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If one of the largest drivers of inflation is housing, why does the government not balance this act with 0% loans to developers/the construction industry? Drive

If one of the largest drivers of inflation is housing, why does the government not balance this act with 0% loans to developers/the construction industry? Drive the supply while slowing demand.

ars 3y ago
That's not necessary - developers are happy to build. They just need to relax zoning, and also open more areas to constructions. (i.e. make a suburbs, that will over time be subdivided into an Urban area.)
- voisin 3y ago
  This is the answer. No need to assume a conspiracy among a massive, dispersed group of developers across the country! The issue is zoning and NIMBYism.
- VancouverMan 3y ago
  Anyone who has followed the development of mid-scale or large-scale residential projects in Canada's major cities will have seen that the construction phase itself is perhaps the easiest and often the quickest part of the process. This is true even for large concrete highrises. One to three years of construction can easily be eclipsed by the unnecessary, onerous, and very lengthy "planning" processes imposed by government, especially if tribunals, appeals, and other bureaucratic overhead is imposed on a project.
guerrilla 3y ago
Probably because property owners lobby very hard* against that in order to maintain the price of their holdings. * that and ouright corruption.
softfalcon 3y ago
I think it likely has something to do with lobbying by said developers and property holders who don't want interest rates to go up. Their whole gamble is building big construction projects sold to investors looking to diversify their portfolio by grounding some of their holdings as physical real estate. As a held asset, these investors want their assets to grow in value, or at the very least, remain stable. If interest rates rise, the sky rocketing prices of real estate slows. This negatively affects the investors asset ratings and their ability to continue to loan against those assets to do even more with their money/assets. This vested interest is a shared agreement between big investors, large builders, and their subsidiaries. Actually building houses that are affordable to real people has absolutely nothing to do with their game plan.
DropInIn 3y ago
Because the false affordability of mansions is the prime cause of the real estate issues Way too many ft2, too many valleys in the roofs, too many yards. We solve the housing crisis with high density, modest housing, not the absurd mcmansions everyone keeps demanding.
- electriclove 3y ago
  Let people choose what kind of housing they want. Don't assume everyone wants to be in high density housing.
  - DropInIn 3y ago
    When sfhs come at the expense of the land required to provide reasonably situated and cost effective high density? No. The needs of society as a whole outweigh the wants of a few excessively privileged persons.
    - electriclove 3y ago
      I’m not arguing for a single family home in Manhattan or Hong Kong. There is plenty of land for single family homes in the suburbs. Needs change as people progress through life.
      - DropInIn 3y ago
        And the infrastructure to support these "remote" homes is paid for by whom? Also, if we don't do as you want and instead build high density only and start demolishing the sprawling suburbs then we can have forests a 5 minute walk from everyone... Parks everywhere, nature thriving, while we have to only travel 4 blocks to do everything we need to in life because the density means that Walmart and everything else can and will be in close proximity to Everyone all without the need for a personal vehicle. See, your demand has serious knock on effects you either didn't consider or view as irrelevant against your personal privileges....
        3y ago
randomdata 3y ago
> If one of the largest drivers of inflation is housing Specifically, mortgage interest is the largest driver of inflation, accounting for 30% of the growth in CPI as of the May figures. > why does the government not balance this act Probably the same reason they pushed the inflation problem off on to the BoC back in the 90s. They don't want to deal with it.
nostromo 3y ago
Central banks need to have a very focused mission: a stable currency. They shouldn't get into the game of picking winners and losers. But if the government itself wants to tax or borrow in order to subsidize loans for housing, that's something they can do. But not the central bank.
Matthias247 3y ago
I think this won't help because money for developers is not what holding things back. Developers in Canada seem to have plenty of money, but they are restricted by approvals and construction capacity in building more. Developers will always charge market rate (which is now like 2000$/sqft) for their new buildings since they want to maximize their profits. Their cost do not play any role in what they are charging. Maybe it would help if these loans would help to get new developers and builders into the game. But if those need to hire the same builders, it's questionable whether there is more build capacity in the end.
- voisin 3y ago
  > Their cost do not play any role in what they are charging. This statement is absurd. By your logic they could charge $20,000/sf but aren’t because of… restraint? No, turns out there are market forces in real estate just like every industry and the more profit there is, the more competitors turn out to play, driving the profit down to a market level.
voisin 3y ago
> why does the government not balance this act with 0% loans to developers CMHC does exactly this if you are willing to build affordable housing. The issue is that construction costs have also gone nuts throughout COVID and a lot of development business plans have been destroyed at these new construction prices.

If one of the largest drivers of inflation is housing, why does the government not balance this act with 0% loans to developers/the construction industry? Drive the supply while slowing demand.

ars 3y ago

That's not necessary - developers are happy to build. They just need to relax zoning, and also open more areas to constructions. (i.e. make a suburbs, that will over time be subdivided into an Urban area.)

voisin 3y ago
This is the answer. No need to assume a conspiracy among a massive, dispersed group of developers across the country! The issue is zoning and NIMBYism.
VancouverMan 3y ago
Anyone who has followed the development of mid-scale or large-scale residential projects in Canada's major cities will have seen that the construction phase itself is perhaps the easiest and often the quickest part of the process. This is true even for large concrete highrises. One to three years of construction can easily be eclipsed by the unnecessary, onerous, and very lengthy "planning" processes imposed by government, especially if tribunals, appeals, and other bureaucratic overhead is imposed on a project.

guerrilla 3y ago

Probably because property owners lobby very hard* against that in order to maintain the price of their holdings. * that and ouright corruption.

softfalcon 3y ago

I think it likely has something to do with lobbying by said developers and property holders who don't want interest rates to go up. Their whole gamble is building big construction projects sold to investors looking to diversify their portfolio by grounding some of their holdings as physical real estate. As a held asset, these investors want their assets to grow in value, or at the very least, remain stable. If interest rates rise, the sky rocketing prices of real estate slows. This negatively affects the investors asset ratings and their ability to continue to loan against those assets to do even more with their money/assets. This vested interest is a shared agreement between big investors, large builders, and their subsidiaries. Actually building houses that are affordable to real people has absolutely nothing to do with their game plan.

DropInIn 3y ago

Because the false affordability of mansions is the prime cause of the real estate issues Way too many ft2, too many valleys in the roofs, too many yards. We solve the housing crisis with high density, modest housing, not the absurd mcmansions everyone keeps demanding.

electriclove 3y ago
Let people choose what kind of housing they want. Don't assume everyone wants to be in high density housing.
- DropInIn 3y ago
  When sfhs come at the expense of the land required to provide reasonably situated and cost effective high density? No. The needs of society as a whole outweigh the wants of a few excessively privileged persons.
  - electriclove 3y ago
    I’m not arguing for a single family home in Manhattan or Hong Kong. There is plenty of land for single family homes in the suburbs. Needs change as people progress through life.
    - DropInIn 3y ago
      And the infrastructure to support these "remote" homes is paid for by whom? Also, if we don't do as you want and instead build high density only and start demolishing the sprawling suburbs then we can have forests a 5 minute walk from everyone... Parks everywhere, nature thriving, while we have to only travel 4 blocks to do everything we need to in life because the density means that Walmart and everything else can and will be in close proximity to Everyone all without the need for a personal vehicle. See, your demand has serious knock on effects you either didn't consider or view as irrelevant against your personal privileges....
      - 3y ago

randomdata 3y ago

> If one of the largest drivers of inflation is housing Specifically, mortgage interest is the largest driver of inflation, accounting for 30% of the growth in CPI as of the May figures. > why does the government not balance this act Probably the same reason they pushed the inflation problem off on to the BoC back in the 90s. They don't want to deal with it.

nostromo 3y ago

Central banks need to have a very focused mission: a stable currency. They shouldn't get into the game of picking winners and losers. But if the government itself wants to tax or borrow in order to subsidize loans for housing, that's something they can do. But not the central bank.

Matthias247 3y ago

I think this won't help because money for developers is not what holding things back. Developers in Canada seem to have plenty of money, but they are restricted by approvals and construction capacity in building more. Developers will always charge market rate (which is now like 2000$/sqft) for their new buildings since they want to maximize their profits. Their cost do not play any role in what they are charging. Maybe it would help if these loans would help to get new developers and builders into the game. But if those need to hire the same builders, it's questionable whether there is more build capacity in the end.

voisin 3y ago
> Their cost do not play any role in what they are charging. This statement is absurd. By your logic they could charge $20,000/sf but aren’t because of… restraint? No, turns out there are market forces in real estate just like every industry and the more profit there is, the more competitors turn out to play, driving the profit down to a market level.

voisin 3y ago

> why does the government not balance this act with 0% loans to developers CMHC does exactly this if you are willing to build affordable housing. The issue is that construction costs have also gone nuts throughout COVID and a lot of development business plans have been destroyed at these new construction prices.