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> This is a problem created by multiple governments over various parties, and at this point I don't see an exit that isn't enormously painful. Isn't Canada's h

by rewmie 3y ago

> This is a problem created by multiple governments over various parties, and at this point I don't see an exit that isn't enormously painful. Isn't Canada's housing problem caused by a supply crunch? Other than the Canadian government going into the real estate business and start building medium and high-density appartment blocks, what role does the Canadian government have in this mess? Also, please note that this issue is plaguing basically the whole European housing market as well.

ttul 3y ago
The supply crunch is caused by wealthy Canadians owning multiple homes, most of which are empty. There are some relatively new speculation and vacancy taxes, but they are trivially easy to evade - just have your adult child “rent” your vacant cottage and suddenly it’s occupied. During the pandemic period, low interest rates caused home owners with plenty of house equity to go on a virtual binge of home buying. I know of people who bought four extra houses in 2021 just because they could. The bank gave them free money. Why not?
- rewmie 3y ago
  > The supply crunch is caused by wealthy Canadians owning multiple homes Is it, though? I mean, that would drive up demand, but what happened to supply? If your hypothesis had any basis, wouldn't real estate developers rush to profit from that demand by building more homes? They wouldn't turn down all that free money, would they? And more to the point, why is that a government problem?
  - randomdata 3y ago
    > but what happened to supply? Insufficient labour. Anyone who builds houses was booked up for years. It looks like this is finally starting to turn, but that doesn't help right now. You need to build houses in the past to be able to live in them now. With the strongest labour market possibly ever seen in Canada, you didn't find anyone going to build houses because they had no other work. So you throw more money at workers to try to compel them away from the work they were doing and into housing work, but that just... drives up the cost of housing.
    - rewmie 3y ago
      > Insufficient labour. I'm not sure that explanation is plausible. Canada's housing stats show a drop in total investments in building construction, and a drop in housing starts. https://www150.statcan.gc.ca/n1/daily-quotidien/230818/dq230818a-eng.htm?indid=19277-1&indgeo=0 https://www150.statcan.gc.ca/n1/daily-quotidien/230818/dq230... https://www.cmhc-schl.gc.ca/professionals/housing-markets-data-and-research/housing-data/data-tables/housing-market-data/monthly-housing-starts-construction-data-tables https://www.cmhc-schl.gc.ca/professionals/housing-markets-da... If supply was catching up with demand to ride that gravy train, we would see in the very least an increase in investments. Why would anyone refuse to invest in a venture that's handing out free money? Also, labour costs don't account for more than 30% of the build cost, which is far below the current real estate prices. Even if they doubled salaries of construction workers, selling apartments in today's market would still be very profitable.
      - randomdata 3y ago
        > Canada's housing stats show a drop in total investments in building construction, and a drop in housing starts. Hence why the labour issues have started to turn... > If supply was catching up with demand Demand has backed away because an increasing number are not willing to take the risk on housing now. High interest rates and a lot of increased pressure for governments to do something means that a coming crash is highly likely and nobody wants to be the bag holder. Same reason rents have skyrocketed. If you can rent, why on earth would you buy a house right now? Indeed, housing tends to be highly sticky, but it's almost certain they will cost a whole lot less in a year or two. The downward trend is already quite visible, with average price in most markets peaking in 2022.
  - ttul 3y ago
    I’m sure the supply side is constrained by various things that aren’t uncommon in other places. NIMBY zoning, terribly slow permitting, etc. But the demand side has been lit on fire by cheap money. It’s as if Canada is a country that pulls resources out of the ground, takes cash from foreigners, lends it out to boomers, and then buys houses. That’s all there is in the country now.
Tiktaalik 3y ago
In the late 60s and 70s when Canada was building the most amount of homes, the Federal government was deeply, deeply involved in housing not just by financing and building publicly owned below market housing and coops, but also huge tax expenditure to heavily incentivize and help finance market housing. All that ended in 1993 with the Jean Chretien austerity budgets. Feds stopped participating in social housing, incentives ended, transfers to Provinces were scaled back, and Provinces responded by pulling back themselves. Accordingly basically nil non-market housing was built for decades. Market housing financing became harder and creation slowed and shifted toward a sort of condo product marketed toward the relatively wealthy. Creation of purpose built rental pretty much ended. So at this point it's pretty clear that huge tax expenditure and investment from the Feds and Provinces in helping finance new housing creation both market and not market is required. There's also policy work to be done here to try to stream line municipal rules to hopefully make it easier such that less government aid is required. But yea just by looking at what we were doing in the 60s/70s and now there's a massive difference that suggests at what the solutions could be.

by rewmie 3y ago

ttul 3y ago

The supply crunch is caused by wealthy Canadians owning multiple homes, most of which are empty. There are some relatively new speculation and vacancy taxes, but they are trivially easy to evade - just have your adult child “rent” your vacant cottage and suddenly it’s occupied. During the pandemic period, low interest rates caused home owners with plenty of house equity to go on a virtual binge of home buying. I know of people who bought four extra houses in 2021 just because they could. The bank gave them free money. Why not?

rewmie 3y ago
> The supply crunch is caused by wealthy Canadians owning multiple homes Is it, though? I mean, that would drive up demand, but what happened to supply? If your hypothesis had any basis, wouldn't real estate developers rush to profit from that demand by building more homes? They wouldn't turn down all that free money, would they? And more to the point, why is that a government problem?
- randomdata 3y ago
  > but what happened to supply? Insufficient labour. Anyone who builds houses was booked up for years. It looks like this is finally starting to turn, but that doesn't help right now. You need to build houses in the past to be able to live in them now. With the strongest labour market possibly ever seen in Canada, you didn't find anyone going to build houses because they had no other work. So you throw more money at workers to try to compel them away from the work they were doing and into housing work, but that just... drives up the cost of housing.
  - rewmie 3y ago
    > Insufficient labour. I'm not sure that explanation is plausible. Canada's housing stats show a drop in total investments in building construction, and a drop in housing starts. https://www150.statcan.gc.ca/n1/daily-quotidien/230818/dq230818a-eng.htm?indid=19277-1&indgeo=0 https://www150.statcan.gc.ca/n1/daily-quotidien/230818/dq230... https://www.cmhc-schl.gc.ca/professionals/housing-markets-data-and-research/housing-data/data-tables/housing-market-data/monthly-housing-starts-construction-data-tables https://www.cmhc-schl.gc.ca/professionals/housing-markets-da... If supply was catching up with demand to ride that gravy train, we would see in the very least an increase in investments. Why would anyone refuse to invest in a venture that's handing out free money? Also, labour costs don't account for more than 30% of the build cost, which is far below the current real estate prices. Even if they doubled salaries of construction workers, selling apartments in today's market would still be very profitable.
    - randomdata 3y ago
      > Canada's housing stats show a drop in total investments in building construction, and a drop in housing starts. Hence why the labour issues have started to turn... > If supply was catching up with demand Demand has backed away because an increasing number are not willing to take the risk on housing now. High interest rates and a lot of increased pressure for governments to do something means that a coming crash is highly likely and nobody wants to be the bag holder. Same reason rents have skyrocketed. If you can rent, why on earth would you buy a house right now? Indeed, housing tends to be highly sticky, but it's almost certain they will cost a whole lot less in a year or two. The downward trend is already quite visible, with average price in most markets peaking in 2022.
- ttul 3y ago
  I’m sure the supply side is constrained by various things that aren’t uncommon in other places. NIMBY zoning, terribly slow permitting, etc. But the demand side has been lit on fire by cheap money. It’s as if Canada is a country that pulls resources out of the ground, takes cash from foreigners, lends it out to boomers, and then buys houses. That’s all there is in the country now.

Tiktaalik 3y ago

In the late 60s and 70s when Canada was building the most amount of homes, the Federal government was deeply, deeply involved in housing not just by financing and building publicly owned below market housing and coops, but also huge tax expenditure to heavily incentivize and help finance market housing. All that ended in 1993 with the Jean Chretien austerity budgets. Feds stopped participating in social housing, incentives ended, transfers to Provinces were scaled back, and Provinces responded by pulling back themselves. Accordingly basically nil non-market housing was built for decades. Market housing financing became harder and creation slowed and shifted toward a sort of condo product marketed toward the relatively wealthy. Creation of purpose built rental pretty much ended. So at this point it's pretty clear that huge tax expenditure and investment from the Feds and Provinces in helping finance new housing creation both market and not market is required. There's also policy work to be done here to try to stream line municipal rules to hopefully make it easier such that less government aid is required. But yea just by looking at what we were doing in the 60s/70s and now there's a massive difference that suggests at what the solutions could be.