Great post! Let alone wealth, current poverty measures often don't even measure *income* all that well. The Market Basket Measure has a really coarse adjustment for the reduction in shelter costs for paid-off homes, which I believe they are considering adjusting to reflect that homeowners near the end of their mortgages often have cost advantages over renters. (Even with rising interest rates now affecting many, the average existing mortgage payment is lower than the average rent!) Effectively, it reduces the shelter component of the measure. But it doesn't have anything that accounts for the fact that older homeowners are often just consuming way more housing than renters, and way more housing than is a basic need. Where I live a detached 3 bedroom home might rent for 3.5k, and a 1 bedroom apartment around 2k -- that's a ton of 'extra' consumption beyond the basics that a home is allowing but that isn't being counted. From another perspective, that home is providing the same value as 42k a year (!!) of income, which if it were cash income would put a single person or a couple above the MBM poverty line in every region of the country.
There's a good case that's not actually something you want to factor in as "income" in an official poverty measurement, even if it were easy to measure, because people are likely to cut back on other things they need before downsizing or renting out a room and it's not as easily available as cash income like Beth pointed out in another comment. (You're unlikely to even convince homeowners this is real income!) But, it is still such a huge hidden difference between the financial situations of long-time homeowners and everyone else.
I see this in my community as well. Given the poverty measures by income and the lack of affordable rentals or options to downsize, what policy options do you see available to unlock some of the paper / real estate wealth in a more equitable way?
In general, I have no issue. I guess where it may fall apart are the number of seniors/families with no or limited liquid income being forced either to sell and move or pull money out of home equity to pay the tax. Again, makes sense to me. Challenge for me is that, at least in my area, for 1 - there’s limited places for them to go (0% vacancy rate and almost no smaller homes available to purchase) and 2 - it may lock in the desire to sell at a high rate as they want to ensure they have money to pay off line of credit / equity loan in the long term. In our area, seniors can do a property tax deferral as well depending on their income - so they can avoid paying the property tax now anyway and then if housing prices go down, may get out of paying the 1% premium anyway.
This is SUCH a good question Beth. Every time I mention housing wealth being concentrated in the hands of older Canadians people always come back with "Well, yeah, they have lots of "paper" wealth but they have nowhere to go to downsize to make use of the wealth." First of all they can unlock their equity through financial institutions, which is becoming popular. Secondly, I'm not even sure if the data holds true on that actually. Are there really no 1 bedroom places available to someone who is ready to sell a 5 bedroom $2 Million home? Or is it more of a case of them not wanting to move or even consider make the SAME or fewer adaptations that young Canadians have been making for literally decades? Move out of the big cities to a home with smaller square footage, away from your friends/family and where you need to commute further to access similar services. Sounds very familiar to us young people. The difference is, we were forced into it and without a $2Million cheque to add to our bank accounts. Wealthy older people who are overhoused are not forced into doing that, so we get fooled into thinking we have to incentivize them with policy change or even more supports than they're already given by virtue of simply being over age 65. But when are we going to have the conversation about Canadians doing the right thing for the next generation(s) without being incentivized?
I’m from a rural area and our vacant rate has been 0% for 5+ years unfortunately. Even if I could get folks to have a desire to downsize, current market and policies aren’t set up to lower purchase price for those buying what they have to sell. Using home equity as a source of current income keeps them in the large home longer but also requires the value stays high to pay it back once a smaller space becomes available - it just seems to kick the problem down the road a bit.
"Kicking the can down the road". That should be the new slogan for Canada. HAHAHAHA! You're SO right. There are so many implications for even the smallest adaptations to this crisis. It makes my head hurt trying to figure it out but aren't their smarter people out there who can do this policy writing for me? I like the GenSqueeze approach because the Solutions Framework for Housing is incredibly detail oriented with so many ideas and for both the supply and the demand side of the equation. This either starts working soon or I may be moving my family to Signapore. I think they have like 80% of their housing stock as social housing or something crazy rediculous like that. BONUS: Amazing food!!!
It's such a crisis at this point that it feels like if we had said instead of having to stay home during covid to help hospitals, young people should have had to pay a bit extra to shore up hospital capacity... eventually. You have a problem that in the short-term can't be fixed with money, and the relative consensus is that some people's contribution to a solution, if anything, should only be money. There's this real asymmetry in how much we're actually willing to treat something like a crisis (and if you don't like housing as a comparably-serious issue, try climate). Any number of policies--from how we means-test benefits, to tax policy, to property tax deferrals--are designed in a way that takes it for granted that increased housing costs should not affect the amount of housing older homeowners get to take up and even that it should be a policy priority to keep people in too-big homes. I even agree with some of those policies, but I do think it means being really serious about whether the rate of population growth to combat aging is creating short-term costs for young people that we are not willing to have be meaningfully shared.
100% Thanks for mentioning climate because if we don't get that sorted out and FAST all this housing crisis stuff is only going to get WAY worse and leave an even bigger debt for future generations. When I was younger (in my 20s and 30s) I honestly thought I had a good idea of where we were headed but I feel totally lost at this point. I thought the climate and housing crisis thing would happen in the 2040s or 2050s. I felt like we might have had time for the younger generations to take over politics and right the ship but it's looking anything but hopeful now...
So many want to get in on this get rich easy-quick scheme of housing-even those scrapping up enough to afford a mortgage don't like the idea of once in a home not seeing huge returns on their investment. It's societal greed- an expectation of profiting from housing. Government needs to build housing-a lot of it- and sell it for affordable prices and then put a limit on how much those houses can be resold for so that they remain affordable and not just an investment opportunity. The market enables scarcity and greed. Only the government can break the cycle of greed and offer an alternative to those who actually want homes and not get rich scheme.
As I posted earlier everybody wants to get in on this get rich easy-quick scheme of housing-even those scrapping up enough to afford a mortgage don't like the idea of once in a home not seeing huge returns on their investment. It's societal greed- an expectation of profiting from housing. Government needs to build housing and sell it for affordable prices and then put a limit on how much those houses can be resold for so that they remain affordable and not just an investment opportunity. The market enables greed. Only the government can offer an alternative to those who actually want homes and not an investment.
Great post! Let alone wealth, current poverty measures often don't even measure *income* all that well. The Market Basket Measure has a really coarse adjustment for the reduction in shelter costs for paid-off homes, which I believe they are considering adjusting to reflect that homeowners near the end of their mortgages often have cost advantages over renters. (Even with rising interest rates now affecting many, the average existing mortgage payment is lower than the average rent!) Effectively, it reduces the shelter component of the measure. But it doesn't have anything that accounts for the fact that older homeowners are often just consuming way more housing than renters, and way more housing than is a basic need. Where I live a detached 3 bedroom home might rent for 3.5k, and a 1 bedroom apartment around 2k -- that's a ton of 'extra' consumption beyond the basics that a home is allowing but that isn't being counted. From another perspective, that home is providing the same value as 42k a year (!!) of income, which if it were cash income would put a single person or a couple above the MBM poverty line in every region of the country.
There's a good case that's not actually something you want to factor in as "income" in an official poverty measurement, even if it were easy to measure, because people are likely to cut back on other things they need before downsizing or renting out a room and it's not as easily available as cash income like Beth pointed out in another comment. (You're unlikely to even convince homeowners this is real income!) But, it is still such a huge hidden difference between the financial situations of long-time homeowners and everyone else.
I see this in my community as well. Given the poverty measures by income and the lack of affordable rentals or options to downsize, what policy options do you see available to unlock some of the paper / real estate wealth in a more equitable way?
Great point Beth! What do you think about our proposal for a surtax on the most valuable homes as a solution?
https://www.gensqueeze.ca/price_on_housing_inequity
In general, I have no issue. I guess where it may fall apart are the number of seniors/families with no or limited liquid income being forced either to sell and move or pull money out of home equity to pay the tax. Again, makes sense to me. Challenge for me is that, at least in my area, for 1 - there’s limited places for them to go (0% vacancy rate and almost no smaller homes available to purchase) and 2 - it may lock in the desire to sell at a high rate as they want to ensure they have money to pay off line of credit / equity loan in the long term. In our area, seniors can do a property tax deferral as well depending on their income - so they can avoid paying the property tax now anyway and then if housing prices go down, may get out of paying the 1% premium anyway.
This is SUCH a good question Beth. Every time I mention housing wealth being concentrated in the hands of older Canadians people always come back with "Well, yeah, they have lots of "paper" wealth but they have nowhere to go to downsize to make use of the wealth." First of all they can unlock their equity through financial institutions, which is becoming popular. Secondly, I'm not even sure if the data holds true on that actually. Are there really no 1 bedroom places available to someone who is ready to sell a 5 bedroom $2 Million home? Or is it more of a case of them not wanting to move or even consider make the SAME or fewer adaptations that young Canadians have been making for literally decades? Move out of the big cities to a home with smaller square footage, away from your friends/family and where you need to commute further to access similar services. Sounds very familiar to us young people. The difference is, we were forced into it and without a $2Million cheque to add to our bank accounts. Wealthy older people who are overhoused are not forced into doing that, so we get fooled into thinking we have to incentivize them with policy change or even more supports than they're already given by virtue of simply being over age 65. But when are we going to have the conversation about Canadians doing the right thing for the next generation(s) without being incentivized?
I’m from a rural area and our vacant rate has been 0% for 5+ years unfortunately. Even if I could get folks to have a desire to downsize, current market and policies aren’t set up to lower purchase price for those buying what they have to sell. Using home equity as a source of current income keeps them in the large home longer but also requires the value stays high to pay it back once a smaller space becomes available - it just seems to kick the problem down the road a bit.
"Kicking the can down the road". That should be the new slogan for Canada. HAHAHAHA! You're SO right. There are so many implications for even the smallest adaptations to this crisis. It makes my head hurt trying to figure it out but aren't their smarter people out there who can do this policy writing for me? I like the GenSqueeze approach because the Solutions Framework for Housing is incredibly detail oriented with so many ideas and for both the supply and the demand side of the equation. This either starts working soon or I may be moving my family to Signapore. I think they have like 80% of their housing stock as social housing or something crazy rediculous like that. BONUS: Amazing food!!!
It's such a crisis at this point that it feels like if we had said instead of having to stay home during covid to help hospitals, young people should have had to pay a bit extra to shore up hospital capacity... eventually. You have a problem that in the short-term can't be fixed with money, and the relative consensus is that some people's contribution to a solution, if anything, should only be money. There's this real asymmetry in how much we're actually willing to treat something like a crisis (and if you don't like housing as a comparably-serious issue, try climate). Any number of policies--from how we means-test benefits, to tax policy, to property tax deferrals--are designed in a way that takes it for granted that increased housing costs should not affect the amount of housing older homeowners get to take up and even that it should be a policy priority to keep people in too-big homes. I even agree with some of those policies, but I do think it means being really serious about whether the rate of population growth to combat aging is creating short-term costs for young people that we are not willing to have be meaningfully shared.
100% Thanks for mentioning climate because if we don't get that sorted out and FAST all this housing crisis stuff is only going to get WAY worse and leave an even bigger debt for future generations. When I was younger (in my 20s and 30s) I honestly thought I had a good idea of where we were headed but I feel totally lost at this point. I thought the climate and housing crisis thing would happen in the 2040s or 2050s. I felt like we might have had time for the younger generations to take over politics and right the ship but it's looking anything but hopeful now...
Breaking the Cycle of Greed:
So many want to get in on this get rich easy-quick scheme of housing-even those scrapping up enough to afford a mortgage don't like the idea of once in a home not seeing huge returns on their investment. It's societal greed- an expectation of profiting from housing. Government needs to build housing-a lot of it- and sell it for affordable prices and then put a limit on how much those houses can be resold for so that they remain affordable and not just an investment opportunity. The market enables scarcity and greed. Only the government can break the cycle of greed and offer an alternative to those who actually want homes and not get rich scheme.
As I posted earlier everybody wants to get in on this get rich easy-quick scheme of housing-even those scrapping up enough to afford a mortgage don't like the idea of once in a home not seeing huge returns on their investment. It's societal greed- an expectation of profiting from housing. Government needs to build housing and sell it for affordable prices and then put a limit on how much those houses can be resold for so that they remain affordable and not just an investment opportunity. The market enables greed. Only the government can offer an alternative to those who actually want homes and not an investment.