Great report Kareem. You cannot lose when you make your point so clearly.
"To restore affordability, we need to Prioritize Housing as a place to call Home, rather than as an investment. The resultant decreases in investor demand will help to bring down prices." We have taken a basic need and financialized it so that the needs of the many go unmet.
Frankly, people should be investing in stocks and businesses. Canada is losing sorely needed innovation money because people are cashing in on the real estate bull market. At the same time high prices are forcing people into poverty and making average wages irrelevant. This is why we are chronically short on construction workers -- they can’t afford to live in the communities they themselves are building. If they can’t even house themselves nearby why would they take a job here? This extends to plenty of other industries. Thus, housing is killing our labour market.
The problem spreads....Trontonians moving to London, my town, are willing to pay astronomical prices for homes here, because they are lower here .Recently a friend of mine sold his home that he paid 80 thousand for back in the 1980s for 1.7 million. The Trontonian who bought it thought that 1 7 million was a steal compared to the prices in Toronto
Today in The Toronto Star-More than half of Toronto condos built in recent years were investor-owned, StatsCan report finds. The financialization of housing leaves so many homeless.
It’s obviously not working. Now is the time for decisive action on housing. I have always thought that the health of democracy depends very much on the happiness of our people. Our people are not happy with the current housing crisis. The importance of the issue seems like a no-brainer to me.
I sat down with my MP this summer and explained the situation from the perspective of the retirees that I deliver food bank emergency rations to every week. My MP is a great lady and I think the stories I brought to her got through. I’m hoping that there are more people like her in Ottawa. How can we as citizens do more to push the pace forward on this important issue?
For now, I think what is most necessary is spreading the word. There is so much misinformation out there - for example, most of our leaders seem to think that just building more homes, alone, will solve this problem. We need people to understand what caused the problem, to understand the best solutions, so that we can all move together in the right direction.
At least that's my theory...what do you think Urich?
It nice to see your focus on wealth windfalls! I see a lot of surprising support among fellow millennials for policies, like a big focus on accessory units, that might increase housing supply but which also potentially increase those kinds of windfalls (by making existing SFH more valuable even as rents fall a little or as 'average' home prices are dragged down by smaller units rather than existing homes becoming more affordable). Adequate and affordable supply matters--no one wants to be stuck in genuinely inadequate housing just because they can't afford what their parents had--but I think it matters for people see their hard work pay off too. Canada hasn't historically been a country too extremely dominated by inherited wealth (or the kinds of windfalls you talk about) and I don't think that's something young people want to lose.
Great observation Valerie...things have changed so drastically - it's easy to forget that there was a time when an average earning worker could save up a downpayment for a comfortable home in just a few years. You're right that we need to make changes so that hard work pays off again, which is one of the things that made Canada such a great place to live.
Exactly, Uric! This needs to be hammered and hammered until it gets it gets nailed into policy. I believe that of all the Western nations Canada gets this least- thus our housing Crises looms so large.
Kareem, you already know what I’m thinking: brilliant as always. I sat down recently on fireside chat with a CIBC director. It seemed he was also of the opinion that Canada desperately needed more rental housing as a way to meet the huge demand for housing and stabilize home prices. I have a feeling that a lot of Canadians are finally on the same page (even though millennials have been sounding this alarm for about 15 years now).
It does seem like everyone is starting to get on the same page! It's exciting, this is a big step forward...feels like there is actually a chance that things will get better.
Things will get better. But it never happens on its own. It takes input from citizens, work from committed professionals like yourselves and, critically, a willing partner in government.
Very interesting article Urich. I would love to see City Planners being more proactive about planning approvals. They should have more authority to push for density.
Let me give you a personal example. I live in an old downtown neighbourhood with largely single family houses. Across the street from me there was an empty non-conforming duplex house that was purchased by a developer and then sat empty for another 4 years!! The house could not be torn down due to heritage issues (I’m pro heritage but this was NOT a special house - required to be saved due to window trim apparently).
What’s interesting here is that the house sat on a double lot. This is why a developer purchased it because he plans a second house. Sure - great more density but honestly the lot was big enough for at least 4 townhomes (which would be much more affordable to buyers).
So when a developer buys a property where density is clearly an option, planners should have some authority to demand density. Instead the duplex will go back to being a single family home and the new house will be single family. Net gain of zero residences. A total missed opportunity.
So.. multiple issues in this example. Excessive heritage restrictions, loss of existing duplex, lack of density when opportunity presented. Empty residences for 4 years (unconsciousnable in the current environment - but our city has no empty home tax).
This example brings to light the many failings and missed opportunities in our current planning environment. And how investors and developers hold all the cards.
There needs to be a cultural shift at all levels with authority given to agencies, planners to get the low cost high density builds needed. If planners had the authority to say “nope there needs to be 4 residences on this development site” then we’d see more of that and greater affordability.
Many small fixes could go a long way to moving the dial on this. Huge projects like Toronto plans are great but we need housing everywhere starting now so let’s get some changes at municipal planning levels to start the ball rolling (or get it rolling faster).
Great article Kareem! I love that this conversation and issue is becoming little by little more mainstream. It has to be discussed widely and often to get the attention of politicians. It’s definitely growing in the consciousness of the nation but it needs to be a priority for those in a position to make change (the political class). Gen Squeeze is on the right track.
Valerie raised a great point about accessory units. I think we need creative thinking around housing, rental and taxation. What if income from an accessory unit in your principle residence was tax-free and the principle residence exemption was lowered dramatically? In this way you motivate homeowners to create rental and provide an income stream for them which would soften the blow if there was a reduction to the principle residence tax exemption. This would only apply to owner occupied principle residence not investment properties.
I also agree with Abe and others that we should know more ie. have data about what’s going on in terms of ownership. We are notoriously bad about collecting data in Canada. Data is incredibly important. Without transparency as to what’s going on we’re at risk of making policy changes while blind folded.
Finally, I’ve said it before and will say it again, Canadians should be investing in stocks and bonds. We need greater investment in industry, small businesses. We have a very serious productivity issue in Canada with GDP falling. I believe part of the this problem can be traced to under investment by Canadians in Canadian businesses and workers. As Kareem said, trillions tied up in real estate is unproductive. This is an Achilles heal for Canada.
And the situation of banks supporting more and more highly leveraged real estate lending over investing in Canadian businesses and workers is also a structural problem. Backstopping banks through CMHC creates an artificially low risk lending situation for them. Why would a bank invest in a new business enterprise with its attendant risks when they can invest in highly lucrative mortgages and offset the risk to CMHC which is backstopped by Canadian taxpayers.
We need to examine all of these issues and make policy that motivates banks, taxpayers, homeowners in directions that widely benefits Canadians.
Bottom line is that prices have to dip given current interest rates, or prices have to stay steady with much lower interest rates for things to make sense to first time home buyers.
Only way to do that in a short timeframe is by dampening demand from investors and causing other investors to sell by taxing the everyloving **** out of investors on a progressive basis. That then requires a list of owners for each home and the ability to tax each owner as per the number of homes they own.
That is an interesting idea Abe. Varying taxes based on whether or not the owner occupies the home would certainly give first time home buyers a desperately needed leg up. Right now they are at a huge disadvantage when bidding against investors who can leverage equity they've gained on other properties over the last couple of decades.
I agree Kareem. It this is very short term although an important step. Sadly, it will only impact short term relatively low volumes of housing. So, if additional stock is not built the market will eventually become overinflated again.
That said, the stock needed is more akin to the victory homes built after WWII which were designed inexpensively and quick to build. Returning vets (close to a million of them) instantly flooded the market much like immigration has done today. Affordability comes with a change to buyer expectations. And, since 1st time buyers are looking for a start (not a mansion) the demand likely exists.
The best example of a politicians thinking about this is Doug Ford. He’s the only one who’s put a stake in the ground to target the 1.5 million homes needed in Ontario to achieve the CMHC forecast. And, his plan is to mass produce modular dwellings that are reasonable and affordable.
What’s most interesting about his thinking is that the ‘experts’ say it can’t be done (which tells me a lot about the experts we’re hearing from). But at least he’s thinking about the end game, not just incremental approaches.
Most revolutionary thinking through history was initially downplayed by those ‘in the know’ at the time.
I mean there are pluses and minuses to that approach. It's definitely easier to implement no doubt- maybe a good first step.
However I can see an argument that having a cottage shouldn't be punishable via a tax, and owning 10 homes should result in higher taxes than owning 3. Thus the need for tracking ownership and taxing progressively for every home in a VHCOL or HCOL area.
Additionally in general Canada has very low visibility into the housing market. We should know % of investor ownership by region, and should have a sunshine list of large landlords to enable quick and decisive policy measures backed by public opinion.
Thanks for posting this article here Urich! Please feel free to drop related links in the chat any time, it would really help us to stay on top of things.
Great report Kareem. You cannot lose when you make your point so clearly.
"To restore affordability, we need to Prioritize Housing as a place to call Home, rather than as an investment. The resultant decreases in investor demand will help to bring down prices." We have taken a basic need and financialized it so that the needs of the many go unmet.
Frankly, people should be investing in stocks and businesses. Canada is losing sorely needed innovation money because people are cashing in on the real estate bull market. At the same time high prices are forcing people into poverty and making average wages irrelevant. This is why we are chronically short on construction workers -- they can’t afford to live in the communities they themselves are building. If they can’t even house themselves nearby why would they take a job here? This extends to plenty of other industries. Thus, housing is killing our labour market.
Great point Urich...It's scary when you start to consider all of the negative effects that unaffordable housing has on our society.
Thank you Glen :) We appreciate your support!
The problem spreads....Trontonians moving to London, my town, are willing to pay astronomical prices for homes here, because they are lower here .Recently a friend of mine sold his home that he paid 80 thousand for back in the 1980s for 1.7 million. The Trontonian who bought it thought that 1 7 million was a steal compared to the prices in Toronto
INSANE. GROSS PEOFITEERING
INJUSTICE comes to mind
Today in The Toronto Star-More than half of Toronto condos built in recent years were investor-owned, StatsCan report finds. The financialization of housing leaves so many homeless.
It’s obviously not working. Now is the time for decisive action on housing. I have always thought that the health of democracy depends very much on the happiness of our people. Our people are not happy with the current housing crisis. The importance of the issue seems like a no-brainer to me.
Concentrated wealth's interests in financializing basic needs is not in the interests of the many- and is indeed undemocratic.
I sat down with my MP this summer and explained the situation from the perspective of the retirees that I deliver food bank emergency rations to every week. My MP is a great lady and I think the stories I brought to her got through. I’m hoping that there are more people like her in Ottawa. How can we as citizens do more to push the pace forward on this important issue?
For now, I think what is most necessary is spreading the word. There is so much misinformation out there - for example, most of our leaders seem to think that just building more homes, alone, will solve this problem. We need people to understand what caused the problem, to understand the best solutions, so that we can all move together in the right direction.
At least that's my theory...what do you think Urich?
Thanks for pointing this out Glen.
I was just looking at the source of this data, you might find it interesting: https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=4610007001
It's not just Toronto that has this problem...
Glen, it was so helpful for you to send this link!
I'm sure you come across lots of other related info that we miss. If you wouldn't mind throwing some of these things in the chat I just opened up, it really help us to stay on top of things: https://open.substack.com/chat/posts/f48b62f3-b2d8-418f-9be7-a6901d4c4d1e
Thanks!
It nice to see your focus on wealth windfalls! I see a lot of surprising support among fellow millennials for policies, like a big focus on accessory units, that might increase housing supply but which also potentially increase those kinds of windfalls (by making existing SFH more valuable even as rents fall a little or as 'average' home prices are dragged down by smaller units rather than existing homes becoming more affordable). Adequate and affordable supply matters--no one wants to be stuck in genuinely inadequate housing just because they can't afford what their parents had--but I think it matters for people see their hard work pay off too. Canada hasn't historically been a country too extremely dominated by inherited wealth (or the kinds of windfalls you talk about) and I don't think that's something young people want to lose.
Great observation Valerie...things have changed so drastically - it's easy to forget that there was a time when an average earning worker could save up a downpayment for a comfortable home in just a few years. You're right that we need to make changes so that hard work pays off again, which is one of the things that made Canada such a great place to live.
Exactly, Uric! This needs to be hammered and hammered until it gets it gets nailed into policy. I believe that of all the Western nations Canada gets this least- thus our housing Crises looms so large.
Yup! We really are addicted to rising home prices here...
Kareem, you already know what I’m thinking: brilliant as always. I sat down recently on fireside chat with a CIBC director. It seemed he was also of the opinion that Canada desperately needed more rental housing as a way to meet the huge demand for housing and stabilize home prices. I have a feeling that a lot of Canadians are finally on the same page (even though millennials have been sounding this alarm for about 15 years now).
Thanks for your kind words Urich!
It does seem like everyone is starting to get on the same page! It's exciting, this is a big step forward...feels like there is actually a chance that things will get better.
Things will get better. But it never happens on its own. It takes input from citizens, work from committed professionals like yourselves and, critically, a willing partner in government.
As long as Canada’s short term mortgaging system continues to exist, homeowner attitude will not change.
Very interesting article Urich. I would love to see City Planners being more proactive about planning approvals. They should have more authority to push for density.
Let me give you a personal example. I live in an old downtown neighbourhood with largely single family houses. Across the street from me there was an empty non-conforming duplex house that was purchased by a developer and then sat empty for another 4 years!! The house could not be torn down due to heritage issues (I’m pro heritage but this was NOT a special house - required to be saved due to window trim apparently).
What’s interesting here is that the house sat on a double lot. This is why a developer purchased it because he plans a second house. Sure - great more density but honestly the lot was big enough for at least 4 townhomes (which would be much more affordable to buyers).
So when a developer buys a property where density is clearly an option, planners should have some authority to demand density. Instead the duplex will go back to being a single family home and the new house will be single family. Net gain of zero residences. A total missed opportunity.
So.. multiple issues in this example. Excessive heritage restrictions, loss of existing duplex, lack of density when opportunity presented. Empty residences for 4 years (unconsciousnable in the current environment - but our city has no empty home tax).
This example brings to light the many failings and missed opportunities in our current planning environment. And how investors and developers hold all the cards.
There needs to be a cultural shift at all levels with authority given to agencies, planners to get the low cost high density builds needed. If planners had the authority to say “nope there needs to be 4 residences on this development site” then we’d see more of that and greater affordability.
Many small fixes could go a long way to moving the dial on this. Huge projects like Toronto plans are great but we need housing everywhere starting now so let’s get some changes at municipal planning levels to start the ball rolling (or get it rolling faster).
Great article Kareem! I love that this conversation and issue is becoming little by little more mainstream. It has to be discussed widely and often to get the attention of politicians. It’s definitely growing in the consciousness of the nation but it needs to be a priority for those in a position to make change (the political class). Gen Squeeze is on the right track.
Valerie raised a great point about accessory units. I think we need creative thinking around housing, rental and taxation. What if income from an accessory unit in your principle residence was tax-free and the principle residence exemption was lowered dramatically? In this way you motivate homeowners to create rental and provide an income stream for them which would soften the blow if there was a reduction to the principle residence tax exemption. This would only apply to owner occupied principle residence not investment properties.
I also agree with Abe and others that we should know more ie. have data about what’s going on in terms of ownership. We are notoriously bad about collecting data in Canada. Data is incredibly important. Without transparency as to what’s going on we’re at risk of making policy changes while blind folded.
Finally, I’ve said it before and will say it again, Canadians should be investing in stocks and bonds. We need greater investment in industry, small businesses. We have a very serious productivity issue in Canada with GDP falling. I believe part of the this problem can be traced to under investment by Canadians in Canadian businesses and workers. As Kareem said, trillions tied up in real estate is unproductive. This is an Achilles heal for Canada.
And the situation of banks supporting more and more highly leveraged real estate lending over investing in Canadian businesses and workers is also a structural problem. Backstopping banks through CMHC creates an artificially low risk lending situation for them. Why would a bank invest in a new business enterprise with its attendant risks when they can invest in highly lucrative mortgages and offset the risk to CMHC which is backstopped by Canadian taxpayers.
We need to examine all of these issues and make policy that motivates banks, taxpayers, homeowners in directions that widely benefits Canadians.
Thanks again Kareem for an excellent article.
Thanks as always, for the thoughtful comment Mary. You summarize everything that's happened in this article and the discussions so nicely.
I'll have a hard time not quoting from your comment in every post, lol!
Bottom line is that prices have to dip given current interest rates, or prices have to stay steady with much lower interest rates for things to make sense to first time home buyers.
Only way to do that in a short timeframe is by dampening demand from investors and causing other investors to sell by taxing the everyloving **** out of investors on a progressive basis. That then requires a list of owners for each home and the ability to tax each owner as per the number of homes they own.
That is an interesting idea Abe. Varying taxes based on whether or not the owner occupies the home would certainly give first time home buyers a desperately needed leg up. Right now they are at a huge disadvantage when bidding against investors who can leverage equity they've gained on other properties over the last couple of decades.
I agree Kareem. It this is very short term although an important step. Sadly, it will only impact short term relatively low volumes of housing. So, if additional stock is not built the market will eventually become overinflated again.
That said, the stock needed is more akin to the victory homes built after WWII which were designed inexpensively and quick to build. Returning vets (close to a million of them) instantly flooded the market much like immigration has done today. Affordability comes with a change to buyer expectations. And, since 1st time buyers are looking for a start (not a mansion) the demand likely exists.
The best example of a politicians thinking about this is Doug Ford. He’s the only one who’s put a stake in the ground to target the 1.5 million homes needed in Ontario to achieve the CMHC forecast. And, his plan is to mass produce modular dwellings that are reasonable and affordable.
What’s most interesting about his thinking is that the ‘experts’ say it can’t be done (which tells me a lot about the experts we’re hearing from). But at least he’s thinking about the end game, not just incremental approaches.
Most revolutionary thinking through history was initially downplayed by those ‘in the know’ at the time.
I mean there are pluses and minuses to that approach. It's definitely easier to implement no doubt- maybe a good first step.
However I can see an argument that having a cottage shouldn't be punishable via a tax, and owning 10 homes should result in higher taxes than owning 3. Thus the need for tracking ownership and taxing progressively for every home in a VHCOL or HCOL area.
Additionally in general Canada has very low visibility into the housing market. We should know % of investor ownership by region, and should have a sunshine list of large landlords to enable quick and decisive policy measures backed by public opinion.
Good point. We certainly need more visibility to both understand what is going on, and design the correct policies.
Along those lines...I think you might find this newly related data to be interesting - https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=4610007001
A lot of interesting info in here, for example we see that investors are purchasing about half of all condos in Ontario.
Like Kareem said, that's a poison pill politically. Nevertheless, I agree that we need to "sour the milk" a bit.
Has anyone read this plan in full? On the surface it sounds very promising so far.
https://www.thestar.com/news/gta/toronto-unveils-30-billion-housing-plan-will-act-as-public-builder-on-five-sites/article_8c2479d0-a815-5480-a23f-41dc5f7c38ea.html
Thanks for posting this article here Urich! Please feel free to drop related links in the chat any time, it would really help us to stay on top of things.
https://open.substack.com/chat/posts/f48b62f3-b2d8-418f-9be7-a6901d4c4d1e
Great Urich-more of us need to do just that...and in solidarity picket Ottawa...Queens Park....