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These are boogieman policies that have zero influence on the root cause. Foreign investors jump into the housing market because the current system ensures that

These are boogieman policies that have zero influence on the root cause. Foreign investors jump into the housing market because the current system ensures that the supply of housing is limited so it is an attractive way to park your wealth. But that is not the root cause. The root cause is the system that is geared to keep houses always appreciating via supply constraints: aggressive zoning, discretionary permitting, NIMBYism. Until we liberalize zoning, legalize building, and reject the idea that houses have to be appreciating assets, the issue will continue. As it is often the case, politicians go for the headline with the highest electoral ROI, rather than tackle the real issues.

weeksie 5y ago
It'll be interesting in a couple years when prices are still crazy and someone has to come up with an excuse for why. It's amazing to me how resistant people are to the idea that housing is expensive because there aren't enough homes for people to live in. It's always a search for exotic explanations like foreign buyers and mysterious empty apartments.
- ihaveajob 5y ago
  What concerns me, as a non-Canadian not living in Canada, is that if a separate cause (i.e. global recession) makes housing prices drop in Canada during this period, NIMBYs everywhere will use that as evidence that "it works", and will try to replicate elsewhere.
  - weeksie 5y ago
    It'll be interesting. Unless the population shrinks I think people will still feel squeezed, since things still won't feel affordable if e.g. interest rates go up and prices stagnate.
- johnnyanmac 5y ago
  >how resistant people are to the idea that housing is expensive because there aren't enough homes for people to live in. I imagine there are enough homes in both America and Canada (they are two of the largest countries after all). But it's all about location. Very few can even afford to move out to the middle of nowhere just to own land. And not many people that can are willing to turn their potentially short commute to work into a 90+ minute trek everyday. Even with an increase in work from home, there's the whole entertainment aspect of living in the city that makes it a hard sell. When I mean middle of nowhere, I mean a small "town" whose businesses amount to a liquor store, some off brand shopping market, a burger joint, and a 20 year outdated public library. Anything else you need is in the suburbs 30 miles out, and Downtown will be another 30-40 after that. You will quickly bore of any ventures in town and seek a drive to the city where there's actual events going on. If you're a recluse you can make it work, but I can understand millenial aged people not jiving with that style
  - scld 5y ago
    Yeah, the NIMBY argument that there are "plenty of homes" is like going into a supermarket whose shelves are completely full of only sardines and saying "there is plenty of food".
    - munificent 5y ago
      I think an extension of that analogy is that there are thousands of supermarkets. A few of them are well-stocked while the rest are full of sardines. There are two proposed solutions: * Let everyone shop at the couple of good supermarkets and hope the supermarket can keep the shelves stocked and deal with the crowds. * Get those other supermarkets to start stocking stuff other than sardines. The right answer is probably a blend of those.
      - bombcar 5y ago
        Or just learn to love sardines.
  - deleted 5y ago
    [deleted]
  - BlargMcLarg 5y ago
    >If you're a recluse you can make it work, but I can understand millenial aged people not jiving with that style Which further creates a spiraling effect where even recluses will feel obligated to move to the city just for anything that you can't / is very difficult to get from a town. Turns out it isn't that fun when the majority of your neighborhood doesn't share your generation or interests. Especially for young people still looking to find someone to settle down with.
    - quickthrower2 5y ago
      I dont get why a recluse would not want to live in a city. It is anonymous (no super friendly neighbours), you get the most food delivery choice and faster internet probably.
- btbuildem 5y ago
  All the same, in the recent years wealthy foreigners have been parking their cash in Canadian real estate, and yes, lot of these places tend to sit unoccupied. It's not the sole factor driving up the prices, but don't discount it either.
- alar44 5y ago
  I think the problem is that people want to buy 3 bedroom homes with a 3 stall garage on 2 acres of land. In my market, there are tons of affordable homes, but they aren't brand new, huge, with a ton of land. People are going to have to pay for that. It's a matter of keeping up with the Joneses from my perspective. People just don't want an average size home built in the 60s. They need a brand new 3k SQ ft home and bitch that's it's not affordable. They can't all be.
  - fizzizist1 5y ago
    I live in Toronto, and there is no way that I could buy a small (not even average size) home built in the 60s for less than a million dollars, unless it's in a really bad neighborhood or needs so much work that I will end up spending that much anyway
    - alar44 5y ago
      That's true, but it's generally people from LA, Toronto, and NYC that really have a problem. They are massive metropolises. Extremely high demand and very little undeveloped land. Supply and demand. For everywhere else that isn't adjacent to a megalopolis, I think the housing "crisis" is massively overstated.
      - freeone3000 5y ago
        Yes, for the minority of people who live outside of a major city, they likely aren't seeing huge increases. But for most people, affordable housing is an issue.
        alar44 5y ago
        No, most people do not live within a market that has these problems. Yes, something like 80% live in a metro area, but this isn't applicable to all metro areas. In the US, maybe the top 5ish cities. Even Chicago, for example, has tons of undeveloped, or underdeveloped land. It's not even close to Toronto or NYC. For most people, moving a little farther from work is what they need. A Chicago suburb commute isn't even close to the same thing as LA or NYC.
- gedy 5y ago
  It's also amazing to me how resistant people are to the idea that housing is expensive because of near zero interest rates and tons of money being flooded into the economy.
  - quickthrower2 5y ago
    Are people resistant to that? All i see in the mainstream news in Australian (and we know dumbed down it is) is future prediction of house prices based in future prediction of interest rates. They are predicting falls now.
- tomc1985 5y ago
  > It's amazing to me how resistant people are to the idea that housing is expensive because there aren't enough homes for people to live in. It's always a search for exotic explanations like foreign buyers and mysterious empty apartments. It shouldn't be. That is describing the demand side of the equation.
- michaelje 5y ago
  The issue is people need homes to live, but people also use homes as an investment vehicle. These are fundamentally at odds with each other.
- jjav 5y ago
  > It's amazing to me how resistant people are to the idea that housing is expensive because there aren't enough homes for people to live in. I have to wonder if it is ever possible to build enough in the places everyone wants to live for it to become cheap? Manhattan is extremely dense and yet, incredible expensive. More expensive than nearly every less-dense area. So density isn't helping drive cost down.
  - chaostheory 5y ago
    Isn't this only possible with Alberta due to all the extra near flat land available? It reminds me of Texas.
  - jackcosgrove 5y ago
    As late as the mid-90s the vast majority of American cities had a median house price to income ratio of 3. California was 3.5-4 and New York was 5 iirc. A lot of factors converged to upend this, but within living memory housing markets were affordable. Whether everyone lived "where they wanted to" is unknowable.
- deleted 5y ago
  [deleted]
- sportslife 5y ago
  There is nothing exotic or mysterious about empty recently-built houses. They are about 0.5% of my neighborhood and are built by all sorts of people, but always for the same reason: Housing is an asset class. In some places, its expected return is always positive even without rental income. You should buy in those places. If you leave it empty, you get an appreciating asset, and the demand for homes to live in remains the same. And then, there are places like Kharian, where there is huge demand for the idea of housing, but the living is mostly done elsewhere. See: https://www.youtube.com/watch?v=_fOYJ3_ZppM https://www.youtube.com/watch?v=_fOYJ3_ZppM
- chaostheory 5y ago
  Yeah, no one wants to admit that musical chairs is a terrible game to play when the authorities refuse to allow the number of chairs to be increased. Shutting out players who already are no longer playing the game doesn't help. China has blocked money from leaving their country for two years now. EDIT it's been three years and not two https://www.scmp.com/economy/china-economy/article/3012312/chinas-capital-outflow-controls-have-gone-extreme-former https://www.scmp.com/economy/china-economy/article/3012312/c...
- burnished 5y ago
  Why do you think people (lets say people like you and I) will come up with excuses? We will all find out together in a couple years what impact this may have had. I think its a good idea but if nothing changes I'll have some evidence that it was not a high impact intervention. Like, there is no need to rail against people not changing their mind two years before you might reasonably expect them too. Besides, it would behoove you to reserve your judgement here and let results speak for themselves lest you fall into the same behavior you decry. Good shout on the whole "build more houses to have more houses" thing though.
dimitrios1 5y ago
The root cause of the supply constraint that ultimately gives real estate it's value is the land, and more specifically, the land being in a particular location. For example, a row of condos built right next to a major employer of the town, in the center of the city. That land is going to be valuable so long as that town exists, and as the population continues to grow, will only become more valuable. Adding more houses won't reduce the value of those condos the same way that adding more lanes to a highway doesn't reduce the congestion. The idea that houses are appreciating assets doesn't come from some fundamental law or ideology. It comes from recognizing reality. There is only so much land where people want to live, and population tends to increase (we are talking about urban and suburban areas, of course), so the demand and price increase. It's pretty simple, really. NIMBYism, zoning laws, permitting, those are always familiar and convenient boogiemen for people who don't want to do actual analysis of market factors. But, what you are really wanting to argue against is private property ownership.
- weeksie 5y ago
  You can always build more dense housing on land that is in high demand. In fact, doing that is the most obvious and effective way to keep prices low for desirable locales. Backed up by pretty much all the economic research on the subject in the last decade.
  - dimitrios1 5y ago
    Great, is that economic research based on thought experiments or reality? I'd love to read it. Let's go back to my example. You build denser housing on top of or next to the condos I mentioned, what happens? The workers move in closer to the city center. The price is low for a short period of time, until more people migrate. Just like when the highway opens up a new lane. The traffic is better for a short period, until more people begin using the highway more. Then you are back to the status quo. You could argue that you can just keep building up and up until you cross the threshold of demand affecting the price, but without a market incentive to do that, it's wishful thinking at best. "Well the government could fund it" you could say, and indeed it can. But speaking of economic research, everytime the government has done such a thing, it causes widespread economic depression of the local area.
saos 5y ago
> Until we liberalize zoning, legalize building, and reject the idea that houses have to be appreciating assets, the issue will continue. That’s it. > reject the idea that houses have to be appreciating assets Particularly this. This is the outlook in the UK and it so problematic because normal people want this "property empire". Its become a source of content creation on YouTube or boasting on social media platforms. So fustrating
skeeter2020 5y ago
>> As it is often the case, politicians go for the headline with the highest electoral ROI They also conveniently target people who can't vote, much like big taxes on out-of-province housing purchases that are very popular within Canada.
- deleted 5y ago
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vkou 5y ago
> The root cause is the system that is geared to keep houses always appreciating via supply constraints: aggressive zoning, discretionary permitting, NIMBYism. You're conspicuously avoiding low interest rates and 30-year mortgages from that list. When people can borrow against their entire life's earnings to buy a home, the price of a home will trend towards that of a person's entire life's earnings. Limiting maximum mortgage terms to 9 years would do more to bring down the price of homes than dealing with anything else you've listed.
- danielmarkbruce 5y ago
  This is insightful.
- reedjosh 5y ago
  > Limiting maximum mortgage terms to 9 Or at least not bolstering the mortgage market. Fannie and Freddie practically caused the extreme leverage mortgage phenom in the US.
- oneoff786 5y ago
  Would it? Or would it simply push home ownership further out of reach and favor landlords with capital?
  - vkou 5y ago
    To rephrase my point: What do you think would happen to the price of the average home if we printed, and handed out, each man, woman, child, and dog in Canada a million dollars? My guess is that it would increase by ~2.6 million. But it would certainly level the playing field between the average person and 'the landlord with capital'. So if we are so concerned about keeping the average Joe up with that landlord, why don't we go ahead and do it? [1] It's not like it's hard to run the printing presses! [1] Unfortunately, we do do it, except instead of just handing this money out, we wrap it up in decades of indentured mortgage payments, instead. The net result is the same, with the addition of a colossal wealth transfer from borrowers to lenders.
    - 5y ago
mpalczewski 5y ago
In general I agree, that the root cause tends to be a supply constraint. Even if there were a bunch of people buying up houses, at least in theory that should make rents go down. However, in places like Vancouver people are buying up property as a place to park money and they remain unoccupied. Policies like additional taxes on unoccupied or secondary residences. Seem like one good way of adding supply.
- danielmarkbruce 5y ago
  Similar happens in Sydney. There are a lot of foreign people looking for safe havens for their cash. I can't blame them (I'd do the same), but it is problematic for the people living there because it does reduce supply.
- weeksie 5y ago
  The easiest way to solve that is by making housing a less attractive investment, which you can do by building a lot more of it. Otherwise you're stuck crafting clever anti-investment legislation which may or may not work and may or may not create weird distortions due to some unforeseen consequence of how the regulations are worded.
  - HeyImAlex 5y ago
    I feel like this works for housing but not really for land? As density increases the cost of housing should go down (more houses), but the cost of land would go up (ability to build more houses on the same plot). I’m imagining the house from Up in the middle of manhattan; you could never build enough housing to make that a bad investment.
- andrewmutz 5y ago
  If they buy properties as an investment, why not rent them out? If you dont want the hassle, there are property management companies that will handle everything for you.
  - danielmarkbruce 5y ago
seanmcdirmid 5y ago
We really should follow Japan on this: (a) National zoning (b) A culture that abhors second hand housing (so structures don't appreciate like land does). Housing that depreciates is no longer a sound investment. (c) Liberal definition on minimal standard housing to rent (central heating not required, toilets can be shared, no personal shower or even a shower at all in the building you are renting a room in, small spaces are OK). Maybe not this one: (d) Not very open to immigration at all, have a decreasing population.
- idiotsecant 5y ago
  In what sane universe is not requiring toilets and showers a solution to housing issues? I'm reasonably sure we can meet housing needs and still maintain basic human dignity.
  - andrewmutz 5y ago
    Not all housing need to go to a 4-person family. In my late teens and early 20s I shared a bathroom and a bedroom and never felt my dignity impinged. At that age it was much more important for it to be cheap than for it to be good. It should not be illegal for such housing to exist.
    - evilduck 5y ago
      I think you're speaking past each other. The comment mentioned no access to shower facilities at all. Go search Youtube for tiny apartments in Japan or Tokyo and you'll quickly find rooms for rent where bathrooms and personal or communal showers simply don't exist, residents must walk to nearby businesses or public facilities like libraries during business hours just to relieve themselves. This is not a desirable housing situation either. I think a dormitory or barracks style housing is perfectly acceptable as a solution but putting the burden of supplying bathrooms on private businesses or implicitly requiring people shit in buckets in their one and only room is not.
  - oneoff786 5y ago
    One with a public bathhouse culture
cosmiccrisp 5y ago
>The root cause is the system that is geared to keep houses always appreciating via supply constraints: aggressive zoning, discretionary permitting, NIMBYism. I don't agree that this is the root cause. The root cause is the artificial demand on housing created though our mass immigration policy. Canada accepts _at least_ 500,000 people per year through various channels, "temporary" foreign workers, international students (many of whom stay), refugees, and of course, normal immigration. And I am low balling that number. It could be closer to 1 million. When you bring in an entire large city worth of people, it stands to reason that this will cause massive pressure on housing prices. Now sustain that yearly increase for decades, and you have the problem we face today. There are 9 million people in Canada (a country of around 40M) currently living here on 10 year visa's. - Crazy! So there you have it. How could you leave that completely out from your argument and only blame zoning laws and nimbyism?
- quest88 5y ago
  So you're saying supply isn't meeting demand. Why isn't supply meeting demand? What's preventing buildings from building more and faster?
- danbolt 5y ago
  > And I am low balling that number. It could be closer to 1 million. Canada's population has increased around 4 million over the past ten years, so I don't know if that velocity of closer to million tracks.
- mikepurvis 5y ago
  I assume the response would be that with policies that allowed for rampant building/sprawl, the market would sort this all out regardless of the population. However, these kinds of price spikes still happen in lots of places that have neither a ton of immigration or constraints on building, so it's not clear to me that either one is really a singular root cause.
  - zip1234 5y ago
    A price spike, maybe. A long term unending price increase, no. Would love to see an example of a place that doesn't have such constraints on building that has high prices.
kspacewalk2 5y ago
I agree that this is the root cause, and it remains a third rail in Canadian politics. The province of Ontario commissioned a "Housing Availability Task Force" to do a [report](https://www.ontario.ca/page/housing-affordability-task-force-report https://www.ontario.ca/page/housing-affordability-task-force...) spelling out the problem. They identified under-supply due to land use restrictions as the primary cause. The government ignored it and addressed secondary issues with lame bandaids in their June election platform. They are conservatives, this "foreign buyer ban" bandaid is put in place by liberals. NDP and Greens offer nothing different. A quadri-partisan consensus on ignoring the root cause. I do think there's another major cause - cheap money. It's fuelling a lot of the meteoric price growth and making the housing market even more of a wild speculative one, where all that matters is the carrying costs and not any underlying fundamentals. This one is more of a worldwide problem, and a small country like Canada cannot use monetary policy to bludgeon the housing market back into reality without bludgeoning the rest of the economy with it.
- TimPC 5y ago
  The recommendations of the committee reflect the fact that they had only one month to work in and as such severely limited the consultations they did. To take just one example of how ridiculous some of the conclusions are: They recommend forcing any municipality to accept 6 to 11 story buildings on any street that has a bus route regardless of whether that bus route actually reaches the building or not. This is a huge deal in Canada as many streets are absurdly long. Yonge Street for example is the longest street in the world and effectively transitions into a highway through rural areas. Still this policy says you could build an 11 story building without providing parking in any small township on Yonge Street because it has a bus or subway route while it's in Toronto.
  - kspacewalk2 5y ago
    I think we have a philosophical difference here. You seem to accept the idea of centrally planning a city down to the micro-management level. I reject it. Yes, as you say, "this policy says you *could* build an 11 story building without providing parking in any small township on Yonge Street". The operative word is *could*. If there's market demand for it, you could and you absolutely should do it. If there isn't, you (the builder) won't build it, and you (the tenant) won't move in. If you focus urban planning on the big picture and allow the market to determine how many parking spots a building needs, or whether a single family neighbourhood makes any sense next to subway stops, the housing crisis will literally solve itself with private money. Instead, we keep floundering while entire generations of our under-30s struggle in precarious housing, because we are unwilling to adopt a different approach. 3/4 of discussions about 'housing affordability' at my city's council meetings are about money pits and bandaids such as airBnB bans and 'affordable housing' (can we build 30,000 units of it with taxpayer money? Didn't think so, let's move on). If you ignore the blah-blah and focus on actions, we the voters don't really want to solve this problem. If we did, we'd act on the obvious solution.
rasz 5y ago
>Foreign investors jump into the housing market because the current system ensures that the supply some do, others just want to safely park capital away from their own government reach (China/Russia/various *stans/corrupted countries).
- mise_en_place 5y ago
  The real reason is that those foreign investors are productive and have excess capital available to invest. They are from creditor nations, not debtor nations.
  - rasz 5y ago
    If you call local corruption productive.
    - mise_en_place 5y ago
      You cannot lie in the foreign exchange market. If you bs your productivity vis-a-vis loose money supply, your currency will rightly be worthless. The USD would usually be worthless too, it's just that due to Petrodollar system and reserve currency status, it's artificially propped up to be strong.
      - imtringued 5y ago
        I hope you notice the irony in your comment. You praise the exporters while completely ignoring that imports must exist in equal proportion to exports.
        mise_en_place 5y ago
        > You praise the exporters while completely ignoring that imports must exist in equal proportion to exports. In a closed system with two economies, yes, true. But in reality, many nations either run a trade deficit (exports < imports), or a trade surplus (exports > imports)
slothtrop 5y ago
It can't be reduced to just zoning. Corporations also buy up 30-50% of new housing. Also immigration rate doubles than of new housing starts.
nullc 5y ago
> Until we liberalize zoning, legalize building, and reject the idea that houses have to be appreciating assets, the issue will continue. Even if all those things are done the issue will still continue. There is a limited amount of land at desirable locations with desirable properties. You can increase density-- sure-- but after densifying more than some threshold of land it won't help because the extremely high density housing is itself extremely unattractive to many people, so building more density only helps to the extent that there are people who want that with unmet housing needs. The fundamental natural of housing is the root cause, restrictive policy is an exacerbating factor. To use an extreme example, you can easily go find big tracts of land in Montana for under $1000 an acre where no one would prevent you from building a gosh darn arcology if you wanted to. Yet the existence of cheap land someplace else doesn't magically make the issue of housing costs solved. People don't want to live in that someplace else, they want to live in particular places and there always is and always will be a finite amount of land in those particular places.
- zip1234 5y ago
  Maybe at the extremes there will be an issue, but doing all those things would massively bring down prices.
clpm4j 5y ago
Eliminating a subset of buyers, i.e. slightly decreasing demand, is an easy and obvious action to take. Will it have a significant and long lasting effect? Very likely not. But when examining the supply-demand equation, it's painfully obvious to say "foreigners who don't live here should not be allowed to buy residential housing". It's way, way easier than incentivizing developers to build affordable housing and dealing with all of the in-place bureaucracies and regulations and all of the hard stuff that comes along with constructing new neighborhoods and large residential buildings.
- nullc 5y ago
  A key point is that people buying for investment are less sensitive to driving the prices up-- so long as they're sustained. If you have enough wealth that you would be buying multiple properties anyways, buying fewer more expensive places just lowers your transaction costs. As such, they likely have an outsized effect on driving up prices. I'm dubious that Canada's policy will achieve that, as I understand it they exempt purchases by foreign students which is already a major avenue for foreign investment property purchases. If they limited resident aliens to a single piece of property which they also lived in, that would be something but my understanding is that they don't.
  - munk-a 5y ago
    In theory BC at least has a residency tax on vacant homes - but that just increases the cost of making the investment and shifts the numbers... it doesn't necessarily make the investment a losing strategy unless you're right on the border.
- xapata 5y ago
  > incentivizing developers to build affordable housing But that's unnecessary. If developers build more luxury housing, that'll reduce the price of existing housing, such that it becomes affordable.
  - RangerScience 5y ago
    That (first) either assumes demand remains constant, or requires measuring actual cost vs theoretical cost instead of simply actual; and second, assumes that there aren't complex interdependencies - ie, more luxury housing can make an area more desirable and increase demand more than it increases supply - arguably that's the goal, since otherwise you're literally building places people want to live in less than what's already available.
jlhawn 5y ago
Land Value Tax would solve this.
specialp 5y ago
It is not just that it is an attractive place to park wealth as far as ROI. It is attractive period because you can park your wealth in an obscured way in a place more fair than where you live. If you have a lot of money in places like China and Russia or if you have money from graft, it could all be taken away quickly. So these people are very willing to buy something real in a "safer" country, even if it has a negative ROI. This is not the only problem with housing in general, but it is a contributing factor that does not provide value for people that are looking to actually live somewhere.
- 8note 5y ago
  From that perspective, the simplest way to resolve the money parking issue is to seize assets owned by chinese or Russian citizens. Break that assumption for non-canadians. Alternatively, provide a dedicated asset class for that, so they can put their money in something other than housing
- chaostheory 5y ago
  > If you have a lot of money in places like China and Russia or if you have money from graft, it could all be taken away quickly. I don't think people from Russia or China can do this anymore. At least the Russians can no longer do it in the West. As for the mainland Chinese, the CCP has blocked capital flight and they have even blocked cryptocurrency. This happened two years ago ie. unless they already got their money out of China two years earlier, they can't buy anything in Canada EDIT it happened three years ago and not two years https://www.scmp.com/economy/china-economy/article/3012312/chinas-capital-outflow-controls-have-gone-extreme-former https://www.scmp.com/economy/china-economy/article/3012312/c...
hristov 5y ago
When you liberalize zoning you get slum cities. This has already happened many times in latin america, india and africa. It also happened in America when we had liberalized zoning. (See, for example, the history of San Francisco, and New York). I am all for increasing density in places where there is high demand for housing. But a lot of people are living in this libertarian fantasy that all you have to do is liberalize zoning and you will magically get a perfect high density city like Singapore (which ironically has some of the strictest zoning in the world) and not a sea of slums (which actually happens in the real world when you combine high demand with no zoning). I think cities should increase density when they see high demand for housing. But they should do it smartly by providing services and infrastructure for more citizens when allowing higher density buildings. The most important service for high density living and the first pain point a city hits when population increases is transport. So if you want higher supply of housing, the most important thing to do first and foremost is to vote for all mass transit initiatives and try to convince your city leaders to put in more mass transit. Once the mass transit is there it will be far easier to put in apartment buildings and increase density without choking the city in traffic.
- jonny_eh 5y ago
  > See, for example, the history of San Francisco SF has notoriously strict zoning.
freyr 5y ago
This is a policy addressing one side of the supply-demand equation. I think most people would agree that measures can be taken on both the supply and demand sides. It’s a rather extraordinary claim to suggest that root causes don’t exist on the demand side, and that the issue can only be addressed from supply side. That’s an opinion on a debatable topic stated as fact, and it may be a popular opinion among the HN crowd, but that doesn’t make it more of a fact. If foreign buyers are using Canadian housing as an investment vehicle and to park assets, that additional demand decreases supply for Canadian citizens who require housing for shelter. Of course, they can (and should) directly address the supply side as well. But there’s the possibility that foreign buyers’ demand will continue to outpace supply, leading to ghost cities like there are China, with 65M+ empty homes. Canada is under no obligation to perpetuate that.
mzs 5y ago
This has most to do with being a signal to investors that Canadian housing is not a safe place for their money and that has the largest likelihood of having a more lasting effect beyond two years.
deleted 5y ago
[deleted]
titzer 5y ago
> The root cause is the system that is geared to keep houses always appreciating via supply constraints: aggressive zoning, discretionary permitting, NIMBYism. These are contributing factors, but the energy that drives the bubble is capital, and bubbles have a way of becoming self-perpetuating. When a bubble becomes critical, you can't "build out of it", unless you think you can actually produce 10% more houses in a year, every year!
- chipsa 5y ago
  You can pull capital out of it by making it expensive to leave a home empty. Then capital will go where they can get better returns. Bonus tax when the average occupancy of the property drops below a certain percentage, say.
  - titzer 5y ago
    People will just rent it. I don't know what the solution to the problem is, but I fear where it's heading. If people cannot get housing, anarchy and revolution are in the making. Then it's heads on pikes, French Revolution style.
    - chipsa 5y ago
      Yes. That's the point. People will rent it. Which means they need to be priced such that people can rent it. (If the rent is too high, people can't rent, which means it sits empty, which triggers the punitive tax). Lower rents will drive prices down, as people will decide to rent instead of buy for a while.
      - titzer 5y ago
        I don't think the empty tax is a bad idea, but I don't think it will have a substantial effect.
rcpt 5y ago
Really doesn't matter how much we build if tax law continues to scream at everyone to reallocate everything they have into bets on land value
zbrozek 5y ago
Build, baby, build. But we need property rights to be able to do it. None of this discretionary permitting nonsense; that's how we got into this mess.
wonnage 5y ago
The lack of housing is not a issue of attracting investment. Canada (and basically every other country with a housing price crisis) is perfectly capable of funding construction with domestic investment. It is, as you mentioned, an issue with policy. Until the policy is fixed, additional foreign investment is pointless and only serves to drive speculative price increases. It makes sense to deter it. In theory as countries apply similar policies across the world, the surplus countries driving these capital flows will be forced to either invest in developing countries that could actually use the funds, or park the cash domestically. That will force countries like China and Germany to deal with their issues internally instead of exporting them.
chaostheory 5y ago
> Foreign investors jump into the housing market because the current system ensures that the supply of housing is limited so it is an attractive way to park your wealth. If they were targeting mainland Chinese investors, it's too late. China already stopped capital flight out of their country two years ago. They even banned crypto, so getting money out of China is both difficult and expensive for both Chinese citizens and even expats. The former is understandable since it's an authoritarian country, but expats? That's a new one unless countries in the Middle East do the same thing.
acchow 5y ago
Toronto has tons of upzoning. There are developments all over the city. The problem is that your primary residence is a tax-advantaged vehicle in Canada (infinite tax-free capital gains). So the optimal choice is always to buy as much real estate as you possibly can. People also use their children to hold deeds when they want to expand into second and third homes. The tax advantaged status drives the Canadian housing bubble People are regularly talking about "housing cannot be both a good investment and affordable". In Canada, it is a 'good investment' by tax law. Look at how much real estate prices have diverged from rent in Toronto. It is mind-boggling. The gap's growth accelerated with COVID-era quantitative easing.
dwighttk 5y ago
If houses don’t appreciate, why buy a house? Just rent
- madboston 5y ago
  because you want to settle down and stop moving? maybe have a family? have a place for your own that you can actually configure to your own liking? not get kicked liked a football because rent was increased for lease renewal because new corporate landlord doesn't give a shit? give next generation a fair/reasonable chance of making it on their own and not because they were not lucky enough to be born with family money? I laugh when I see people have BLM signs on their property because those are the exact people who don't want to care about it.
- hadlock 5y ago
  We bought a house, then had to move cross-country. After owning, where all they did was examine our finances, it was really degrading having to submit an application to rent a house, background check, references etc. Also when something breaks I have to call someone, who will then, within a week or two schedule a handy man to come by and fix it. I have no say over the appliances, external appearance of the house, can't apply for a permit to convert the attic into a third story, fix the inadequate wiring (technically to code, but my space heater will blow out the circuit because it's attached to several other things in the house). I recently reseeded the back yard, at great time expense, and things generally while nice, look a lot more run down than if I owned it and could make improvements knowing I would retain the value, but I'm not going to pour money into this house just to let the landlord receive that value at no charge. Also when he and his wife feel like retiring here, we're going to have to move, at our expense with no recourse. We already tried buying it from them. Renting sucks.
janmo 5y ago
The root cause of high real estate prices are low interest rates. There is always a correlation between those two.
Trias11 5y ago
Right. Communist until you get rich Feminist until you get married Atheist until the plane starts falling Critisizing NIMBYism until you own the house.
donthellbanme 5y ago
The wealthy of the world should shouldn't be able to buy up our real-estate period. In the USA, all it takes is a email, or phone call, from practically anywhere in the world and they own it. At minimum we (USA) need to start with citizenship as a prerequisite. Oh yea, stop corporation for buying up precious stock too. (Until we have more stock--the last thing we should allow is foreigners with funds buying our land. I have found it infuriating since I found out about how easy it is to buy here. Other countries do not let wealthy Americans buy land so dam easy.)
- 2143 5y ago
  When the wealthy of the world buy land in USA, isn't their wealth from abroad getting transferred into USA? That's foreign money coming in to USA. Technically, that's a good thing for the country as a whole.
akhmatova 5y ago
The root cause is the system that is geared to keep houses always appreciating via supply constraints: aggressive zoning, discretionary permitting, NIMBYism. You can believe that if you want to. Any level-headed analysis of the situation, however, points to multiple factors at play, here -- dark actors with huge pools of dark money to park somewhere (that just so happens to be mildly appreciating on average) being one of them. A system which promotes and protects de-facto anonymization of luxury assets at scale being another. Truncating the root cause analysis simply to "supply" is simplistic at best. Until we liberalize zoning, legalize building, and reject the idea that houses have to be appreciating assets, the issue will continue. As much as one may want to believe that this is the right fix in the long term -- even under the best of conditions, it will take years, more like decades to pan out. Meanwhile the housing market needs relief now.
cowpig 5y ago
I hear this all the time on HN, but I never see any data to back it up. It's also a very broad statement: I never see any construction when I visit SF, but in Montreal everything is under construction all the time. There are a dozen new condo developments within a few blocks of where I live, and yet the prices of homes still rose something like 20% last year. There isn't usually one The Root Cause for economic issues, so blanket statements about policies being "boogeyman politics" are the kinds of unlikely sentiments that I'd like to see backed up by significant evidence.
thawaya3113 5y ago
Building more housing does not lower housing prices. This should be fairly obvious but here’s why it doesn’t work, at least in the US, and frankly would cause huge problems if it did. The major problem is that the vast majority of the U.S. which is not underwater in debts, has the majority of their wealth in their houses. So if building more housing led to a secular reduction in housing prices, people would get poorer. Which means that it will never happen, because people who own housing in those areas and therefore control the entire political processs, will not accede to shooting themselves in the foot even if they are YIMBYs. What this means then, is that the only housing that will be allowed to be built, or the only housing that will not in turn make the people of the area poorer, will be “luxury” housing, which does not lower their property values because it compensates for the drop in housing value due to greater supply by adding “amenities”, allowing them to maintain their existing house values. The escape route for this is low income housing. Creating cheaper housing for people who couldn’t afford to buy their houses anyways, and therefore even though it leads to lower cost housing, it doesn’t lead to a drop in their house values (if anything, it may lead to an increase in their house values since it reduces virgin land that could have otherwise been used to build non low income housing that would compete with their houses).
raxxorraxor 5y ago
I disagree that zoning alone is the problem as you see these market developments in almost all western nations and some of them have ample land to build upon. Zoning could be more liberal, but it would still be massive stakeholders that would build new homes and rent them out to get a decent ROI.

weeksie 5y ago

It'll be interesting in a couple years when prices are still crazy and someone has to come up with an excuse for why. It's amazing to me how resistant people are to the idea that housing is expensive because there aren't enough homes for people to live in. It's always a search for exotic explanations like foreign buyers and mysterious empty apartments.

ihaveajob 5y ago
What concerns me, as a non-Canadian not living in Canada, is that if a separate cause (i.e. global recession) makes housing prices drop in Canada during this period, NIMBYs everywhere will use that as evidence that "it works", and will try to replicate elsewhere.
- weeksie 5y ago
  It'll be interesting. Unless the population shrinks I think people will still feel squeezed, since things still won't feel affordable if e.g. interest rates go up and prices stagnate.
johnnyanmac 5y ago
>how resistant people are to the idea that housing is expensive because there aren't enough homes for people to live in. I imagine there are enough homes in both America and Canada (they are two of the largest countries after all). But it's all about location. Very few can even afford to move out to the middle of nowhere just to own land. And not many people that can are willing to turn their potentially short commute to work into a 90+ minute trek everyday. Even with an increase in work from home, there's the whole entertainment aspect of living in the city that makes it a hard sell. When I mean middle of nowhere, I mean a small "town" whose businesses amount to a liquor store, some off brand shopping market, a burger joint, and a 20 year outdated public library. Anything else you need is in the suburbs 30 miles out, and Downtown will be another 30-40 after that. You will quickly bore of any ventures in town and seek a drive to the city where there's actual events going on. If you're a recluse you can make it work, but I can understand millenial aged people not jiving with that style
- scld 5y ago
  Yeah, the NIMBY argument that there are "plenty of homes" is like going into a supermarket whose shelves are completely full of only sardines and saying "there is plenty of food".
  - munificent 5y ago
    I think an extension of that analogy is that there are thousands of supermarkets. A few of them are well-stocked while the rest are full of sardines. There are two proposed solutions: * Let everyone shop at the couple of good supermarkets and hope the supermarket can keep the shelves stocked and deal with the crowds. * Get those other supermarkets to start stocking stuff other than sardines. The right answer is probably a blend of those.
    - bombcar 5y ago
      Or just learn to love sardines.
- deleted 5y ago
  [deleted]
- BlargMcLarg 5y ago
  >If you're a recluse you can make it work, but I can understand millenial aged people not jiving with that style Which further creates a spiraling effect where even recluses will feel obligated to move to the city just for anything that you can't / is very difficult to get from a town. Turns out it isn't that fun when the majority of your neighborhood doesn't share your generation or interests. Especially for young people still looking to find someone to settle down with.
  - quickthrower2 5y ago
    I dont get why a recluse would not want to live in a city. It is anonymous (no super friendly neighbours), you get the most food delivery choice and faster internet probably.
btbuildem 5y ago
All the same, in the recent years wealthy foreigners have been parking their cash in Canadian real estate, and yes, lot of these places tend to sit unoccupied. It's not the sole factor driving up the prices, but don't discount it either.
alar44 5y ago
I think the problem is that people want to buy 3 bedroom homes with a 3 stall garage on 2 acres of land. In my market, there are tons of affordable homes, but they aren't brand new, huge, with a ton of land. People are going to have to pay for that. It's a matter of keeping up with the Joneses from my perspective. People just don't want an average size home built in the 60s. They need a brand new 3k SQ ft home and bitch that's it's not affordable. They can't all be.
- fizzizist1 5y ago
  I live in Toronto, and there is no way that I could buy a small (not even average size) home built in the 60s for less than a million dollars, unless it's in a really bad neighborhood or needs so much work that I will end up spending that much anyway
  - alar44 5y ago
    That's true, but it's generally people from LA, Toronto, and NYC that really have a problem. They are massive metropolises. Extremely high demand and very little undeveloped land. Supply and demand. For everywhere else that isn't adjacent to a megalopolis, I think the housing "crisis" is massively overstated.
    - freeone3000 5y ago
      Yes, for the minority of people who live outside of a major city, they likely aren't seeing huge increases. But for most people, affordable housing is an issue.
      - alar44 5y ago
        No, most people do not live within a market that has these problems. Yes, something like 80% live in a metro area, but this isn't applicable to all metro areas. In the US, maybe the top 5ish cities. Even Chicago, for example, has tons of undeveloped, or underdeveloped land. It's not even close to Toronto or NYC. For most people, moving a little farther from work is what they need. A Chicago suburb commute isn't even close to the same thing as LA or NYC.
gedy 5y ago
It's also amazing to me how resistant people are to the idea that housing is expensive because of near zero interest rates and tons of money being flooded into the economy.
- quickthrower2 5y ago
  Are people resistant to that? All i see in the mainstream news in Australian (and we know dumbed down it is) is future prediction of house prices based in future prediction of interest rates. They are predicting falls now.
tomc1985 5y ago
> It's amazing to me how resistant people are to the idea that housing is expensive because there aren't enough homes for people to live in. It's always a search for exotic explanations like foreign buyers and mysterious empty apartments. It shouldn't be. That is describing the demand side of the equation.
michaelje 5y ago
The issue is people need homes to live, but people also use homes as an investment vehicle. These are fundamentally at odds with each other.
jjav 5y ago
> It's amazing to me how resistant people are to the idea that housing is expensive because there aren't enough homes for people to live in. I have to wonder if it is ever possible to build enough in the places everyone wants to live for it to become cheap? Manhattan is extremely dense and yet, incredible expensive. More expensive than nearly every less-dense area. So density isn't helping drive cost down.
- chaostheory 5y ago
  Isn't this only possible with Alberta due to all the extra near flat land available? It reminds me of Texas.
- jackcosgrove 5y ago
  As late as the mid-90s the vast majority of American cities had a median house price to income ratio of 3. California was 3.5-4 and New York was 5 iirc. A lot of factors converged to upend this, but within living memory housing markets were affordable. Whether everyone lived "where they wanted to" is unknowable.
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sportslife 5y ago
There is nothing exotic or mysterious about empty recently-built houses. They are about 0.5% of my neighborhood and are built by all sorts of people, but always for the same reason: Housing is an asset class. In some places, its expected return is always positive even without rental income. You should buy in those places. If you leave it empty, you get an appreciating asset, and the demand for homes to live in remains the same. And then, there are places like Kharian, where there is huge demand for the idea of housing, but the living is mostly done elsewhere. See: https://www.youtube.com/watch?v=_fOYJ3_ZppM https://www.youtube.com/watch?v=_fOYJ3_ZppM
chaostheory 5y ago
Yeah, no one wants to admit that musical chairs is a terrible game to play when the authorities refuse to allow the number of chairs to be increased. Shutting out players who already are no longer playing the game doesn't help. China has blocked money from leaving their country for two years now. EDIT it's been three years and not two https://www.scmp.com/economy/china-economy/article/3012312/chinas-capital-outflow-controls-have-gone-extreme-former https://www.scmp.com/economy/china-economy/article/3012312/c...
burnished 5y ago
Why do you think people (lets say people like you and I) will come up with excuses? We will all find out together in a couple years what impact this may have had. I think its a good idea but if nothing changes I'll have some evidence that it was not a high impact intervention. Like, there is no need to rail against people not changing their mind two years before you might reasonably expect them too. Besides, it would behoove you to reserve your judgement here and let results speak for themselves lest you fall into the same behavior you decry. Good shout on the whole "build more houses to have more houses" thing though.

dimitrios1 5y ago

The root cause of the supply constraint that ultimately gives real estate it's value is the land, and more specifically, the land being in a particular location. For example, a row of condos built right next to a major employer of the town, in the center of the city. That land is going to be valuable so long as that town exists, and as the population continues to grow, will only become more valuable. Adding more houses won't reduce the value of those condos the same way that adding more lanes to a highway doesn't reduce the congestion. The idea that houses are appreciating assets doesn't come from some fundamental law or ideology. It comes from recognizing reality. There is only so much land where people want to live, and population tends to increase (we are talking about urban and suburban areas, of course), so the demand and price increase. It's pretty simple, really. NIMBYism, zoning laws, permitting, those are always familiar and convenient boogiemen for people who don't want to do actual analysis of market factors. But, what you are really wanting to argue against is private property ownership.

weeksie 5y ago
You can always build more dense housing on land that is in high demand. In fact, doing that is the most obvious and effective way to keep prices low for desirable locales. Backed up by pretty much all the economic research on the subject in the last decade.
- dimitrios1 5y ago
  Great, is that economic research based on thought experiments or reality? I'd love to read it. Let's go back to my example. You build denser housing on top of or next to the condos I mentioned, what happens? The workers move in closer to the city center. The price is low for a short period of time, until more people migrate. Just like when the highway opens up a new lane. The traffic is better for a short period, until more people begin using the highway more. Then you are back to the status quo. You could argue that you can just keep building up and up until you cross the threshold of demand affecting the price, but without a market incentive to do that, it's wishful thinking at best. "Well the government could fund it" you could say, and indeed it can. But speaking of economic research, everytime the government has done such a thing, it causes widespread economic depression of the local area.

saos 5y ago

> Until we liberalize zoning, legalize building, and reject the idea that houses have to be appreciating assets, the issue will continue. That’s it. > reject the idea that houses have to be appreciating assets Particularly this. This is the outlook in the UK and it so problematic because normal people want this "property empire". Its become a source of content creation on YouTube or boasting on social media platforms. So fustrating

skeeter2020 5y ago

>> As it is often the case, politicians go for the headline with the highest electoral ROI They also conveniently target people who can't vote, much like big taxes on out-of-province housing purchases that are very popular within Canada.

deleted 5y ago
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vkou 5y ago

> The root cause is the system that is geared to keep houses always appreciating via supply constraints: aggressive zoning, discretionary permitting, NIMBYism. You're conspicuously avoiding low interest rates and 30-year mortgages from that list. When people can borrow against their entire life's earnings to buy a home, the price of a home will trend towards that of a person's entire life's earnings. Limiting maximum mortgage terms to 9 years would do more to bring down the price of homes than dealing with anything else you've listed.

danielmarkbruce 5y ago
This is insightful.
reedjosh 5y ago
> Limiting maximum mortgage terms to 9 Or at least not bolstering the mortgage market. Fannie and Freddie practically caused the extreme leverage mortgage phenom in the US.
oneoff786 5y ago
Would it? Or would it simply push home ownership further out of reach and favor landlords with capital?
- vkou 5y ago
  To rephrase my point: What do you think would happen to the price of the average home if we printed, and handed out, each man, woman, child, and dog in Canada a million dollars? My guess is that it would increase by ~2.6 million. But it would certainly level the playing field between the average person and 'the landlord with capital'. So if we are so concerned about keeping the average Joe up with that landlord, why don't we go ahead and do it? [1] It's not like it's hard to run the printing presses! [1] Unfortunately, we do do it, except instead of just handing this money out, we wrap it up in decades of indentured mortgage payments, instead. The net result is the same, with the addition of a colossal wealth transfer from borrowers to lenders.
  - 5y ago

mpalczewski 5y ago

In general I agree, that the root cause tends to be a supply constraint. Even if there were a bunch of people buying up houses, at least in theory that should make rents go down. However, in places like Vancouver people are buying up property as a place to park money and they remain unoccupied. Policies like additional taxes on unoccupied or secondary residences. Seem like one good way of adding supply.

danielmarkbruce 5y ago
Similar happens in Sydney. There are a lot of foreign people looking for safe havens for their cash. I can't blame them (I'd do the same), but it is problematic for the people living there because it does reduce supply.
weeksie 5y ago
The easiest way to solve that is by making housing a less attractive investment, which you can do by building a lot more of it. Otherwise you're stuck crafting clever anti-investment legislation which may or may not work and may or may not create weird distortions due to some unforeseen consequence of how the regulations are worded.
- HeyImAlex 5y ago
  I feel like this works for housing but not really for land? As density increases the cost of housing should go down (more houses), but the cost of land would go up (ability to build more houses on the same plot). I’m imagining the house from Up in the middle of manhattan; you could never build enough housing to make that a bad investment.
andrewmutz 5y ago
If they buy properties as an investment, why not rent them out? If you dont want the hassle, there are property management companies that will handle everything for you.
- danielmarkbruce 5y ago

seanmcdirmid 5y ago

We really should follow Japan on this: (a) National zoning (b) A culture that abhors second hand housing (so structures don't appreciate like land does). Housing that depreciates is no longer a sound investment. (c) Liberal definition on minimal standard housing to rent (central heating not required, toilets can be shared, no personal shower or even a shower at all in the building you are renting a room in, small spaces are OK). Maybe not this one: (d) Not very open to immigration at all, have a decreasing population.

idiotsecant 5y ago
In what sane universe is not requiring toilets and showers a solution to housing issues? I'm reasonably sure we can meet housing needs and still maintain basic human dignity.
- andrewmutz 5y ago
  Not all housing need to go to a 4-person family. In my late teens and early 20s I shared a bathroom and a bedroom and never felt my dignity impinged. At that age it was much more important for it to be cheap than for it to be good. It should not be illegal for such housing to exist.
  - evilduck 5y ago
    I think you're speaking past each other. The comment mentioned no access to shower facilities at all. Go search Youtube for tiny apartments in Japan or Tokyo and you'll quickly find rooms for rent where bathrooms and personal or communal showers simply don't exist, residents must walk to nearby businesses or public facilities like libraries during business hours just to relieve themselves. This is not a desirable housing situation either. I think a dormitory or barracks style housing is perfectly acceptable as a solution but putting the burden of supplying bathrooms on private businesses or implicitly requiring people shit in buckets in their one and only room is not.
- oneoff786 5y ago
  One with a public bathhouse culture

cosmiccrisp 5y ago

>The root cause is the system that is geared to keep houses always appreciating via supply constraints: aggressive zoning, discretionary permitting, NIMBYism. I don't agree that this is the root cause. The root cause is the artificial demand on housing created though our mass immigration policy. Canada accepts _at least_ 500,000 people per year through various channels, "temporary" foreign workers, international students (many of whom stay), refugees, and of course, normal immigration. And I am low balling that number. It could be closer to 1 million. When you bring in an entire large city worth of people, it stands to reason that this will cause massive pressure on housing prices. Now sustain that yearly increase for decades, and you have the problem we face today. There are 9 million people in Canada (a country of around 40M) currently living here on 10 year visa's. - Crazy! So there you have it. How could you leave that completely out from your argument and only blame zoning laws and nimbyism?

quest88 5y ago
So you're saying supply isn't meeting demand. Why isn't supply meeting demand? What's preventing buildings from building more and faster?
danbolt 5y ago
> And I am low balling that number. It could be closer to 1 million. Canada's population has increased around 4 million over the past ten years, so I don't know if that velocity of closer to million tracks.
mikepurvis 5y ago
I assume the response would be that with policies that allowed for rampant building/sprawl, the market would sort this all out regardless of the population. However, these kinds of price spikes still happen in lots of places that have neither a ton of immigration or constraints on building, so it's not clear to me that either one is really a singular root cause.
- zip1234 5y ago
  A price spike, maybe. A long term unending price increase, no. Would love to see an example of a place that doesn't have such constraints on building that has high prices.

kspacewalk2 5y ago

I agree that this is the root cause, and it remains a third rail in Canadian politics. The province of Ontario commissioned a "Housing Availability Task Force" to do a [report](https://www.ontario.ca/page/housing-affordability-task-force-report https://www.ontario.ca/page/housing-affordability-task-force...) spelling out the problem. They identified under-supply due to land use restrictions as the primary cause. The government ignored it and addressed secondary issues with lame bandaids in their June election platform. They are conservatives, this "foreign buyer ban" bandaid is put in place by liberals. NDP and Greens offer nothing different. A quadri-partisan consensus on ignoring the root cause. I do think there's another major cause - cheap money. It's fuelling a lot of the meteoric price growth and making the housing market even more of a wild speculative one, where all that matters is the carrying costs and not any underlying fundamentals. This one is more of a worldwide problem, and a small country like Canada cannot use monetary policy to bludgeon the housing market back into reality without bludgeoning the rest of the economy with it.

TimPC 5y ago
The recommendations of the committee reflect the fact that they had only one month to work in and as such severely limited the consultations they did. To take just one example of how ridiculous some of the conclusions are: They recommend forcing any municipality to accept 6 to 11 story buildings on any street that has a bus route regardless of whether that bus route actually reaches the building or not. This is a huge deal in Canada as many streets are absurdly long. Yonge Street for example is the longest street in the world and effectively transitions into a highway through rural areas. Still this policy says you could build an 11 story building without providing parking in any small township on Yonge Street because it has a bus or subway route while it's in Toronto.
- kspacewalk2 5y ago
  I think we have a philosophical difference here. You seem to accept the idea of centrally planning a city down to the micro-management level. I reject it. Yes, as you say, "this policy says you *could* build an 11 story building without providing parking in any small township on Yonge Street". The operative word is *could*. If there's market demand for it, you could and you absolutely should do it. If there isn't, you (the builder) won't build it, and you (the tenant) won't move in. If you focus urban planning on the big picture and allow the market to determine how many parking spots a building needs, or whether a single family neighbourhood makes any sense next to subway stops, the housing crisis will literally solve itself with private money. Instead, we keep floundering while entire generations of our under-30s struggle in precarious housing, because we are unwilling to adopt a different approach. 3/4 of discussions about 'housing affordability' at my city's council meetings are about money pits and bandaids such as airBnB bans and 'affordable housing' (can we build 30,000 units of it with taxpayer money? Didn't think so, let's move on). If you ignore the blah-blah and focus on actions, we the voters don't really want to solve this problem. If we did, we'd act on the obvious solution.

rasz 5y ago

>Foreign investors jump into the housing market because the current system ensures that the supply some do, others just want to safely park capital away from their own government reach (China/Russia/various *stans/corrupted countries).

mise_en_place 5y ago
The real reason is that those foreign investors are productive and have excess capital available to invest. They are from creditor nations, not debtor nations.
- rasz 5y ago
  If you call local corruption productive.
  - mise_en_place 5y ago
    You cannot lie in the foreign exchange market. If you bs your productivity vis-a-vis loose money supply, your currency will rightly be worthless. The USD would usually be worthless too, it's just that due to Petrodollar system and reserve currency status, it's artificially propped up to be strong.
    - imtringued 5y ago
      I hope you notice the irony in your comment. You praise the exporters while completely ignoring that imports must exist in equal proportion to exports.
      - mise_en_place 5y ago
        > You praise the exporters while completely ignoring that imports must exist in equal proportion to exports. In a closed system with two economies, yes, true. But in reality, many nations either run a trade deficit (exports < imports), or a trade surplus (exports > imports)

slothtrop 5y ago

It can't be reduced to just zoning. Corporations also buy up 30-50% of new housing. Also immigration rate doubles than of new housing starts.

nullc 5y ago

> Until we liberalize zoning, legalize building, and reject the idea that houses have to be appreciating assets, the issue will continue. Even if all those things are done the issue will still continue. There is a limited amount of land at desirable locations with desirable properties. You can increase density-- sure-- but after densifying more than some threshold of land it won't help because the extremely high density housing is itself extremely unattractive to many people, so building more density only helps to the extent that there are people who want that with unmet housing needs. The fundamental natural of housing is the root cause, restrictive policy is an exacerbating factor. To use an extreme example, you can easily go find big tracts of land in Montana for under $1000 an acre where no one would prevent you from building a gosh darn arcology if you wanted to. Yet the existence of cheap land someplace else doesn't magically make the issue of housing costs solved. People don't want to live in that someplace else, they want to live in particular places and there always is and always will be a finite amount of land in those particular places.

zip1234 5y ago
Maybe at the extremes there will be an issue, but doing all those things would massively bring down prices.

clpm4j 5y ago

Eliminating a subset of buyers, i.e. slightly decreasing demand, is an easy and obvious action to take. Will it have a significant and long lasting effect? Very likely not. But when examining the supply-demand equation, it's painfully obvious to say "foreigners who don't live here should not be allowed to buy residential housing". It's way, way easier than incentivizing developers to build affordable housing and dealing with all of the in-place bureaucracies and regulations and all of the hard stuff that comes along with constructing new neighborhoods and large residential buildings.

nullc 5y ago
A key point is that people buying for investment are less sensitive to driving the prices up-- so long as they're sustained. If you have enough wealth that you would be buying multiple properties anyways, buying fewer more expensive places just lowers your transaction costs. As such, they likely have an outsized effect on driving up prices. I'm dubious that Canada's policy will achieve that, as I understand it they exempt purchases by foreign students which is already a major avenue for foreign investment property purchases. If they limited resident aliens to a single piece of property which they also lived in, that would be something but my understanding is that they don't.
- munk-a 5y ago
  In theory BC at least has a residency tax on vacant homes - but that just increases the cost of making the investment and shifts the numbers... it doesn't necessarily make the investment a losing strategy unless you're right on the border.
xapata 5y ago
> incentivizing developers to build affordable housing But that's unnecessary. If developers build more luxury housing, that'll reduce the price of existing housing, such that it becomes affordable.
- RangerScience 5y ago
  That (first) either assumes demand remains constant, or requires measuring actual cost vs theoretical cost instead of simply actual; and second, assumes that there aren't complex interdependencies - ie, more luxury housing can make an area more desirable and increase demand more than it increases supply - arguably that's the goal, since otherwise you're literally building places people want to live in less than what's already available.

jlhawn 5y ago

Land Value Tax would solve this.

specialp 5y ago

It is not just that it is an attractive place to park wealth as far as ROI. It is attractive period because you can park your wealth in an obscured way in a place more fair than where you live. If you have a lot of money in places like China and Russia or if you have money from graft, it could all be taken away quickly. So these people are very willing to buy something real in a "safer" country, even if it has a negative ROI. This is not the only problem with housing in general, but it is a contributing factor that does not provide value for people that are looking to actually live somewhere.

8note 5y ago
From that perspective, the simplest way to resolve the money parking issue is to seize assets owned by chinese or Russian citizens. Break that assumption for non-canadians. Alternatively, provide a dedicated asset class for that, so they can put their money in something other than housing
chaostheory 5y ago
> If you have a lot of money in places like China and Russia or if you have money from graft, it could all be taken away quickly. I don't think people from Russia or China can do this anymore. At least the Russians can no longer do it in the West. As for the mainland Chinese, the CCP has blocked capital flight and they have even blocked cryptocurrency. This happened two years ago ie. unless they already got their money out of China two years earlier, they can't buy anything in Canada EDIT it happened three years ago and not two years https://www.scmp.com/economy/china-economy/article/3012312/chinas-capital-outflow-controls-have-gone-extreme-former https://www.scmp.com/economy/china-economy/article/3012312/c...

hristov 5y ago

When you liberalize zoning you get slum cities. This has already happened many times in latin america, india and africa. It also happened in America when we had liberalized zoning. (See, for example, the history of San Francisco, and New York). I am all for increasing density in places where there is high demand for housing. But a lot of people are living in this libertarian fantasy that all you have to do is liberalize zoning and you will magically get a perfect high density city like Singapore (which ironically has some of the strictest zoning in the world) and not a sea of slums (which actually happens in the real world when you combine high demand with no zoning). I think cities should increase density when they see high demand for housing. But they should do it smartly by providing services and infrastructure for more citizens when allowing higher density buildings. The most important service for high density living and the first pain point a city hits when population increases is transport. So if you want higher supply of housing, the most important thing to do first and foremost is to vote for all mass transit initiatives and try to convince your city leaders to put in more mass transit. Once the mass transit is there it will be far easier to put in apartment buildings and increase density without choking the city in traffic.

jonny_eh 5y ago
> See, for example, the history of San Francisco SF has notoriously strict zoning.

freyr 5y ago

This is a policy addressing one side of the supply-demand equation. I think most people would agree that measures can be taken on both the supply and demand sides. It’s a rather extraordinary claim to suggest that root causes don’t exist on the demand side, and that the issue can only be addressed from supply side. That’s an opinion on a debatable topic stated as fact, and it may be a popular opinion among the HN crowd, but that doesn’t make it more of a fact. If foreign buyers are using Canadian housing as an investment vehicle and to park assets, that additional demand decreases supply for Canadian citizens who require housing for shelter. Of course, they can (and should) directly address the supply side as well. But there’s the possibility that foreign buyers’ demand will continue to outpace supply, leading to ghost cities like there are China, with 65M+ empty homes. Canada is under no obligation to perpetuate that.

mzs 5y ago

This has most to do with being a signal to investors that Canadian housing is not a safe place for their money and that has the largest likelihood of having a more lasting effect beyond two years.

deleted 5y ago

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titzer 5y ago

> The root cause is the system that is geared to keep houses always appreciating via supply constraints: aggressive zoning, discretionary permitting, NIMBYism. These are contributing factors, but the energy that drives the bubble is capital, and bubbles have a way of becoming self-perpetuating. When a bubble becomes critical, you can't "build out of it", unless you think you can actually produce 10% more houses in a year, every year!

chipsa 5y ago
You can pull capital out of it by making it expensive to leave a home empty. Then capital will go where they can get better returns. Bonus tax when the average occupancy of the property drops below a certain percentage, say.
- titzer 5y ago
  People will just rent it. I don't know what the solution to the problem is, but I fear where it's heading. If people cannot get housing, anarchy and revolution are in the making. Then it's heads on pikes, French Revolution style.
  - chipsa 5y ago
    Yes. That's the point. People will rent it. Which means they need to be priced such that people can rent it. (If the rent is too high, people can't rent, which means it sits empty, which triggers the punitive tax). Lower rents will drive prices down, as people will decide to rent instead of buy for a while.
    - titzer 5y ago
      I don't think the empty tax is a bad idea, but I don't think it will have a substantial effect.

rcpt 5y ago

Really doesn't matter how much we build if tax law continues to scream at everyone to reallocate everything they have into bets on land value

zbrozek 5y ago

Build, baby, build. But we need property rights to be able to do it. None of this discretionary permitting nonsense; that's how we got into this mess.

wonnage 5y ago

The lack of housing is not a issue of attracting investment. Canada (and basically every other country with a housing price crisis) is perfectly capable of funding construction with domestic investment. It is, as you mentioned, an issue with policy. Until the policy is fixed, additional foreign investment is pointless and only serves to drive speculative price increases. It makes sense to deter it. In theory as countries apply similar policies across the world, the surplus countries driving these capital flows will be forced to either invest in developing countries that could actually use the funds, or park the cash domestically. That will force countries like China and Germany to deal with their issues internally instead of exporting them.

chaostheory 5y ago

> Foreign investors jump into the housing market because the current system ensures that the supply of housing is limited so it is an attractive way to park your wealth. If they were targeting mainland Chinese investors, it's too late. China already stopped capital flight out of their country two years ago. They even banned crypto, so getting money out of China is both difficult and expensive for both Chinese citizens and even expats. The former is understandable since it's an authoritarian country, but expats? That's a new one unless countries in the Middle East do the same thing.

acchow 5y ago

Toronto has tons of upzoning. There are developments all over the city. The problem is that your primary residence is a tax-advantaged vehicle in Canada (infinite tax-free capital gains). So the optimal choice is always to buy as much real estate as you possibly can. People also use their children to hold deeds when they want to expand into second and third homes. The tax advantaged status drives the Canadian housing bubble People are regularly talking about "housing cannot be both a good investment and affordable". In Canada, it is a 'good investment' by tax law. Look at how much real estate prices have diverged from rent in Toronto. It is mind-boggling. The gap's growth accelerated with COVID-era quantitative easing.

dwighttk 5y ago

If houses don’t appreciate, why buy a house? Just rent

madboston 5y ago
because you want to settle down and stop moving? maybe have a family? have a place for your own that you can actually configure to your own liking? not get kicked liked a football because rent was increased for lease renewal because new corporate landlord doesn't give a shit? give next generation a fair/reasonable chance of making it on their own and not because they were not lucky enough to be born with family money? I laugh when I see people have BLM signs on their property because those are the exact people who don't want to care about it.
hadlock 5y ago
We bought a house, then had to move cross-country. After owning, where all they did was examine our finances, it was really degrading having to submit an application to rent a house, background check, references etc. Also when something breaks I have to call someone, who will then, within a week or two schedule a handy man to come by and fix it. I have no say over the appliances, external appearance of the house, can't apply for a permit to convert the attic into a third story, fix the inadequate wiring (technically to code, but my space heater will blow out the circuit because it's attached to several other things in the house). I recently reseeded the back yard, at great time expense, and things generally while nice, look a lot more run down than if I owned it and could make improvements knowing I would retain the value, but I'm not going to pour money into this house just to let the landlord receive that value at no charge. Also when he and his wife feel like retiring here, we're going to have to move, at our expense with no recourse. We already tried buying it from them. Renting sucks.

janmo 5y ago

The root cause of high real estate prices are low interest rates. There is always a correlation between those two.

Trias11 5y ago

Right. Communist until you get rich Feminist until you get married Atheist until the plane starts falling Critisizing NIMBYism until you own the house.

donthellbanme 5y ago

The wealthy of the world should shouldn't be able to buy up our real-estate period. In the USA, all it takes is a email, or phone call, from practically anywhere in the world and they own it. At minimum we (USA) need to start with citizenship as a prerequisite. Oh yea, stop corporation for buying up precious stock too. (Until we have more stock--the last thing we should allow is foreigners with funds buying our land. I have found it infuriating since I found out about how easy it is to buy here. Other countries do not let wealthy Americans buy land so dam easy.)

2143 5y ago
When the wealthy of the world buy land in USA, isn't their wealth from abroad getting transferred into USA? That's foreign money coming in to USA. Technically, that's a good thing for the country as a whole.

akhmatova 5y ago

The root cause is the system that is geared to keep houses always appreciating via supply constraints: aggressive zoning, discretionary permitting, NIMBYism. You can believe that if you want to. Any level-headed analysis of the situation, however, points to multiple factors at play, here -- dark actors with huge pools of dark money to park somewhere (that just so happens to be mildly appreciating on average) being one of them. A system which promotes and protects de-facto anonymization of luxury assets at scale being another. Truncating the root cause analysis simply to "supply" is simplistic at best. Until we liberalize zoning, legalize building, and reject the idea that houses have to be appreciating assets, the issue will continue. As much as one may want to believe that this is the right fix in the long term -- even under the best of conditions, it will take years, more like decades to pan out. Meanwhile the housing market needs relief now.

cowpig 5y ago

I hear this all the time on HN, but I never see any data to back it up. It's also a very broad statement: I never see any construction when I visit SF, but in Montreal everything is under construction all the time. There are a dozen new condo developments within a few blocks of where I live, and yet the prices of homes still rose something like 20% last year. There isn't usually one The Root Cause for economic issues, so blanket statements about policies being "boogeyman politics" are the kinds of unlikely sentiments that I'd like to see backed up by significant evidence.

thawaya3113 5y ago

Building more housing does not lower housing prices. This should be fairly obvious but here’s why it doesn’t work, at least in the US, and frankly would cause huge problems if it did. The major problem is that the vast majority of the U.S. which is not underwater in debts, has the majority of their wealth in their houses. So if building more housing led to a secular reduction in housing prices, people would get poorer. Which means that it will never happen, because people who own housing in those areas and therefore control the entire political processs, will not accede to shooting themselves in the foot even if they are YIMBYs. What this means then, is that the only housing that will be allowed to be built, or the only housing that will not in turn make the people of the area poorer, will be “luxury” housing, which does not lower their property values because it compensates for the drop in housing value due to greater supply by adding “amenities”, allowing them to maintain their existing house values. The escape route for this is low income housing. Creating cheaper housing for people who couldn’t afford to buy their houses anyways, and therefore even though it leads to lower cost housing, it doesn’t lead to a drop in their house values (if anything, it may lead to an increase in their house values since it reduces virgin land that could have otherwise been used to build non low income housing that would compete with their houses).

raxxorraxor 5y ago

I disagree that zoning alone is the problem as you see these market developments in almost all western nations and some of them have ample land to build upon. Zoning could be more liberal, but it would still be massive stakeholders that would build new homes and rent them out to get a decent ROI.