24 ms·

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

by clpm4j 4y 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 4y 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 4y 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 4y 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 4y 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.
  - xapata 4y ago
    > more luxury housing can make an area more desirable Depends how big the "area" is that you're thinking about. The effect of increasing housing supply is well-studied. Demand can only grow as fast as the population does. If one area experiences increasing demand, then another area will have decreasing demand, comparatively.
    - nradov 4y ago
      That relationship doesn't hold in ski resort areas. Wealthy people have increasingly bought up vacation homes even as the population remains flat. Those vacation homes are vacant much of the year. There are usually geographic and infrastructure constraints which make it impossible to build significant amounts of new housing within practical commuting distance. So long time local residents are effectively being forced out.
      - xapata 4y ago
        I have little sympathy for people that are "forced" to sell their homes for a large capital gain. They can move to where it's cheap and live large. Maybe my perspective as an immigrant is unusual, but I'm a big fan of the freedom to migrate. That includes the freedom to buy housing at market price.
        nradov 4y ago
        Most of the people being forced out are renters.
tick_tock_tick 4y ago
> build affordable housing Lets build shitty buildings that will last for decades. Affordable housing is and will always be a horrible idea. Build and build until you get a surplus and suddenly tons of housing is affordable.
- cardamomo 4y ago
  I agree with this, minus the "shitty buildings" part. The way to create more affordable housing is to create more housing period. I do feel that they should be homes they people want to live in, though!
- munk-a 4y ago
  This may be a healthy long term outcome but a lot of people have a good portion of their value parked in their home - if there is a sudden oversupply how will you cousin the economic and social shock as millions of middle-class folks suddenly lose their wealth while upper class folks mainly invested in the stock market come out the far side with even more wealth? This is not an easy problem - and as soon as you try and alert people to the fact that you're going to fix it the market will respond and the problem will occur.
  - seunosewa 4y ago
    So why bother cutting off foreigners if you want your real estate to keep appreciating in value?
    - munk-a 4y ago
      To slow the value gain - I think ideally the government would like to sort of stabilize housing prices in BC & ON for a few years then re-start a slower more reliable growth pace... exploding the housing market fully could cause a value loss - so this is like opening one pressure release valve to slow the build up a bit.
      - seunosewa 4y ago
handmodel 4y ago
I'm actually happy they did it only because it will get people (at least the subset of people who follow casually and do care) to acknowledge that foreign buyers are not the root cause once a couple years pass and the data will be apparent.
- Eliezer 4y ago
  That's a very cheerful take about people's ability to update about politics after a law fails to give them a promised result. I wish I lived in the territory corresponding to your map.
thawaya3113 4y ago
This is also, obviously, not intended to be a long term solution as evidenced by the fact that it’s limited to 2 years. I do think it would have been better if they hadn’t announced it was limited to 2 years but that’s not practical. I’m a huge proponent of the “build more supply” side. But that takes time. And in addition, there is a huge 2 year gap of supply creation that didn’t happen because of the pandemic. This may help ease some of that pandemic related imbalance.
majani 4y ago
The next question to that is why does zoning exist in the first place? Zoning exists because of how hard it is to scale up infrastructure to match demand. And we decided to entrust governments with infrastructure, yet they are not nimble enough to handle these scaling issues

by clpm4j 4y ago

nullc 4y 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 4y 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 4y 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 4y 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.
- xapata 4y ago
  > more luxury housing can make an area more desirable Depends how big the "area" is that you're thinking about. The effect of increasing housing supply is well-studied. Demand can only grow as fast as the population does. If one area experiences increasing demand, then another area will have decreasing demand, comparatively.
  - nradov 4y ago
    That relationship doesn't hold in ski resort areas. Wealthy people have increasingly bought up vacation homes even as the population remains flat. Those vacation homes are vacant much of the year. There are usually geographic and infrastructure constraints which make it impossible to build significant amounts of new housing within practical commuting distance. So long time local residents are effectively being forced out.
    - xapata 4y ago
      I have little sympathy for people that are "forced" to sell their homes for a large capital gain. They can move to where it's cheap and live large. Maybe my perspective as an immigrant is unusual, but I'm a big fan of the freedom to migrate. That includes the freedom to buy housing at market price.
      - nradov 4y ago
        Most of the people being forced out are renters.

tick_tock_tick 4y ago

> build affordable housing Lets build shitty buildings that will last for decades. Affordable housing is and will always be a horrible idea. Build and build until you get a surplus and suddenly tons of housing is affordable.

cardamomo 4y ago
I agree with this, minus the "shitty buildings" part. The way to create more affordable housing is to create more housing period. I do feel that they should be homes they people want to live in, though!
munk-a 4y ago
This may be a healthy long term outcome but a lot of people have a good portion of their value parked in their home - if there is a sudden oversupply how will you cousin the economic and social shock as millions of middle-class folks suddenly lose their wealth while upper class folks mainly invested in the stock market come out the far side with even more wealth? This is not an easy problem - and as soon as you try and alert people to the fact that you're going to fix it the market will respond and the problem will occur.
- seunosewa 4y ago
  So why bother cutting off foreigners if you want your real estate to keep appreciating in value?
  - munk-a 4y ago
    To slow the value gain - I think ideally the government would like to sort of stabilize housing prices in BC & ON for a few years then re-start a slower more reliable growth pace... exploding the housing market fully could cause a value loss - so this is like opening one pressure release valve to slow the build up a bit.
    - seunosewa 4y ago

handmodel 4y ago

I'm actually happy they did it only because it will get people (at least the subset of people who follow casually and do care) to acknowledge that foreign buyers are not the root cause once a couple years pass and the data will be apparent.

Eliezer 4y ago
That's a very cheerful take about people's ability to update about politics after a law fails to give them a promised result. I wish I lived in the territory corresponding to your map.

thawaya3113 4y ago

This is also, obviously, not intended to be a long term solution as evidenced by the fact that it’s limited to 2 years. I do think it would have been better if they hadn’t announced it was limited to 2 years but that’s not practical. I’m a huge proponent of the “build more supply” side. But that takes time. And in addition, there is a huge 2 year gap of supply creation that didn’t happen because of the pandemic. This may help ease some of that pandemic related imbalance.

majani 4y ago

The next question to that is why does zoning exist in the first place? Zoning exists because of how hard it is to scale up infrastructure to match demand. And we decided to entrust governments with infrastructure, yet they are not nimble enough to handle these scaling issues