could say its the only problem. Canada just raised the immigration quota by 20% and expanded many other programs that probably double that rise in real terms. Canada is not a early 20th century vast open land with little regulations and little standards where people lived to 60 and were building the country. Canada is a established already built country and that's why everyone who comes just crams into the handful of major cities. This offers Canadians nothing beyond increasing competition for housing, space, jobs, services, and overcrowding our infrastructure that we cant keep up with given current regulations and standards. Not to mention we are getting very different immigrants today then before, and most of the good ones don't stay but instead return home or go elsewhere. The solution the housing crisis again is simply cutting the immigration quota. Maybe to 200k. Maybe 100k. Maybe back down to 250k is good enough. Just have to hit the sweet spot.

I leave with one question for you and everyone. What is the appropriate immigration quota? 300k? 400k? 1 million? Unlimited? Also at what point does a number become negative and how can you tell? What happens?

If you read my posts on other immigration topics I am far from an "immigration free-for-all" person. I will note that I am an immigrant myself. I don't think more immigration is automatically better, nor do I think that lessening immigration is automatically worse.

What I'm saying is that if the goal is to improve housing affordability cutting immigration will not be nearly as effective as banning foreign ownership. The amount of demand involved in either case just doesn't compare, especially when you consider that we can't conceivably completely eliminate immigration. A gradual diminishment maybe, but I just don't see it affecting housing prices by nearly as much.

[milomilo]

Originally Posted by Nouvellecosse

In every other industry, product producers will create and sell as long as the price is high enough to create a profit even if their margins remain the same or get slimmer. On what are basing the claim that property developers will only build if prices are increasing?

Any other market is much 'freer', it's much easier for someone with a low cost product to sell that product anywhere. You are right though, it should be possible for other developers to sell lower cost units in a market, it just never actually happens in practice. Land value makes up a large amount of the cost anyway, so the discount lower cost developers could give is limited. And, overpriced real estate is something that is ingrained in the Canadian physche, like monopolies. Canadians want to pay too much for real estate.

[Nouvellecosse]

Originally Posted by GlassCity

We already have that. It hasn't helped. As long as crack shacks continue to be sold for over a million dollars there won't be true affordability here and only a crackdown on foreign ownership can help that.

If a condo costs $500,000, the rent won't be affordable because the owner still has to recover their mortgage costs. The vacant unit tax is obviously a positive but it's not nearly enough.

If it's affordable for the owners to leave the units empty and not get any rent (while paying out maintenance fees, taxes etc.) why would they be forced to charge high, unaffordable rents when they'd still be getting a lot more than with the alternative regardless?

[GlassCity]

Originally Posted by Nouvellecosse

If it's affordable for the owners to leave the units empty and not get any rent (while paying out maintenance fees, taxes etc.) why would they be forced to charge high, unaffordable rents when they'd still be getting a lot more than with the alternative regardless?

Good point, but regardless, that measure has been implemented and it hasn't helped. Right now it's only a 15% tax though if you keep your unit empty. Maybe if it was raised it might have more of an impact, but I don't think it has significantly improved rental stock at all.

And wouldn't that sort of set up a future where foreigners own much of the property and locals have to rent it from them? Local home ownership is important too, so in any case, foreign ownership has to be scaled back.

[casper]

Immigration is not the problem. Immigration is needed to address an aging work-force and the fact there are labour shortages in multiple areas in Canada. We need more immigration not less.

What we also need to do is create affordable rental accommodation. In BC the provincial government has stayed out of operating new social housing themselves instead they are dependent on social enterprises. Housing societies are non-profits that create, own and operate housing for the social good. Some focus on addressing first nations housing others on seniors and others on the poor or middle class.

We need more autonomous housing societies that are social enterprises and operate at arms length from government. Let each of them have a different focus on the community they serve. If you leave these to their own devices they will become create in what they do.

The nice this about this strategy is these non-profits can be self-sufficient. The government just needs to loan the housing societies money to build property, the government can hold the 25 year mortgage on the building, and as the society pays off its mortgage that money that can be loaned to others to build more housing.

[Nouvellecosse]

Originally Posted by GlassCity

Good point, but regardless, that measure has been implemented and it hasn't helped. Right now it's only a 15% tax though if you keep your unit empty. Maybe if it was raised it might have more of an impact, but I don't think it has significantly improved rental stock at all.

And wouldn't that sort of set up a future where foreigners own much of the property and locals have to rent it from them? Local home ownership is important too, so in any case, foreign ownership has to be scaled back.

But how does it help to have something be domestically owned if it doesn't even exist? I mean, isn't it be better to have foreign financing and actually be able to fund the developments rather than to keep everything domestic and not have as many units to begin with?

Personally I think foreign ownership vs domestic ownership is important in terms of the economy as a whole, since foreign ownership dominates manufacturers, retailers, the natural resource sector etc. but I'm not sure why it's more important for residential real estate than anything else.