I bought a condo in Toronto in 2015 for $592,000 CAD. I live here and quite like it. It's been my home for eight years.
Similar units in the same building now sell for $1.2m.
This means that my family's wealth has increased by $75,000 per year just from owning our home. That's more than the median income in Canada!
I don't say this to gloat. I say this as an example of how badly wrong things are. Nothing about this is sustainable. If it continues for another decade, we can presume no young person today will ever be able to afford a home.
> This means that my family's wealth has increased by $75,000 per year just from owning our home.
Sort of, but in practice not really (particularly when interest rates are higher, like now). The only meaningful way to realize that extra wealth is to sell. But then you’ve got to live somewhere, but everywhere else has (on average) gotten proportionally more expensive too. The only way to really capture that wealth is to downgrade or to go to an area that has underperformed, neither of which are typically appealing options, nor are they generally aligned with our notions of “increased personal wealth”.
What’s really happened is that non-homeowners have effectively gotten effectively poorer since their only options are to pay increasingly-large rents or buy at inflated prices.
No, this is purely wealth, it's not a "sort of" it's the actual real wealth just like a bag of diamonds in a safe.
Indeed, homes are some of the most liquid form of wealth, easily leveraged with loans to buy even more property. And home values are one thing that governments are most likely to protect through drastic policy changes. Sure, you can take out a loan backed by your diamonds, but it won't be on terms as good as that of your home.
Home wealth really is one of the strongest forms of wealth there is, and people trying to pretend it is not have no concept of how lucky they are, or even what wealth really means.
People without this wealth are forced to pay their rent to others, who accept both the rent and then the real estate gains.
> People without this wealth are forced to pay their rent to others, who accept both the rent and then the real estate gains.
I note this in that not owning results in being beholden to increasing rents and at a cost disadvantage in buying a future home.
But the property value gains are hard to realize in a meaningful way. Yes, you can potentially leverage your equity into acquiring more homes. But real estate gains have traditionally lagged the stock market. So as you continue this cycle, you increase your leverage dramatically while investing in highly-correlated and slightly underperforming assets.
Meanwhile, little of these gains are able to be used for actual lifestyle improvements until you start unloading these properties.
Well the location is the lifestyle. If the homeowner doesn't value the location as much as all the wealthy people clamoring for a spot in the neighborhood, yet they still hold onto their home, it truly is a bad allocation of resources among people.
None of these homeowners would even consider the option of selling their home and renting it from the purchaser, because it is so obviously a bad idea in every way. But their blindness to the alternative is also indicative of just how amazing a form of wealth is.
Super wealthy people are always convincing themselves that they are not wealthy, because they always see others with a higher level of lifestyle. I knew an older man who had built an empire of hotels, but because he wasn't Hilton, he always felt like a failure despite never flying commercial, owning mansions across the world, and being surrounded by servants at his beck and call.
When people have raised their wealth without their lifestyle "changing," yet they can now move nearly anywhere else and have a massive lifestyle improvement in consumption, without the location they were in, they somehow trick themselves into thinking this is not wealth.
> they still hold onto their home, it truly is a bad allocation of resources among people.
The above statement assumes that a home is nothing but a cold investment decision.
A home is a place to live and a neighborhood to grow older in. It is not an "allocation of resources".
People hold on to their home because they like it there, they like the neighbors, their kids like their friends in the area and so on. It is not a financial decision. It's a home. This is often lost in these discussions.
A home is all those that things, but it's also a scarce resource that costs a lot to build and that we don't have enough of. So for every market inefficiency we accept on the basis that a home is special (which isn't wrong!) we accept some level of people dying in the streets, or young people being pushed out of their hometowns, or families never being started.
We don’t have to accept it to this degree though. We have options available to limit who can participate in local markets, and to what extant. A foreign billionaire with loose ties at best to the locations in question should not be eligible to buy houses as they please as “investments”, in fact I find it a strenuous ask to allow local billionaires to do the same. I certainly wasn’t happy to hear a Silicon Valley billionaire moved back to my area and started buying up land in a vain attempt to “revitalize” the area, only to sit on it for the last 5 years.
The problem is that enforcing any sort of restrictions would be warped to disproportionately affect the 99% while the 1% would use loopholes to continue doing as they please. So it would probably be more pragmatic to eat the rich and their lackeys before anything else.
I think you are forgetting the most common way people realize this: sell house for gain, use money to afford down payment on nicer home, perhaps enough to end up paying a similar monthly payment in the end. People act like you need to go from paid off house to paid off house but thats hardly the case. Partially paid off house to even less paid off house is common especially if you know you will be working for another few decades.
I’m not forgetting this. The house was a store of wealth. Assuming your house went up 50% in value, it’s reasonable to assume a better house in a nicer area also went up by something near 50% in that time.
This is an assumption, but on average this is true.
If that’s the case, the extra wealth you have for purchasing the new home was simply having a convenient way to store your down payment while saving additional money each month in the form of your principal.
Some people do actually realize a good part of their gains by retiring to the countryside and keeping the lion’s share of their RE gains. But this is something you get to do more or less once, and it’s something generally done in one’s twilight years. Nothing to sneeze at of course, but it again doesn’t really dovetail with the notion of a means to become practically wealthy.
Someone noted it as an investment strategy (which is one way), but I was specifically using it to address the ‘you don’t get the money until you sell’ element.
You pull money out of the HELOC, which does give you access to the equity. You then pay it down similar to a mortgage, at very low rates.
You just cashed out some of the ‘inaccessible’ equity by using it as loan collateral.
You’d still get to live there, and any gains in equity will be 100% yours. But you have cash now, with low payments and low interest to pay it back. If you do sell, proceeds could go right into paying it off.
There are similar ways to setup second mortgages, etc.
That's a pretty common investing strategy. Take a HELOC, invest the money in index funds or whatever, and take a tax write-off for the interest. As long as the average return beats the HELOC rate (minus tax deductions) you come out ahead.
My parents bought their house for $150k in Miami in the 90's. They sold it last year for 800k. Then moved to a cheaper town in central Florida where they got a place for 200k.
Considering the above scenario where real estate is gaining at 75k per year. A wealthy individual could easily leaver themselves to 75*5 = 375k/yr. Using the starting cost of a home at 600k, this would equate to an average rate of return of about 300%
Such rates of returns are simply impossible in the general stock market without getting very lucky.
It's not, though. Since 1970 home prices in the US have gone up 16x and the S&P 500 has gone up 44x. Adjusted for inflation, that's 2x for houses and 5.5x for stocks. And you don't have to sell your stock if you have to move (and take a 6% hit on RE agent commissions) or pay money to maintain it. You can borrow against it whenever you want with just the click of a button. Of course housing sounds like a great form of wealth when you compare it to the hilariously bad investment of a bag of diamonds in a safe.
These calculations ignore that most homes are eligible for extreme amounts of highly protected leverage. Sure, you can trade on margin on the stock market, but you are subject to margin calls, which is not the case with a home.
So multiple that 16x by the typical 4x-5x leveraging, and homes turn out to be really great. And since the transaction fees and the non-existence of index funds in the 1970s made it harder to invest in the stock market at a small scale, and homes were a much better investment.
Add on to that that everybody needs a place to live, and your home acting as an investment vehicle with equivalent performance to the US stock market, and people from the 1970s have had had an amazing deal that younger people have not had access to.
All that leverage absolutely crushed investors in the 2008 housing crash, and is again now ruining people who had poor or nonexistent interest rate hedges.
The idea that it’s easy or natural to make money via leveraged housing had ruined many people.
You are looking at avg gain. I can tell you anecdotally that over the past 25 years there have been markets that have barely budged at all in median prices, and markets that have seen fold change gains in median home prices. In some markets you are doing a lot worse than the index, in others you handily beat the index and these are generally the ones people bemoan in cost of living articles in the media.
The difference here is that you would make 44x from the spare change you can save every month after paying for rent, not from a loan worth >5x your yearly salary.
2) Most people in the US that haven't purchased very recently are locked in at very low rates. Only 9% of mortgages are over 6%. 61% of outstanding mortages are <4% [0].
3) There are a lot of incentives (and the ability) for governments to ensure home prices continue to increase, although at a rate lower than they are now.
4) We spent over a year with inflation that is double most people's mortgage rates.
5) You have to live somewhere regardless; the alternative is renting. For most of the country, at least until very recently, that was a worse option.
And if you are your own landlord (ie a homeowner) you can pretend your rent is whatever you want, but the market rent is what one should impute as the value of that rent.
Indeed, homes are some of the most liquid form of wealth, easily leveraged with loans to buy even more property
They absolutely aren't.
Transaction costs are very high (6%), the time required to sell can be months.
Borrowing against a house is not the definition of a "liquid asset". By that same logic a complex equity with no market could still be "liquid" because you could borrow against it.
Homes are a form of wealth. They are not a liquid form of wealth, and they are more practically a store of wealth for the overwhelming majority of your life.
The one way to generally extract this gain in wealth is to downgrade (e.g., retire to a quiet place in the boonies), and that’s generally a one-time option and not something everyone wants to do.
Liquidity isn't a yes no thing, it's on a spectrum. The legal structures around housing, in addition to the financial products, many invented by legislative force (e.g 30 year fixes rate mortgages), mean that one access cash via real estate much more easily than many other assets, without even having to transact that asset.
This is a remarkable feature of real estate as wealth.
While there are other forms of wealth with more liquidity, housing wealth and real estate really are up near the top of the ones that give a person access to cash.
(Jewelry (as in your diamonds) are not liquid assets either.)
A primary residence is even less liquid for the reasons PP stated. Sure, you can sell it but then what? You still have to live somewhere so you can't use that money for something else, you'd have to buy another home at which point the money is locked up in real estate again. The only time you can extract that wealth into cash is if you can downsize to a much smaller home, or move to a much cheaper area.
So yes, a primary home is real wealth, but it is as far from liquid as any form of wealth can be.
> And home values are one thing that governments are most likely to protect through drastic policy changes
100%. Home owners are one of the most selfish voting blocs out there, and will punish politicians for not perpetuating unsustainable policies at the expense of the greater social good. That makes it a very good investment, at least until society completes its transition away from capitalism to a new kind of feudalism.
The only way to really capture that wealth is to downgrade or to go to an area that has underperformed, neither of which are typically appealing options, nor are they generally aligned with our notions of “increased personal wealth”.
There are people doing that. I know of multiple people who have sold their $1m++ houses in the city and moved out to retire on farms. Their property taxes and total cost of living went way down and all of that real estate wealth turned into cash.
Do you mean that there are a lot of Ontarians temporarily staying in Alberta for less than 183 days, or that a lot of those newly minted former-Ontarians Albertans arrived in the last 90 days[1]?
Not necessarily. Home Equity Lines of Credit (HELOC) are a thing. My admittedly overly simplistic understanding is that the higher the valuation of your house, the higher line of credit you can borrow against it, thus the incentive to keep valuation high even if it's unrealized.
A large part of the 2008 housing crash in the US was driven by HELOCs where the borrower ended up not being able to repay or refinance. Such loans can be a good way to access the value of the home, but only at the expense of reduced consumption while paying the loan off or reduced payout when it finally selling.
It works out to effectively way more than $75k/yr in realizable income because, in the US at least, long term capital gains on your primary residence are heavily tax-advantaged in a way that income isn't.
This entire thread is unsophisticated people bemoaning (or celebrating) things they don't understand. A median that is going to be less than 1 house for a 30 year old, and maybe 3 in the average lifetime, so truly, what do they know? 90th percentile is probably 10 trades. It's garbage in, garbage out, and it's why there is zero progress made on any of these issues.
Nobody forces you to buy, or sell, a house. And if you feel strongly about the politics of the issues, try to get elected.
It's one of the only assets available to "normal people" that is highly leveraged (yet also protected in many ways).
So that 200-something-thousand-dollar increase is on a downpayment that may have originally just been 200K or less.
Short-term "stepping up" through a series of properties can be much more wealth-building than, say, renting + investing in stocks. The longer you stay in one place the less advantageous the returns are over just putting the down payment in the market, but then having a concrete asset has its own benefits even then.
> The only meaningful way to realize that extra wealth is to sell
This is true only on first approximation. On second approximation rent prices are positively correlated with property prices. This means that rent_amount / mortgage >>> 1 and if you rent the place out you can essentially get passive income. You are correct that you still need to live somewhere and that is going to come at a cost which will eat up the passive income, but effective rent will still be lower.
Another option is to realize that lower mortgage compared to equivalent rent means that extra cash is freed up towards other things. This can either be extra investments every month, experiences such as traveling the world, or even a lower paying job with a lot less stress.
The problem these days, though, is that the equity in House 1 is often needed to buy House 2 if you move, otherwise you're dipping into your nest egg for a second down payment, which is not financially wise. Equities generally have a higher rate of return than real estate.
Also, multiple homes mean multiple maintenance bills, and also the potential for bad tenants wrecking the place. I had a rental property in the past and had to spend multiple thousand dollars staging it for sale because, renters generally DGAF about maintenance, and property managers get lazy and do the bare minimum to get it rented.
I don't see the problem here. You aren't entitled to ownership of multiple houses. Being forced to sell one house in order to buy another one sounds like working as intended to me.
My point was that "rent it out and print money" doesn't always work. I did it with a home I owned, but that was also a period of time where I was a) bouncing around the country renting the roof over my own head and b) waiting to sell after taking it in the shorts value-wise during the Great Recession. I was never underwater, but would have taken a huge capital loss for awhile if I'd sold.
But that’s entirely my point. It’s hard to actually realize these gains in practice since when you sell your house, the increase in value is absorbed by buying your next residence, which has on average also inflated in value.
That’s a one-time trick, and it only really works if you were already wealthy enough to own in a HCOL area to begin with.
Plus “moving to a less desirable area” doesn’t really dovetail with most people’s assumption of “increased personal wealth”. It is sometimes a good option for retiring somewhere cheap, which absolutely reflects a real increase in net worth. But it’s far from liquid worth and requires steep compromises not everyone is a fan of.
This is an English sentence with grammatical structure, yet no coherent meaning.
If I can be approved for a mortgage or have cash on hand, and have someone agree to sell me a house, and I sign a contract with them to purchase said house on such-and-such a date, and I fulfill my end of the deal and don't default on the contract, then yes, I am entitled to ownership of a single house. Because I bought it fair and square, and it's now legally mine. Just like if I were to stop making payments on said house, the bank would then seize it, and then I wouldn't be entitled to own that house any more, because I defaulted. This is not rocket science.
Losses will be socialized like they always are. Homeowners are too politically powerful. No government will let them bear the costs of their decisions.
Could you be more specific, in what ways does one homeowner have more votes than one renter? Or if there are special elections where only homeowners can vote, could you give some citations to those?
AFAIK everyone gets one vote, regardless of home ownership status. Am I wrong?
Those wealthy enough to own homes are more likely to have the time (especially if retired!) to be able to organize, communicate with their representatives and assuredly to vote in an election.
In contrast the poorest working class people (renters) that are struggling just to survive, are more likely to be so busy working multiple jobs, commuting etc, that they literally do not have the time to vote in an election.
Additionally because of this, the two parties that have traditionally formed government, rarely even acknowledge the issues of the working poor, which means that the working poor are even more dissuaded from participating in the process, because regardless of who wins they can be assured that neither party is interested in policy change that would help them.
The picture you paint is that homeowners are the independently wealthy rich people with tons of idle free time, while renters are all very poor working multiple jobs.
In reality the vast majority of homeowners are regular working professionals, working those 50-70 hour weeks to pay the mortgage.
Unless legislation changes, investors will just scoop up the sales and keep property values high. It's a pessimistic take but I don't see any deviation from this path (in Canada and the US).
They're not getting mortgages. All cash purchases are extremely high right now (roughly 30% of all home sales in the US). They can fleece us for "modest" rent increases every year, conveniently just less than 8%, while property values stay high because these investors are able to gobble up the housing stock.
Without legislation dissuading this behavior, home ownership will continue to be increasingly difficult for working people.
IT just differently mortgaged. It's not a direct mortgage, but the company that's buying these had to raise the capital one way or another. And if the company didn't buy a house, they have the choice in investing it in something else. If the bonds are paying 8%, the company must believe that the house will return even more which is pretty hard.
I think the only good news I heard in this area in the US, is one of the big companies doing this was going bust because they screwed up their calculations for how much to offer when buying homes. So if the companies just can't make the math work and go bust that would also be a good outcome here.
Why would they use cash when they could buy 5x the amount of houses by spreading the cash buy into 5 down payments? It’s likely less than 5 if you’re putting 30% down for investment properties.
No, investors won't scoop them up, just like in 2008 in the US, where there were screaming deals to be had for years yet housing was regarded as radioactive for years after the crash.
I've lived through 2 housing crashes in 20 years in the US, and personally suffered both times, while there's been 0 in Canada. Maybe this time it's different? Maybe, but probably not.
Toronto’s change in COL is high, but the absolute COL just isnt that high compared to other major cities. Your home price doubled in 8 years which is high but not crazy for a strong housing market. Thats a 9% annual growth rate. On par with the historical SP 500 rate.
Also for reference, everone should know 592k CAD is 433k USD and 1.2M CAD is 880 USD.
By all means it’s expensive and has changed relatively fast. But Toronto isnt even top 25 for most expensive cities. Most rankings ive seen dont even have it in the top 50. I think people are surprised by this because its changed fast and feels expensive but in reality its cheaper than the major metros in the US, mich of Western Europe, China, Japan, SK.
> If it continues for another decade, we can presume no young person today will ever be able to afford a home.
In Toronto. Welcome to having a large, growing city. Generally speaking young people dont buy homes in NYC, Tokyo, London, Hong Kong, SF, and about 50 other places. Probably 2/3rds of the world population are living in metros like this.
Part of the issue is wages have lagged behind the market, so hearing that housing merely has followed the market is like a wet blanket when the issue is a lack of wage growth to match asset growth.
It’s not just Toronto, housing prices and overall CoL are soaring all over Canada, and wages are stagnant.
The major issue isn’t that the absolute cost of living is high, it’s that the difference between cost of living and wages is increasing too fast. A median wage earner literally can’t save a down payment for a house because the amount they need is too growing too fast.
But you’re right that other major world cities even worse... in Taipei where I’m living now, home ownership is simply out of the question for most people unless they have family support to get a mortgage.
> This means that my family's wealth has increased by $75,000 per year just from owning our home. That's more than the median income in Canada!
This is a pattern we also see in Europe. Homeowners, largely older, get richer and richer by just standing still, while at the same time controlling politics so that fiscal policy supports this and new construction is made expensive by regulations.
It surprises me that Canada, with a relatively younger population, has similar issues.
Is the same issue in Australia. However it increasing has become a supply and demand issue, where housing supply has not kept up with immigration policy.
The same is in New Zealand as well. Canada, NZ, and AU all have a points-based immigration system, which awards points to education and skills in white-collar areas. Over 40 years these systems have grown the population, but has kept trades out. The result is it's now more expensive than ever to build. It's not the only reason, but it sure contributes. All three of these countries have insane housing prices.
Its kind of true of capitalism in general that its easier to get ahead by owning valuable things rather than being an employee. I think that would be true of any economy that is growing, which is most of them.
Taxes on unearned income (i.e. income from simply owning something) have eased over time relative to taxes on earned income (i.e. income from actual productive activity).
Those that argue against wealth taxes on the basis that they discourage hard work and productive activity are often hypocrites in my opinion. They are usually more interested in maintaining a system that has a tendency towards concentration of wealth instead of promoting a system that encourages positive contribution to overall wealth (i.e. societal progress).
Sort of. Picketty writes that it’s about the capital to labor replacement ratio. If you can replace labor with more capital (I.e. robots, automation, tools/equipment - etc), then wealth is going to tend to concentrate. With the speed of technological innovation today, this is largely the case.
> Taxes on unearned income (i.e. income from simply owning something) have eased over time relative to taxes on earned income (i.e. income from actual productive activity).
Over what time period? Canada didn't even have capital gains taxes pre 1972.
>This means that my family's wealth has increased by $75,000 per year just from owning our home. That's more than the median income in Canada!
I live in Toronto as well, and did penny pinch from the time I graduated (2016) to buy to buy my 1st condo here in 2020. I keep hearing statements like these, but if we're being honest unless this was an investment property, a 2nd home or you were moving away to a different city altogether, money is only made on paper. While the condo price has gone up, so has the prices of all the other houses. If you were to sell your condo to realize your gains, the next property you buy has gone up proportionally as well.
Let's be clear: none of the condo or homeowners "deserve" these economic gains, they are merely a wall that is raised ever higher to ensure that new entrants to the country are forced to pay their wages to existing homeowners' valuations.
Which is what makes complaints that it somehow doesn't benefit homeowners all the more outrageous: saying that "sure I'm on the other side of this wall, but I can only use my wealth to stay in this side of the wall" minimizes an absolutely huge unfair advantage you have over people unlucky enough to be born after you or not have wealthy parents.
That's like saying no deserves economic gains by investing in the stock market. You are complaining you were too young and not rich enough to buy Microsoft or Apple shares from the start and feel you will never catch up to those.
Write your own story. Find a city with home prices similiar to Toronto 40 years buy and wait. Toronto 40 years ago was very different from the city you know. You had farm land, military bases, going to Yorkdale by bus was two bus tickets. Toronto has grown the people who bet on Toronto were rewarded. It could have went the other way if Quebec didn't almost leave Canada which moved invest from Montreal to Toronto. The Toronto stock exchange at the time was mainly mining financing.
We are so far from exhausting usable land that this argument is ridiculous. There will be more cities. 3rd tier cities will become 1st tier cities (and probably vice versa). Go invest in a city or town wisely (and don't forget to be lucky!) and you will be rewarded.
The idea that you could build out in a field ignores the true value and the true finiteness of land, the geography of agglomerations of skill and people.
Also drive around and you'll find that not all land is created equal. Much of Canada muskeg, tundra, and just awful places to be, which is why no one lives there.
British Columbia looks big on a map, turn on the topographic layer and oops it's all mountain. No wonder everyone lives in a handful of tiny valleys. And oops we flooded tons of the valleys for hydro power too, further driving down the actual available prime land one can live on.
If no one lives in a place there's usually a good reason.
Also, while Dubai is flashy, I wouldn’t really consider it a first tier city in terms of actual living. The urban planning is not human scale at all and they just defaulted to highways and skyscrapers.
40% of Federal MPs are landlords. Haven't got figures for Provincial MPs or Municipal representatives but I'll wager a substantial amount are landlords too.
Yes but we're not running out of land in any meaningful sense of the word. There is nothing at all preventing you from investing in the development of a yet undiscovered area and betting it will blow up. If you're not choosey you can buy land so cheap it might as well be free if you want to start from scratch too. If your bet comes to fruition you'll be richer than god and you'll be the catalyst for so much growth and economic development it will make the stock market blush.
We are completely out of land in Canada and elsewhere, because prices are going through the roof, because the thing that matter most about land is location.
Land is not fungible, you can't exchance an acre of downtown Vancouver for an acre in a rural area. Nobody would ever confuse the two when it comes to economics!
Land value is all about access, about who is near by, about what natural resources are near by. When real estate prices go up without construction, land value is increasing.
In the US, restrictive zoning limits workers from moving into productive areas and being able to use their labor for more productive ends. This has been a tremendous drag on our GDP, while simultaneously concentrating wealth into the unproductive hands of landowners.
The first paper to point this out made big errors, leading to an underestimate of this effect:
This is the difference between gains from land use and gains from the stock market: one reduces overall wealth and concentrates wealth to those with the most; stock market investing does the opposite.
This is only true if your definition of land is constrained to the teeny tiny fraction of land that is already developed into highly desirable cities. Which in real estate terms is like trying to buy a stock at its peak and complaining it's expensive.
I am in no way saying that burdensome regulation hasn't artificially limited the growth of existing metro areas and caused a bubble driven by artificial scarcity but the idea that there's nowhere to invest in at the ground floor where it's cheap is absurd. This happens in cities on a smaller scale already. The nice areas are too expensive so young artsy people move where its cheap, make it better, and then it becomes a good area -- repeat.
If you invested in the development of say, Akron Ohio with the goal of tipping the scales and starting flywheel of metropolitan growth and your bet pays off not only will you be filthy filthy rich but you'll create brand new economic activity and real growth. Of course fighting over the same 100 sq miles is a zero sum game.
As an individual laborer your choices are obviously limited to where you can find work but as an investor the sky is the limit.
>>If you invested in the development of say, Akron Ohio with the goal of tipping the scales and starting flywheel of metropolitan growth and your bet pays off not only will you be filthy filthy rich but you'll create brand new economic activity and real growth.
SF billionaires seem to be thinking along the same lines. If it worked for Las Vegas, perhaps they can make it work for a brand new SF-adjacent town.
>the stock market is exactly the opposite of real estate investing. Land is finite, capital is not.
This is where you go wrong.
Unlike posters defending real estate "investment," I'll criticize you from the opposite end: capital markets are a disguised form of the same old rentierism.
It's like saying no one deserves anything but an hourly wage, and damn anyone that actually builds something.
And yeah, it was "easier" yesterday than today, given today's knowledge of the winners. Today is easier than tomorrow, if you know tomorrow's winners.
The internet / pop-culture narrative of "everything is against me, I'm too late, and there's nothing I can do about it" is actually great for people that want to go out and do something about it. The competition is sitting around bitching on Reddit.
Oh come on - the wealth realized here wasn't gained by building more for everyone, but by making sure others don't build their homes so the exiting owners gain wealth without actually creating anything.
And if voting NIMBY they're pulling the ladder up, denying their neighbors the same benefit. Strikes me as parasitic behavior.
I was generally taught to buy only what one needs and can maintain, and work for wealth. Maybe naive, but the rent seeking and praise of extractive wealth is noxious the more I learn to recognize it.
The wealth was not generated by the person doing anything, but by all the activity occurring around them! Adam Smith despised landlords and wealth accumulation based on land-ownership for exactly this reason. They’re a parasitic drag on market economies that shifts capital from productive activities to unproductive ones (i.e. speculating on real estate).
“As soon as the land of any country has all become private property, the landlords, like all other men, love to reap where they never sowed, and demand a rent even for its natural produce.”
People deserve the fruits of their own labor. They do not "deserve" to charge rent to others. And appreciation of real estate without productive labor to improve that particular parcel is collecting the work of others.
Not to even get into how weird it is that something that is literally in worse condition at the end than the beginning, just like a car, increases in value instead of decreasing. And even more that this is the assumption, despite it being based entirely on demand and not at all on quality.
This is the scary bit for me. It doesn't take much imagination to speculate that homes are possibly dramatically overvalued at present and current prices are unsustainable. This can't end well.
The only time home prices collapsed was when the mortgages underlying them were shown to be funny money. This is largely not the case right now, at least in the US. I can't speak for Canada, but the US largely has a supply problem which can't keep up with demand.
My house lost about 60-70k from the top one of the years (I suck at timing the market). I couldn't care less - I'm not going to sell it anytime soon, and this price is imaginary anyway, and the imaginary price recovered half of it since then, and I still have no idea how much it would be priced when I am going to sell - but I'll be worrying about it then, no point in doing it now. Of course, if that happened every year for 8 years, that would probably be weird, but that would also mean I could buy houses with my pocket change by the end of it.
This is more or less how housing works in Japan outside of Tokyo and maybe a couple other places and I would say they’re doing a lot better than Canada.
What do you mean by "deserve"? It looks like you are making some kind of hidden morality market, where market gains are or should be distributed according to some kind of moral merit, based on unspecified criteria. But no market in the history of humanity has ever worked that way. I think it's safe to assume none ever will. So what's the point? Yes, it's not "fair" that some people are born in better circumstances and some in worse, some are lucky and some are not, so what? Yes, the son of Bill Gates has a huge "unfair advantage" over me whose parents are not billionaires. So what?
The point is, the more that gains are distributed randomly in society (and not due to productive effort or doing something useful), the more unstable a society becomes.
Sort of how the Weimar hyperinflation in the 1920s (which exacerbated the feeling that things are unfair) set the stage for the rise of Hitler in the 30s.
If taken to the extreme, it leads to the collapse of law&order.
It’s also why feudal systems were inherently unstable and suffered many uprisings.
Weimar wasn't random in any way or form. A lot of purposeful action went into making Weimar what it was, and the subsequent events what they were. It wasn't the result of random distribution of gains, it was a result of many purposeful actions of many people. Inflation included of course.
The randomness depends on the perspective - I'm sure that for the people in power or in the know it was not random, but to a random peasant/worker in Germany, it probably seemed pretty random.
Same as stock market investing - you can say that the profits are due to smart investing, but you can't ignore all of the centralized decision makers that put their thumb on the scale (i.e. 2008 bailouts?), which preference specific outcomes. In fact, this intervention makes the resulting disparate outcomes worse than random in the eyes of many people (i.e. people are more willing to accept the winner of a random lottery than a lottery that they believe was rigged).
Ok, but people who did not buy a home ten years ago still have to compete in the same housing market, and they didn't earn an additional $75,000 every year from their labor.
First, I know it fully well how bad the housing market here is.
Second, that's my point, unless it's an investment property or if you're selling and leaving the city altogether, you haven't actually earned $75,000/year.
Take two people X and Y, both have $500k in the bank. X buys a house with it, Y sticks to renting. A few years later, they want to move to another place with the same costs. X's house now sells for $1M and he is able to buy a new place for the same money, thus his new house effectively only cost him the $500k he had spent years ago. Y, having not bought a house previously, now has to pay $1M, which he does not have.
Nothing about these gains are imaginary. Imagine this person rented the entire time instead of buying. They did buy, so let's imagine they decided to sell today and rent instead. How did they just convert those imaginary gains into real ones?
Exactly. You need a place to live, and other places to live have become more expensive too, but you own more of the place you live thanks to appreciation. You don't have to sell it either to realize the gains, you can borrow against it to make more money for instance, opportunities they certainly wouldn't have had without the appreciation.
Because the rents have gone up equally in the city? I rented a 1 bedroom condo back in 2017 for $1700/month. The same unit is around $2600/month now. So the price to either rent or purchase the same unit in the city has gone up significantly regardless.
Okay but they'd be paying the higher rate regardless. On the hypothetical "rent the whole time" track they have much less money than the "bought ten years ago" track they actually took. In both cases housing costs more, but in the latter they have hundreds of thousands of dollars more in easily liquified assets.
You’re still missing the point. The gains are real - you not willing to give up your house to realize them) or insisting that you need another house in exchange) doesn’t make them not real.
Yes, every other homeowner is sitting on the same gains, so relative to them, it feels like nothing has changed. But relative to the non-owners, you have been given a free handout of wealth. Which you are « consuming » by staying in the same house you were in before.
If the rent has gone up, then your house you live in is now producing 2600 dollars of value per month rather than 1700 (even though it feels like nothing has changed to you)
> Second, that's my point, unless it's an investment property or if you're selling and leaving the city altogether, you haven't actually earned $75,000/year.
Yes, you have. You can take loans against your property value, for example. But even if you sell and put the money right back into another inflated asset, you still actually earned it.
Sure, you can take out HELOC against it, and but you're playing a very dangerous game when interests do rise. That has literally been happening right now.
Are there cheaper places in Canada? In the US, if you can work remotely, you can get better and bigger house 2x-3x cheaper than, say, around the Silicon Valley or any similarly priced cities, and still earn hi-tech salary. Of course, you need a remote-friendly job (which may cut off some opportunities) and you need to agree to live in a place that is not the first destination for every fashionable band out there, but it's possible.
Historically, the maritimes (Atlantic) provinces and Manitoba and Saskatchewan were relatively dirt cheap, but their home values have skyrocketed since covid and WFH, especially in Nova Scotia.
Yes this is possible but can come with significant challenges.
Seems like the biggest affordability gains has come from people moving entire provinces. There's been a huge exodus out of Ontario and into the relatively more affordable Alberta and Nova Scotia.
In general prices of homes in the few medium and small towns in desireable provinces like Ontario and BC have also exploded upwards, so while sure in absolute terms there are "more affordable" homes in other smaller towns, the gap isn't quite so big as one would think. The very low supply of homes in smaller towns have also kept their prices lofty.
IMO Canada in comparison to the USA seems to not have nearly as many medium and smaller cities one could downshift to.
In many parts of Canada it very quickly becomes remote and rural. Outside of the Vancouver there are a handful of small towner but quickly you'll find "towns" so small that the only store in "town" is the combination gas station/liquorstore.
The problem here is 1) low supply of homes 2) few if any services.
How do you afford something that high? Were you coming into this with a trust fund or are you one of those 300k+ per year engineers? I make 130k and feel my 220k mortgage (7.5% interest sadly) is scary.
Every time I watch one of those House Hunter type shows in Canada or just look at the home prices in my old home in Charleston I’m boggled by purchases.
I didn't even think it was realistic to get above 200k CAD in Canada, but now it's not even realistic to land a job. Strange time in this country. Beautiful summer here in BC though :)
There's a few companies offering good money, when hiring starts again.
There's the typical Amazon, Google, Uber who pay decently (though Google is only in Waterloo and no remote). Shopify was paying well because they wanted to grow quickly and outbid on top talent elsewhere, but that blew up in their face (I was in the 20% laid off in May).
2 years ago Instacart offered me a ridiculous total comp for remote Canada, but it was mostly paper money- pre-IPO stock that will be worth something, someday, maybe.
So that means you only put down 118,000 CAD and you were leveraged up
Your family wealth didn't increase by 72,000 CAD/year it increased by 135,000 CAD/year
but I see, you paid it off. you didn't have to, the option was to just make the minimum payments and sell, could have used your big income for other things but now I'm just reminded why its not interesting to listen to boring (your words) mortgage holders.
Some of this might be your expectation of housing costs? A 220k mortgage, even at 7.5% interest, is still affordable on a 130k salary. This works out to < 25% of your after-tax income which is pretty average or maybe lower than average (unsure if most affordability stats are quoting pre or post-tax income).
The 220k is the value of the mortgage and not the original purchase price; there was most likely a downpayment at time of purchase. Or, they recently renewed their mortgage and the remaining amount owing is 220k.
It's been that way for almost a hundred years. It's not so scary when interest rates and values have stayed relatively steady (as they have in most of the post-ww2 era in inflation-adjusted terms). All that seems to have fallen apart around the year 2000 (when interest rates were made lower than they should have been).
if you plug those numbers into an affordability calculator, you'll see that 18k/130k is very very very sane. I mean, I've paid that much in rent on less income.
An interesting thing to understand is that your apartment is "worth" 1.2 only because someone is willing to buy it for that much. Sounds like you are s young family, who are your new neighbors? Are they folks like you or are they the proverbial foreign investor?
Because the way I play this out... imagine you list your apartment for 1.2 but nobody can afford it so it stays unsold. Your neighbor lists for 1.1 and it doesn't sell either because nobody can afford that. Eventually you go oh shit it's never going to sell, lower it to 1.0. You play that game until it's low enough for somebody to afford it.
It's kinda crazy to think about it but the reason homes are so unaffordable is precisely because enough people CAN afford them at this price. So yeah I am curious, who are your new neighbors?
>> If it continues for another decade, we can presume no young person today will ever be able to afford a home.
I mean, the US isn’t as bad as Canada (as the article states), and this is already the case here. Most young people who manage to buy a house either get substantial help from parents, or buy in the middle of nowhere because they are able to capitalize on having a WFH job. Everyone else is stuck renting, at least until their parents die (if they have homeowner parents that is).
I bought a home in Woodstock, Ontario for about 525k in 2019. Last year comparables sold for almost $1M. And now they’re back down to about $600k.
Family wealth going up is somewhat written in fake money. Especially if you’re paying a mortgage with a rate that might renew at double.
Toronto is still super desirable but I think there’s real risk, versus it being a guaranteed good investment the way the boomer generation has been hammering into us about real estate. Can you imagine buying a home at $900k, only for it to fall 33% in value and your mortgage interest payments double?
We're considering moving to London (ON) to be near family and friends, since we're both remote workers anyway. Interesting to hear the prices down there are falling.
It’s smaller so it’s generally just lower stress. You can comfortably walk to Southside park from most neighbourhoods. Amazing splash park and family pool and playgrounds. Good schools. Less traffic means less anxiety with letting kids be independent. I love being able to drive literally anywhere in 7 mins and making unprotected left turns during “rush hour” without waiting an eternity.
A lot of good programs, especially at the library. There’s a great robotics program at the highschool level. Lots of sports leagues… it’s kinda wild how many quality ball parks there are here (with fences and clay infields and lighting). Good hockey arena. Good curling program for adults and kids.
Both my partner and I volunteer at schools and they’re generally great. Filled with teachers who care quite a lot.
It feels like what Waterloo was when I grew up there in the 90s. I love seeing roving bands of kids on bikes without parents in tow.
Of course a lot of it is subjective. Everyone has to make their own decisions.
Yep, for about five years now. I can’t cay much about the commute other than you’ve got decent access in three directions of southern Ontario. My neighbour goes to Toronto daily and woof… he leaves at like 5am to avoid the traffic.
>>My neighbour goes to Toronto daily and woof… he leaves at like 5am to avoid the traffic.
And therein lies the rub. The 401 and 403 (heck, even the QEW and most other major highways) were (and still are!) so congested that it was a deciding factor to moving away from Toronto.
The only other place that reminded me of my days in sitting endlessly in stop-and-go traffic on major highways in Toronto was LA, which is a different major North American city famous for its gridlock.
Or, they'd do 60-year mortgages. US already has 30-year more or less universally, and those are actually backed by the state. I don't see why they can't move to 60 years. Let the next generation deal with the fallout, this is the tried and true recipe, has been working for nearly a hundred years by now.
> If it continues for another decade, we can presume no young person today will ever be able to afford a home.
You want to lay blame? 30% of all homes in the last year have been bought by speculators and rental investors.
That’s right… one in three homes were bought by someone who will never live in it, but who has hoarded it in order to ransom it back to the community for more than it’s worth, thereby denying another working-class family the ability to exit the rental market and contributing directly to our housing problem.
> I don't say this to gloat. I say this as an example of how badly wrong things are.
I think it's a global phenomenon. I own an apartment in an European country and I also saw my neighbors selling theirs for 2 or 3 times what I paid for mine. The same trend can be observed in basically all European capitals. I don't think this is a Canadian problem.
I think it's dangerous to jump straight to witch hunts. First the scapegoat was golden visas, then it was Airbnb's, then "the rich" whatever that means, and now the Canadian government too? Which one is it?
Same here. Bought a house for 700.000 euros in the Netherlands. 4 years later got valued at 1.100.000.
I guess its a global issue we have. Housing either renting or buying is extremely difficult for starters. Once you are in the game its relatively easy to move arround. But as a starter impossible.
I think whats important to note is that increase in value is on paper. Market is already dropping a fair bit and is in a situation where prices could descend another step down in the short term as everyone has to refi their 5 yr mortgage and make some financial adjustments
Thing is, your wealth actually hasn't increased. You still only have 1 condo unit of wealth regardless of its nominal currency value and you have to live somewhere. So if you sold it you'd just have to buy another unit or house somewhere anyway.
But this collective delusion that the house prices of homeowners has gone up is a huge part of the problem, in part because if house prices halved, it would be a huge problem but probably not as large as people think, mainly because people can largely just walk away from underwater mortgages (in Canada AFAIK).
The only people who benefit are those hoarding real estate, not individual homeowners. This is the core problem with neoliberal private property.
There's no inherent need to have a condo in Toronto; you always have an option to cash out and rent, or cash out and buy at a cheaper location - and in both of these cases the absolute value of the increase matters a lot.
And where is that cheap place to live in Canada exactly?
Toronto (or the GTA more specifically) was the cheaper version of Vancouver. Now the average house price is north of C$1m in a country where average wages are a fraction of that.
People live in cities often because that's where the owrk is. A lot of people like it too. Some jobs can be remote. Many can't. You can't be a nurse or a mechanic or an EMT or a firefighter remotely. Toronto needs all those so-called "essential workers" too. Where are they supposed to live?
The general pattern has been in Canada (and the US and other places) is that you have starter homes like condos and then you buy a house when you want or need more space (eg you have children). The commenter I replied to buy a condo for just shy of C$600k. At that time maybe a house they might move up to was $900k. $300k is a lot but probably doable. Now their condo is $1.2m that house is probably $1.5-2m. It's actually more relatively unaffordable than at the time they bought their condo.
You see what I mean when rising prices for a basic necessity you cannot live without actually don't increase wealth?
They do increase wealth, it’s just that the prices of your preferred consumption basket (houses in this case) increases even faster (an important nuance).
Wealth is defined as the purchasing power across all possible consumption baskets - not just the one that you want though. So if you measure the value of your house in bananas, or oranges, or bars of chocolate, it’s value has definitely gone up.
In a cheaper location outside of Canada, $1m is sufficient to never ever have to work in your life - that is one impact of the absolute numbers, because at this level of wealth suddenly there are other options than having to live where the high-paying jobs are.
This is probably the most pressing topic in Canadian politics at the moment. Cost of housing, both to buy and to rent, has scaled greatly out of pace with Canadian salaries. Our PM and his cabinet recently went on a retreat with the intention of creating an action plan on how to get us pointed in the right direction. They came back empty handed. [1]
Truthfully I don't think this is an issue the federal government is in a position to solve any time soon. The long and short is that our population has grown faster than our supply of housing, COVID being an unfortunately timed disruption which further strained that supply. Nothing was built for almost a year, but the population continued to grow.
If I had a singular policy suggestion, after having talked to some friends in the industry, it would be to pump federal money into expediting site plan approvals and environmental assessments done at a county or municipal level. Some of these offices have tiny rosters who end up being the bottlenecks for enormous projects which otherwise would be breaking ground. Environmental assessments are notoriously time-consuming and particular in Canada, something we're largely very proud of. That said, I believe if there were ever a time for Canadians to be okay with cutting corners if it meant getting more of us into homes, I think it would be now. From my understanding, there are many housing projects in Ontario for which construction could begin next week, if not for the Sisyphean approval processes.
Here's an example of a site plan approval process for a town in Ontario[2] - just imagine all the points in which that chain of communication can get gummed up and projects can sit idle. We're used to steps like this taking a couple weeks in tech, but in the land development industry things move s l o w.
Canadians often take pride in our ability to do things the way they're meant to be done and to follow the rules as presented, even when they might not make sense in the moment. I think occasionally our love of process can be our downfall.
At many levels Canada seems to be choking on it's own bureaucracy. We have a complete lack of intra provincial trade, including many intra provincial barriers for experts. Does Saskatchewan with a population of 1 million need its own licensing board for Psychologists? Why Can't I buy an Ontario wine in Alberta?
Quebec was controlled politically and economically by english speakers when Canada was formed. The decentralized political nature was more practical due to Canada's sparse population at the time. It's a blessing and a curse.
You meant not leave the country, Québec, Ontario, Nova Scotia, and New Brunswick are the founding provinces and Québec had almost no leverage at the time.
I really don't think it's that hard to work it at the federal level.
The issue is at the municipal level (mainly), and the provincial level (less so).
Look at what California has been doing in the last 2 years. You force constraints on zoning regulations down on the lower level entities. You force permitting time limits and acceptance rates. You force a minimum level of multifamily lots per population.
It's really really really not as hard as it's presented. It's just in political gridlock.
>The issue is at the municipal level (mainly), and the provincial level (less so).
The municipalities are creations of the province so personally I would assign them just as much blame. The provinces have the most power to address the issue but seem to be happy to hide behind the Feds and Cities.
British Columbia realised just how serious of a problem housing is, going so far as to implement an updated provincial housing policy aimed squarely at densifying Vancouver[1], even though technically it applies to the entire province.
>>The long and short is that our population has grown faster than our supply of housing, COVID being an unfortunately timed disruption which further strained that supply. Nothing was built for almost a year, but the population continued to grow.
It was completely asinine for Trudeau to refer to potentially restricting the number of foreign students[1] because, while this is a contributing factor, he sidestepped the primary driver which is that the largest reason for Canada's population growth[2] is our (permanent) immigration targets, where said policy is set primarily by the federal government (although some provinces have overlapping programs for immigrants such as Quebec).
> Truthfully I don't think this is an issue the federal government is in a position to solve any time soon. The long and short is that our population has grown faster than our supply of housing,
Federally they can do an immigration moratorium. Immigration-driven population increase is clearly making quality of life worse for Canadians.
Since demand won’t be going down the only solution is expedited development as you suggest. We’ve seen government pump record money into businesses so it’s frustrating that in both the US and Canada more isn’t being done to solve the problem of housing affordability by pursuing the only real solution.
Federal government can easily solve immigration if they wanted to though. Does it make sense to bring in a million people each year? It's not gonna change though because people are profiting from it.
The fertility rate in Canada is far below the reproduction level. Any Canadian government has no choice but to double down on immigration. The alternative is financial collapse due to the lack of workforce and diminishing internal consumer demand that would span everything, not just real estate.
Does this mean that most young Canadians can certainly financially afford to have kids without going into debt, but for some reason (worried about the future? Lazy? Other priorities?) just aren't interested anymore?
So in other words, them not making babies has nothing to do with economics?
That's a good question. I don't think anyone has a good understanding of the causes of low fertility rates in Canada and in other developed countries. I personally think economics certainly play a role here, especially in high COL cities. However, there are undoubtedly other factors that affect fertility (e.g. health issues, family getting out of fashion in general) and it's hard to say if any of the factors defines the trend alone, or it's a combination of them that pushed the fertility rate down.
> Our PM and his cabinet recently went on a retreat with the intention of creating an action plan on how to get us pointed in the right direction. They came back empty handed. [1]
It's too bad that's such important discussions happen in private. Between this and the shenanigans with the Ontario Premier and developers, I think it is obvious that most politicians don't actually want to solve the problem.
I'm hoping we get something like a single issue party with a mandate to implement a land value tax.
> Truthfully I don't think this is an issue the federal government is in a position to solve any time soon.
I agree in general. There is some stuff the federal government can do, which is to return to funding social housing. The Federal government for a long time provided subsidized housing in the post war period up to the 1970s-80s.
> If I had a singular policy suggestion, after having talked to some friends in the industry, it would be to pump federal money into expediting site plan approvals and environmental assessments done at a county or municipal level.
I've seen similar. One of the biggest issues that is almost never talked about is development (land improvement?) taxes occur late in the process. So when it comes to multi-dwelling development, there is substantial risk the developers have to take on and manage, because they could get slapped with losing all their profits in surprise taxes near the end of the project (besides all the risks for building costs in general). I think the stats is in the ballpark of 2/10 building are successes, 6/10 are break even, and 2/10 are are losses. At $100-$400 million a piece for a medium sized tower, imagine taking on that risk profile... I can't. So cities need to understand the risks they're transferring to development, and fund their infrastructure upgrades through good and solid planning upfront.
Another related idea I saw from a youtube video on Vancouver I think it was, was the return to the Vancouver standard house plan. It was one of the post war house plans, and while there were a couple variations and you could make superficial changes, it was extremely cheap to get approvals for because the city was basically approving the same structure every time, and were so used to it the reviews were cheap and easy.
So you're right, just finding the opportunities to optimize that process for both the City and Developer is essential. And also allowing basement apartments and other medium density development. The giant towers are hella expensive if that's the only density getting built.
Canada does not have a housing supply problem. That is the big lie told by governments to make themselves look good. It's mostly a cost of money problem. When the cost of money was near zero for so long, especially during the pandemic, people loaded up on debt, increasing the demand for houses, driving prices to insane levels. Now that the cost of money has increased to the (historically low) level of 5%, the demand for housing has decreased, listings are flooding the market, and prices are falling.
You can completely expedite the site plan approval and environmental assessments to take place in one day, and still not get anywhere. The problem is not the amount of bureaucracy, it's that you've made it illegal to build anything but single family homes on >80% of your urban land.
I don't think it's unreasonable that the government was "empty handed" after the retreat.
Given the amount of time and prep that is put into government communications and policy, if they actually had some concrete policy to announce after the retreat it would have meant that the whole retreat was actually a sham and they had something planned all along.
The government has switched out the housing minister from a dud to a rising star, and had a retreat where they listened to a bunch of experts. These are promising things to notice, but if they are only now changing tack on this issue, it will likely take months from now until we see a coherent policy response.
I believe that the current housing bubble began to really go off the rails during the 2008 financial crisis due to decisions made by the Conservative Party of Canada at that time. Instead of addressing the issue directly, the government chose to stimulate the housing market through incentives and policies, effectively artificially inflating it. Subsequent governments have followed a similar path.
As we've seen, the accumulated potential energy in the housing market has now grown to such an extent that we don't know what to do with it. Eventually, the "sandpile effect" is likely to come into play, since the laws of nature always wins.
The solution (in my opinion) is simple. Increase taxes on unearned income and balance that with decreased taxes on earned income (i.e. productive activity). Unfortunately this looks like political suicide in a climate where a large portion of the population has gone all in on a strategy of investing in unearned income.
We've embraced the exploitative aspects of capitalism at the expense of the creative aspects and it has made our societies sick and fragile.
One big difference between Canada and the US is tax policy related to housing. In Canada, you don't pay capital gains on the sale of your home. In the USA you do if the gain was over $250k ($500k if you're married). So this creates a huge incentive in Canada to buy a house, renovate it while you live there, and then sell it and apply the entire gain to your next purchase.
It means Canadians who are already in the system can afford a lot more house in their subsequent purchases, especially at the high end.
Capital gains taxes on your primary residence stops older people (who have large unrealized gains in the home they own) from selling their large, built-to-accommodate-a-family house to buy something smaller in a more convenient location. They’re not able to buy something in the same price bracket after selling, because of capital gains taxes. So old people stay in their large homes and younger people, who would actually need that larger house, can’t get into the market.
I would think dropping capital gains taxes on your primary residence, and have a property tax that scales with the market value of your home, would make the housing market more efficient.
It makes it more efficient by allowing the price to go more towards the natural price, which is high due to lack of inventory.
It keeps prices suppressed in the USA for exactly the reason you say -- old people won't sell their high end homes, which keeps the median price lower.
But then many provinces go and pursue policies like allowing seniors to defer property taxes until death, which if anything incentivizes them to stay in place.
No, they were referring to the capital gains exemption, which is only allowed every two years.
Actually, you pay full cap gains on a 1031 exchange because it can't be your primary residence. You pay gains on the difference in value during the exchange, and if you sell it down the line you pay gains on the full difference (minus your improvements).
I thought house-flipping like this was reasonably popular in the US. Is it common for renovations to homes to increase the value by more than $250k (or $500k for married couples)? My guess would be no and even if some couple buys an actual fixer-upper that needs a lot of work, they aren’t going to next look for some kind of dilapidated mansion in need of hundreds of thousands of dollars of repairs. I’m pretty unconvinced that this specific tax difference has a big effect.
Any improvements increase the cost basis in the US and reduces the capital gain as well.
I think the 2 bigger taxes difference are:
1. Property tax in Canada is often 80% less than much of the US. (0.28% in Vancouver vs 1.3% in Bay Area, CA vs 2.2% in Austin, TX)
2. Interest on $750k is tax deducible in the US, however with low interest rates, many people just take the standard deduction anyway.
this is 100% it. there's a ratcheting effect in owning housing in canada. that recent study about how 70% of homes in canada are being bought be investors is completely bogus. 70% of homes in canada are being bought by people who already own homes. often this is "investment" properties like rental units but a significant proportion of it is second ("vacation") properties and parents using their own equity to fund children's home purchases
I feel like your comment is implying that it's common for renovations in the US to increase the value of the property by over $500,000 (or over $250,000 for the sort of home that an unmarried person would flip). If that's not what you're implying, then there's no difference in incentive to reno-and-flip.
It seems to me that the incentive-difference is that in the US, the tax code is telling you to flip often, or not flip at all.
Another big difference in tax policy, if I recall correctly, is that Americans don't pay tax on mortgage interest. Seems to me, that incentivizes Americans to over-leverage on paying mortgage interest. Don't worry though, in Canada these days, we too over-leverage on mortgages, because otherwise we're homeless, as per the article. I sure wish I could tax-deduct my mortgage interest, because that's the main thing I spend money on.
I'd think that a $250k deduction (per person) every two years is pretty often, no?
I feel like if my entire income stream was buying, renovating to improve value, and selling, and my spouse and I had a family income of $300k per year, and we could only get the income tax waived on $250k of that (me one year, my spouse the next), and thus were only paying income tax on one sixth of our income, I'd feel like I wasn't paying very much income tax.
Though. I mean. Currently I teach post-secondary for a living, so the idea of a $300k two-earner family income sounds like a dream, no matter what the taxes, so maybe my intuitions about the incentives of house-flippers are off the mark.
It seems you are assuming that flipping houses is somehow super easy and therefore seemingly high returns and possibly preferential tax treatment are morally objectionable. Moral questions are very person and I won’t speculate on that. However, flipping is far from easy on a consistent basis - it requires: a lot of capital (that one has presumably earned), sourcing deals, managing transactions, carrying market risk while capital is not liquid, project management (at minimum, but I’m sure there are folks who actually do the repairs/renovations themselves), marketing/selling the property for profit. During all this time our hypothetical house flipper is not getting paid, they have to wait for this once every two years payout. That’s not how businesses run, so this tax treatment doesn’t really encourage house flipping. This tax treatment does help people that have to move for job or other reasons, which I’d say is a good thing.
So many people in this and every thread online (there’s a deluge on Reddit / Instagram even, almost feels like astroturfing) complaining about immigrants. Perhaps it’s convenient to blame other people.
Take a look at housing density and zoning, and fix the problems there. Get a more vibrant economy in the process: a society that aspires to be stuck in a ‘golden era’ is one that is chasing an illusion.
People critical of immigration aren't necessarily critical of the immigrants themselves but they are critical about the level of immigration during a housing shortage.
I believe governments don't want to address this because of the ugly truth it would expose.
At the heart of the issue is sky high deficits and an ageing population putting pressure on federal budgets and the easiest way to grow the budget is to continually increase the tax base.
The local population doesn't wan't to or can't afford to have children and it's more beneficial for the government to import full grown adults who will contribute towards GDP immediately. All costs from doing this (i.e not just financial costs) are passed onto the citizens. Those with assets actually pay the least in this system since they financially benefit from increased increased rents, suppressed wages and larger target markets.
This is not a phenomenon unique to Canada. It is common problem in developed nations.
> complaining about immigrants. Perhaps it’s convenient to blame other people.
So, this is conflating two completely different issues, in a rather counterproductive way.
There is "complaining about immigrants", which is racist stuff like "I don't like the fact that the composition of my neighborhood is changing, I don't like the fact that the people from other places are different than me, I don't like that my school has to hire a Mandarin interpreter for parent council meetings".
Then there's a completely different thing, complaining about unsustainable immigration levels. Which has nothing to do with disliking the immigrants themselves, and might even involve a great deal of concern about their welfare. This is what you get when the situation is so bad that even Ukrainian refugees want to go back to Ukraine because they didn't realize how hard it would be to fend for themselves in Canada.
As one person aptly put it, this is the kind of complaint that happens when a host invites a hundred guests to a party and only orders three pizzas. You aren't complaining because you don't like the other guests, you're complaining because the host's all-are-welcome attitude is completely irresponsible when they have no intentions of making accommodations available.
Then make accommodations available. The analogy doesn't even hold to reality: you don't need to spend any money creating accommodations; you only need to repeal the extreme restrictions that prevent any more accommodations from being built.
Most of the housing crisis is a result of politicians and homeowners refusing to cede even one plot of land for any building denser than a detached single family house. The other week on Twitter, a city councilmember from Toronto/some major Canadian city was complaining about an apartment tower being "out of scale with the neighbothood" as though 90th percentile incomes were still sufficient to get a loan for a house.
It's worse than my example because the reality would be like if baking a pizza had a three-year lead time.
Even if the authorization was permitted to construct an entire new city capable of housing 3 million people, no reviews or permits, and assigned the highest priority and a blank-cheque budget to rush construction, it would take at least ten years to build. Vancouver's massive Oakridge redevelopment alone broke ground in 2019 and is expected to take until 2027 to complete. (The rezoning was approved in 2014.)
And that is what we should do! Yes! The country should be building brand new cities and linking them up with high-speed rail. But, even if that plan were shovel-ready today -- which it definitely, definitely isn't! -- it would still take years before it contributed to the solution, and all the while, the demand is continuing to grow!
The seeds of the supply solution to today's housing crisis needed to be planted at least ten years ago. But it wasn't, so we can plant those seeds now, but they'll take time to come to fruition. In the meantime, the only fast-acting measures are demand-side measures. And having to deploy demand-side measures is a very tragic consequence of not having taken timely action on the supply side. And that's even assuming we can plant those seeds today: if the city council squabbling about setbacks and floor-space-ratios continues today, then those seeds still aren't being planted, the demand-side measures will unfortunately need to last even longer, and the vitality of the country will suffer for it.
do you mean make housing available? (I ask because "accomodations" could mean other things)
If so-- Who would pay for that housing?
Are you opening your door and renting out rooms for free? Do you expect other people to do so?
Asking my tax dollars to go towards the housing of an illegal entrant... when there are legal entrants waiting years to enter the country... Nah, doesn't make sense. Sounds more like theft.
Crossing the border illegally is the same as barging through my locked door into my house. And it's especially egregious when there is a system created specifically for LEGAL immigration.
It's a slap in the face to those who follow the lawful process, in our orderly society...
...by a person coming from a disorderly society (where 90%+ of crimes go unpunished-- as is the case in Mexico)
...who thinks they have the right to break the law in a country they aren't even legally allowed to enter.
It's not astroturfing. Its a major contributor, and has been weaponized to the point that large portions of the population are trained to immediately dismiss any mention of it.
The reason I use the term astroturfing is the complaint posts / comments all look & sound very similar with minor variations, like a “shaped charge” that detonates peoples’ emotional centers and taps into primal emotions like hatred and fear of the Other.
Very occasionally I see ‘real sounding’ and human sounding comments from every day people (instead of a professionally sharpened message). Those are now growing very slowly over time, which could just be a success of the propaganda.
>primal emotions like hatred and fear of the Other.
It's not hatred and fear "of the Other". Leftist and their leftist policies invite as many immigrants as they possibly can to an area with limited housing. Then it's shockedpikachu.jpg when the reality of supply and demand occurs and they clutch their pearls and ask "what could we have done to stop this?!" When in reality land, conservatives are telling them "we told you so". So instead of taking ownership of their mistakes thus proving conservatives were right, they gaslight everyone into thinking anything even remotely pointing towards the influx of immigrants is an issue is racist, effectively shielding themselves from blame.
This tactic of blaming any opposition as "racist" has been insanely effective in the West for the past four or so decades. Reality is catching up, and people left and right are seeing through the BS.
No one hates the immigrants, who wouldn't leave a third world country for Canada? The blame is firmly on the leftist politicians in Canada that are speed running the housing crisis.
People should be allowed to discuss to what extent immigration should be allowed. Certainly there is such a thing too few incoming immigrants just like there could by too many. We should be able to have level headed discussions about the effects different policies have on different groups of people.
>complaining about immigrants. Perhaps it’s convenient to blame other people.
Leftist and their leftist policies invite as many immigrants as they possibly can to an area with limited housing. Then it's shockedpikachu.jpg when the reality of supply and demand occurs and they clutch their pearls and ask "what could we have done to stop this?!" When in reality land, conservatives are telling them "we told you so". So instead of taking ownership of their mistakes thus proving conservatives were right, they gaslight everyone into thinking anything even remotely pointing towards the influx of immigrants is an issue is racist, effectively shielding themselves from blame.
This tactic of blaming any opposition as "racist" has been insanely effective in the West for the past four or so decades. Reality is catching up, and people left and right are seeing through the BS.
No one hates the immigrants, who wouldn't leave a third world country for Canada? The blame is firmly on the leftist politicians in Canada that are speed running the housing crisis.
If you talk to anyone here in Canada there is bipartisanship. Real Estate owners and non-owners both agree housing prices to be a huge issue around Canada right now, but the former would never budge on reducing the prices as a means to a solution. They have too much invested too late. Non-owners on the other hand want price corrections to take place, but systemic issues such as a rising population due to immigration [1] and increasing construction costs [2] are causing upward pressure.
There is no 'bipartisanship' on this issue as all major parties strongly support at least some mixture of policies that are known to increase housing prices.
Whether that's protecting farmland/parks/forests/etc., increasing immigration, increasing building standards, etc...
In fact, I don't think it's viable for any party to drop support for even two of those. e.g. I doubt there's much of a voting base for someone who's both hard on immigration and relaxed on environment issues to allow for huge housing developments on protected lands.
Sorry, I wasn’t clear enough, I don’t mean bipartisanship in the political sense. I mean bipartisanship between two groups of people namely real estate owners and people who don’t own real estate. At a general level, sellers want high prices and buyers want lower prices, but the level at which the prices are right now is simply way too high if compared with income per capita to be justified for a home purchase, and correction to “USA levels” assuming that’s the baseline is also not justifiable as home equity is a huge chunk of everyone’s wealth
Canada is currently entering catastrophe levels, but because of lagging consequences people don't realize how much of a disaster is before us. There is a collective delusion that has sustained some profoundly self destructive policies. The toll is coming due.
Almost all of Canada cannot qualify for a home at current housing prices. Either to buy or to rent. The rental market is currently at the level of parody where the requirements filter out almost everyone. The bottom 50% of Canada, income wise, is in the precarious situation where if anything happens to their current housing, they will be homeless. Slowly social assistance and related programs are going to have to start resetting and the costs are going to be enormous.
>Almost all of Canada cannot qualify for a home at current housing prices.
How are you quantifying this? If this is true, how is it not reflected in some manner in prices? In other words, who are are the buyers propping up prices?
I'm not trolling, because if what you're saying is true it suggests that there is something fundamentally fraudulent about the Canadian housing market.
My household is in the top 1% of income earners. We cannot afford a house in our exurb. 20 years ago, with this level of income, it would have been trivially affordable.
Yes, I rent for $4250 a home that you can buy for $1.7M. The distortion here is beyond ridiculous. The equivalent mortgage would be something like $7K before property taxes and maintenance.
Because you can’t imagine government moving fast enough to change policy, the only way out is likely a sudden and shocking collapse in home values caused by the bond market failing to continue its belief that Canada is sound.
I was renting a $1.4m home for $2200/mo in Vancouver. Something like a $10k/mo mortgage payment for 25 years at current rates. But they had bought it like 6 or 7 years before so _their_ mortgage was substantially lower.
We haven’t even seen the full brunt of this—every time one of these properties changes hands at this point as the current owner cashes out, we’re going to see one more of these “affordable” rentals off the market in one way or another. (Either they hike the rent to the point of unaffordability, occupy it themselves, or leave it sit empty to just store or accumulate value.)
And just to put it in some perspective—to afford that shitty run down house I was renting, you’d need to be making somewhere around $720k/yr pre-tax to pay the mortgage and maintain the “1/3 toward housing” ratio. People in Canada do not make $720k/yr.
Absolutely this. A friend considers herself too poor to afford a house in Vancouver. Her company makes $10M a year and she peels off 10% net profit. Only in Vancouver…
I don't have a source on me but I've read plenty about wealthy people in other countries buying large amounts of Canadian real estate as a store of value, even if it sits vacant. Mostly people in countries where there aren't so many great places to invest. But I don't know off hand if that's just a drop in the bucket compared to other things or what.
There likely was a great deal of this at some point before 2015, but in 2015 BC finally started tracking who was buying homes and brought in a foreign buyer tax and since there there's been only ever more scrutiny on foreign buying, and from everything I've read foreign buying has fallen off a cliff.
Because there was no data tracked before 2015, whether or not there was indeed a significant amount of foreign buying remains speculation and theory but there are some signs that support the notion that it was important.
For example major luxury condo builder Westbank has significantly reduced their operations in Vancouver, pivoting away from super luxury homes explicitly marketed as pied-a-terres and in the pages of Monocle magazine and are now building increasingly in the USA and even Japan. Some of their projects in Vancouver changed from being condos to rental. That this all happened post foreign buyer tax suggests that foreign buyers were a critical part of their business plan and they needed to remarkably change it after foreign buyers went away.
Data that tracks foreign buyers and owners in Canada are scarce and patchy. The Canadian Housing Statistics Program shows that non-residents only own about two to six per cent of Canadian residential properties in 2020.
Edit: Those numbers are in line with the US. Why is the US real estate market not that crazy then?
Real estate is, at worst, used for sanction evasion and money laundering, and at best, as a loophole for citizens of restrictive countries to extract more of their money from those countries.
All of these create an incentive to overbid on real estate.
Where I live, this is a known issue. In fact, the top real estate companies specifically try to attract foreign investors, and have stated so publicly.
Look at the chart in the article. Home prices plummeted in 2022, when the Canadian government enacted a 1% Underused Housing Tax (UHT) on Canadian residential property that is considered vacant or underused.
Because it's smaller and more concentrated. With fewer cities containing a larger portion of Canada's population, the demand is focused more intensely.
Does the demand side of the equation just not matter to you? It’s not “blaming foreigners”, it’s blaming politicians who come up with the policies that affect both the demand and supply side of the equation.
Hmmm...2 to 6 percent of a market can be more than enough to make a difference, even a sizeable one, if there is already a shortage. Now, there is still the question of why there is a shortage, but 2 to 6 percent in an already tight market is more than enough to spike the prices.
Of course, China shows that you don't need outsider investing to create a ridiculous property affordability situation.
And here's me escaping the west along with my neighbors escaping China, none of us have had a rental price rise in 4 years. We live only a few hundreds metres from the beach and even closer to vibrant national parks.
What would you all pay for such a thing? I'm ashamed of how little it actually costs, you can't even rent a car park in my old city for the same amount.
If this really is hacker news then you can either find somewhere good to live with a bit of searching or you aren't particularity good at hacking the basics of life.
I don't answer that question anymore because I know the exact response it entails.
All that matters is that I'm happy as a migrant from the west, I go home to visit family/friends regularly and who are always stressed with long commutes and up to their necks in debt in cities that are overflowing with population growth. I truly worry for my nephews and nieces there, we've created a rough world for the kids. There's plenty of good things from my home country that I appreciate but for the average person life isn't that great considering their net worth on global scale.
When suicide rates are on par with Japan it's somewhat comical to see the city I grew up in on the "top ten greatest places to live" stats that come out every year.
If you took the median house price from where I'm from and put it into a basic savings account you could have $60k USD annually. That goes a very long way across most of the planet, is the house actually worth that much or is it a mass delusion? Know plenty who have gotten out while the going is good.
No but many of the other transplants here do, they seem to survive fine. It's very strange to see a 12yo kid who was born in the anglosphere being able to speak 3 languages fluently.
> 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.
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?
> 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?
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.
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.
> 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.
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.
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.
Your link was heavy on opinion and light on data, so I went looking for numbers on Canada to verify your assessment.
Median income after taxes: $68,400 [1]
Median rent (2 bedroom): $2,300 [2]
Average tax rate (single worker): ~32% [3]
If we apply the 30% rule (it's ok to spend up to 30% of pre-tax earnings spend on rent), your assertion doesn't hold up - well over 50% of Canadians are making plenty of money to afford rent. Of course, in expensive cities where rents have far outpaced wages things are going to be bad but that's true pretty much everywhere in the West these days. If anyone has better numbers, please share.
What is the purpose of your [3] link? Genuinely curious.
-Very few Canadians can currently qualify for a mortgage for an average home in most markets. The housing market has lost all rational basis.
-Canada has approximately 2 million apartment units across all of Canada [1]. The vacancy rate is currently at less than 1% across Canada, and in many areas is hovering around zero. Just as some context, the vacancy rate in California pushes above 5%. NYC is an especially tight market at 3.1%. In both cases the apartments per capita is dramatically higher than Canada.
-Landlords of apartments that do come to market have become spectacularly picky, because they can be. Perfect credit. Perfect history. No debts. People have been in situations where they've offered tens of thousands in deposits and a seemingly perfect application, to be denied.
It is fascinating how often data is shown that betrays that Canada is in a particularly terrible situation -- like this very submission -- yet people still retort with "oh well it's bad everywhere". No, it is nothing like Canada.
Canada is a fully saturated market like nowhere else on the planet. And this government is squeezing a hundred thousand more a month into an already full container, with zero indication of a letup.
[1] - As some fun context relative to the 2 million apartments across the entire country, Canada currently has >900,000 international students in Canada, a number that is growing by leaps and bounds.
My point about the 30% rule for rent is that you calculate that based on pre-tax income. I provided median post-tax income, so to get pre-tax you need to know how much people are paying in taxes.
I really don't understand your point here since it truly seems more emotional than data-based. Why are you focused on mortgages / home ownership as opposed to being able to afford to live somewhere? What do vacancy rates have to do with affordability? Why don't you provide a single concrete example of a majority of Canadians being unable to afford rent or being "filtered out" as you originally claimed? All your points here are tangential and don't support the argument.
"Canada is completely messed up" is a common refrain online these days, but I just don't see it either in the data or in talking to friends who live outside the Vancouver/Toronto popular areas.
The median Canadian has a credit rating of 650. The median Canadian cannot remotely afford a home in any Canadian market. Apartments -- the absolute last resort -- have vacancies below 1% in most markets, 1.7% nationwide. Canada is seeing an immigrant intake of approximately 130,000 per month.
If this isn't data to you, you are clearly not arguing in good faith and are either a contrarian, agenda-driven, or a troll. Or a mix of the three. The retort of "I talked to a friend in Canada" is so absurd that it confirms the prior.
Alright we're done here since you don't care about actual financial facts. Denouncing people as trolls when they provide data that goes against your opinion is a bad look. Credit rating has nothing to with anything. I already provided you hard data showing that median Canadians absolutely can afford rent in most Canadian markets, but you're just ignoring it. Now you're restating vacancy rates as though that proves something. It doesn't. You clearly have an agenda here and a belief set around that so I'm not going to convince you of anything.
Hi, Please take note that the listed median income is for a financial family. It does not reflect the aprox 32 000$ income of single workers. It does mean that most people cannot afford to be alone.
You just repeated that credit ratings and vacancy rates don't matter regarding people's ability to find housing in an extremely tight market with demand dramatically exceeding supply. Your position on this is detached from any functional reality that yes, we are done here. Your opinion on this is uninformed.
There is a problem in many parts of the world right now, and the same housing problem can be cited in almost all of the West.
The scale of the problem is dramatically different. In the US, like much of the world, there are the expensive areas and then the less expensive areas, and people migrate accordingly. Gentrification happens and people have to move further afield, etc. I see listings for extraordinary homes in various towns in the US for prices that are absolutely dreamy (not like ghettos, but nice little towns). In a remote world, the US has astonishingly attainable options throughout the union.
In Canada, far-flung garbage towns have million dollar bungalows and $3000 rents. There are no inexpensive options anywhere, no matter how far out you're willing to move just to have a place to live. The country literally has politicians telling people to loan a bedroom. Yet in the face of actually falling home building and recurring disasters, the governing party has doubled down on an immigration rate that exceeds every other developed country (and I'm not talking about per capita, I'm talking about in absolute numbers!). It's unbelievable.
IMO the cost of living US kind of averages out these days. House price gradient is pretty slim, and the large metros typically have less expensive services due to local competition/robust economies, vs the rural areas where medical care can be extremely pricey, food prices are outrageous, and no local competition to sustain more than one option for most staples.
Thank you for coming to my TED talk on location-based compensation is wage theft.
The big equalizer is the opportunity cost of not being able to find an income stream if you lose your current one, or the cost of not being able to find better income streams.
Call it volatility, and it is not easily calculable as a number. I can get a job move to cheap Topeka, KS, but how much does the volatility cost me if I lose that job or I get laid off, etc.
>rural areas where [...] food prices are outrageous
How? How can rural people afford it? Are you talking about rural places that are tourist locations? Do you have any data on this? It seems wrong to me.
I was homeless for nearly 6 years. I was willing to relocate to anywhere in the western US to make my life work and get back into housing and spent a few years researching my options.
I'm not convinced the "affordable housing" people imagine is available if you go far enough out in the US is as available as is popularly presumed.
I don't have to imagine anything. I can pull up Zillow right now and find some incredible homes priced at what would be considered very cheap here almost anywhere in the US. Even San Francisco is looking pretty economical! Outside of the major centres homes are amazingly inexpensive.
Obviously this doesn't mean everyone in all situations can find a home, but the scale of the problem is just dramatically different.
I had this same argument with people over and over on HN while I was homeless. If you want to actually move there and live there, looking into those "cheap" homes frequently is a case of they aren't actually livable and need many thousands of dollars of work, among other issues.
You are predicating this entire discussion on your own personal experience. I have no idea what your income, credit rating, job, etc is, but as mentioned obviously people fall through the cracks and have trouble anywhere, at literally any time in human history. I mean, you mentioned that you looked for six years, yet even the US notion of a lack of "affordable" (which again, is a relative term) housing is a recent phenomena.
No, I'm not looking at teardowns. Many of these are absolutely gorgeous, extremely well-appointed homes. This is more than just touristy noise at this point: I am seriously considering relocating to the US because of what is happening in Canada, and have looked in depth at available homes across the nation.
You've basically said "my personal firsthand experience trumps yours" when my personal firsthand experience includes living in multiple places in the US and yours apparently includes living in Canada and looking up info about the US online and concluding life here might be better for you.
I wish you luck in finding your bliss, but this seems like an unconstructive discussion.
PS: What's on the internet is not necessarily a comprehensive and accurate picture of reality on the ground.
I don't want to underplay the housing crisis in the US; the problems are serious. But the situation in Canada is like taking all of that and tripling it.
Stuff like UBI sounds less insane if that's your alternative, and if it's truly as bad as you're suggesting it is. I wouldn't know the Canadian market well enough but based on armchair knowledge of list prices, paired with the knowledge of lower wages, it doesn't seem too far off.
Unless there's in increase in housing supply, UBI will simply increase what the market can bear. That is, in due time, the UBI "advantage" will end up in the pocket of landlords.
I don't see how UBI helps. It would help if home prices were low enough such that builders aren't incentivized to build, but high enough that people can't afford them. But that isn't the scenario. In the current scenario, UBI or any other form of rent subsidy is just going to go almost directly into property owners bank accounts.
UBI would simply increase housing costs. The only way it wouldn’t is if UBI was funded from a land value tax, but even that would require enough housing in non desirable areas.
> This is a problem created by multiple governments over various parties
Why blame "government" and not capitalism? Canadian Gosplan didn't conspire to set housing prices at insane and rising levels. It was the market mechanism doing its own thing.
Canadian housing prices are not irrational. Assuming that no new housing gets built in canada, but canada keeps welcoming immigrants, no new supply but increasing demand, the prices will rise even further.
The supply may be so limited that it may even be the case the demand from the limited amount of people able to afford it at these levels already exceeds it.
Despite how hard that is to believe, market equilibrium may not have been reached and prices may still rise.
In a properly functioning market we should see rising supply to meet demand.
Unfortunately regulation (zoning) prevents that. So until regulation improves to allow for more supply, everything else is a bandage.
That, or make it so somehow people stop wanting to live in large metros by eg creating economic opportunities in other cities.
Interesting the recent focus on the Canadian market. FT just publiched an opinion peice last weekend on why we are not a global leader. Basically low pop density -> limited competition -> limited innovation & productivity
I recently sold my downtown Toronto condo (principle residence) after 8 years and the returns are arguably higher than the wage I've made over the same period of time after taxes (I work at one of the big 4 consulting firms, so a fairly average salary for the city).
We are now with our backs to a wall where we cannot let house prices drop, which means we cannot increase supply to quickly or risk a good chunk of the population losing a significant portion of their future buying power....that is unless wages shift.
Thing is, historically, Canada was incredibly innovative. It seems there was a culture shift somewhere in the 90s where "getting a good job" became the goal of Canadians.
We can see this echoed in education data. Canada has become the most educated nation, but is so because of an exceptionally high rate of vocational training. Canada lags well behind when it comes to research-focused education.
As seen in the link's charts, the US housing market crashed in 2006 because, after a period of innovation stagnation (Dotcom bust, 9/11), new innovation was taking hold. Investors left housing to ride that train, and thus the price declined. The people of Canada do not appear to have it in them to offer anything other than housing to investors.
I was born in the US, and lived in Canada, specifically Toronto, for a while.
And contrary Americans’ vague impressions of some snow-swept utopia…yeah, Canada is shockingly lacking in innovation.
It’s a place of US-designed and Chinese-made products, moribund government-backed private industry like Rogers and Bombardier, and a population that really did seem complacent and rather go-along get-along. People didn't seem to look past going to the cottage on the weekend, and whistling past a lot of increasingly decrepit infrastructure.
The Canadian market lacks innovation because the market doesn’t want innovation. Most Canadian businesses and startups thrive in the U.S. simply because the Canadian market is so much more risk-averse. Buyers are afraid of change and investors afraid of risk.
Wages will have a much harder time heading up unless the federal government implements a moratorium on immigration, both temporary visas (e.g. foreign students) and permanent residence permits. The only way to (equitably?) do this is by turning off the tap going forward and denying/capping new immigration applications.
Oh no, the absolute horror. Homeowners will end up having actually spent money to have somewhere to live instead of making more money just by virtue of owning a home.
Plenty of people are already living that reality, it's called renting.
Given that a lot of people's retirement wealth is largely in their home, and that they've planned and worked toward this for 40 to 50 years, this is a remarkably calloused take. I agree the current system has absurdities and needs to be changed, but rapidly disrupting the system and dismissing people's devastation with a "lol" is how you start political wars. I suspect this attitude is one of the main drivers behind the contemporay political polarization that is ruining friendships, marriages, and families. The only way we are going to be able to fix our broken system is with physical force where the victor gets to impose their beliefs on the others, or with empathy where people genuinely seek to understand the impact of things on others and work towards ideal solutions. I certainly hope the latter is what society chooses.
You're right, the snark was unnecessary, but to be 100% honest no I don't feel that bad that the people that have been willfully participating in and profiting off a system that only works by screwing other people over may lose some money when the people getting screwed over have had enough and try to change things.
Just by living in the US and participating in our modern society here I am myself in a similar situation, and I'm not exactly a political activist dedicating my life to changing the status quo, but if and when the people we're exploiting to fund our current lifestyle start fighting for a better life I'm not gonna be telling them that they need to stop and think about the effect their demands would have on our lives.
Maybe, but you are absolutely right, that “snark” is merely a thing out of frustration from people who can not buy houses, while home owners from previous generations have the audacity to lectures the new generation about their “attitude”, attitude will be the least thing to worry about in the near future from these angry young people who can not even afford rent.
If we want to fix the situation someone is eventually going to end up with the short end of the stick. I don't think it's entirely unfair that the people that have benefited for decades from the current situation end up with said short end.
I've been renting for the last 10 years, the house I'm in now is estimated to be worth $300,000. My rent payment is 2500.
2500 x 10 x 12 = coincidentally, $300,000 exactly, that I'll never see again.
So someone who owns an equivalent home for the same amount of time, if it were to suddenly have the value plummet to $0, would still come out ahead of me because they'd only be losing the equity they've put into their home. And that's still not a fair comparison, because there's almost no way it'd become utterly worthless, so they'd still be left with something to show for it even if it loses a significant percentage of its value.
Housing is a basic human need for survival, to be 100% honest I don't feel that bad that the people that have been willfully participating in a system that only works by screwing other people over may lose some money when the people getting screwed over have had enough and try to change things.
Technically yes, “screwing” the ones that screw other people definitely will even things out and fix it, and it will reduce the gap too, however, that's something no democratic government will do when that said government needs those voters and the sponsor from corps. So democracy is the problem in this issue.
A lot of people borrow against their house in the form of a HELOC. If you run into the case where people owe more than it's worth a lot of for better or worse are going to walk away and the real estate market will crash. This is where home owners have a lot of power.
Everyone talks about the housing crisis in Canada. But the post also includes the curves for income growth. Unfortunately, unlike US, the wages simply don’t increase much in Canada. The purchase power is bad.
One thing driving this bubble is that we just don't build enough houses compared to the number of immigrants we accept. The liberal government is just starting to accept that fact. Kinda ironic that for years the the rest of Canada told Quebecers they were racists because we were pushing back against immigration and now it's a mainstream view.
The problem can be solved in two different directions - accepting fewer immigrants or building more housing (perhaps both for some stretch of time to ensure that citizens can afford housing and build families).
Long-term though I don't see a way for the Anglosphere to thrive unless immigration increases, given low birth rates.
Immigration is a good thing. California would not be the fifth largest economy by gdp without 40 million people moving there over its short history. Its only a bad thing when your elected officials choose to scapegoat them to mask their own incompetence with policy making. Immigrants are also moving where there are jobs to be had, but you never see a politician who is against immigration be against attracting more business in their district no sir e.
Yeah, the US housing market is just too broad to be talked about as one thing. This used to be the case in Canada, where housing was really bad in Vancouver and Toronto, but alright elsewhere. This is just not the case anymore and the last ~5 years or so the Vancouver/Toronto problem has become very widespread. Small cities and town now have insanely high costs as well.
So have undeveloped land prices risen as much as existing houses? It seems like the obvious solution is to add new housing outside of town to serve the unmet demand, as every metro area in the US has done for over a century. With so much land and so few people, why hasn't Canada done this too?
Because most of Canada is uninhabitable. It's like asking why the entire state of Alaska has fewer people than live in Seattle if it has so much land. And not "metro Seattle", just... Seattle.
The housing market is highly interconnected, as people sell homes in expensive areas and thus drive up prices when they compete for homes in less expensive areas. This creates a ripple effect as those new markets show price gains, and owners in those areas can sell their homes and move to other further-flung areas.
So yes, there are regional differences but they impact each other and can broadly be considered a single market.
Some bigger cities (such as Edmonton, 1M people) still have a somewhat sane real estate market. In Edmonton a single family detached home averages around 450k CAD, while average household income is over 120k.
Canada doesn't really have any other industries other than real estate. Oil and mining, sure. But after that, four of the top 8 industries are centered around real estate.
Why is that relevant? It's not as if those properties remain vacant, that wouldn't exactly make sense from the investor perspective.
You've got excess demand over supply, so prices go up. Just like with anything else, the solution is to add more supply. Build more houses and prices of houses will go down.
The intersection of "housing" and "Canada" makes these two topics basically identical from a HN discussion point of view.
The appearance of one thread on HN's frontpage often leads to follow-up submissions on related topics. We try to avoid giving such article clusters more than one slot, because frontpage space is the scarcest resource HN has: https://hn.algolia.com/?dateRange=all&page=0&prefix=true&que....
The investors aren't building the houses. They're not developers. They're speculators. They're the real estate equivalent of scalpers buying up all the Taylor Swift tickets and reselling at huge markups. Except they're doing it with shelter, a basic human need, rather than a luxury entertainment product.
Houses aren't being built. We've had a huge reduction in construction essentially since 2008. This is why the scalper analogy fits: it's a largely fixed supply with skyrocketing demand and investors see it as a gold rush.
The problem with houses is if you just build - it won't solve anything. They have to be built in desirable locations. But then you've to either replace existing buildings in there. Or you need to extend commuting infrastructure. And in either case you need to build/upgrade social infrastructure. Including workforce for it.
Prices of housing or tswift tickets aren't going up because investors/scalpers, they are going up because again there's excess demand versus supply.
Your entire example is predicated on this very fact: scalpers cannot compel middle age white women to all the sudden want to attend a concert, same way investors cannot induce genz kids to want to move to vancouver.
Make more houses or taylor swift tickets and the whole thing resolves itself.
It was relevant to me, I was reading the other thread that dang brought up and it reminded me that I had read this article yesterday and it seemed like something that would be interesting to other people also which is why I posted it.
If they become short term rentals they essentially 'become vacant' (just one example of why an investment property might be 'vacant').
Obviously I'm not suggesting that all do, but some will.
By definition an owner occupier doesn't own a vacant property - only investors do, so the higher the proportion of investors the higher the proportion of underutilised properties.
Houses burn cash monthly - utilities, maintenance, taxes etc. Absent of misguided government interventions (nyc rent control etc), it makes no economic sense to leave a property vacant versus renting it.
Even in your hypothetical, you're still strictly better off renting it while capturing the gains. The mostly-empty cities in China is about the only place that I know of where vacant properties are being held as investment, but even there the problem is lack of demand rather than anything to do with who owns it.
IMO this needs government intervention. Not just in Canada but the US too. And I think it will require a multi prong approach. There is no one single solution but several needed concurrently.
I think they (the government) needs to:
1. Build regional passenger rail from from major cities to smaller surrounding towns to encourage development.
2. Provide favorable taxes and loans to developers with a hard requirement that, say 20%, of the units being built must be below market rate that is tied to inflation(?). And involve a government agency to manage these below rate units. Such agency also sets that rate based on the person's income.
3. Increase the local taxes on empty units (say units that sit empty for more than 3 months). The longer they sit empty the higher the rate (up to some maximum). Use extra revenue to fund #1 and #2 above
4. Extra tax corporations that make, say, over $1B in profit from real estate investments. Waive it if they participate in #2 above. Use extra revenue to fund #1 and #2 above
5. On the low end of the market finance building SROs and very high density housing for people that are struggling and simply cannot afford much.
In the US, there's no real way to force a city to build if they want to and honestly, they shouldn't be forced to. I've seen a city build up fast and it's ugly when the infrastructure lags the amount of people in an area.
I'd like to see literally any kind of rail, but for rail to be viable the Feds would actually have to enforce the law that passenger trains get priority. They're the only people who can sue about it and that's basically why Amtrak sucks. New rail is largely a pipe dream if we can't even leverage the miles and miles of rail we already have.
Subsidiaries would help, since most placed want to grow, but can't. Encouraging municipal internet would help since remote work could bring money into more rural areas and kick start the process of making them worth living in. Honestly, I just think we need strategies to encourage people to leave cities and more to smaller places. Or at least establish new cities outside of the normal bounds of the city a bit further away. The US has the space. There's no reason for everyone to crowd together.
How can any government ever tackle this issue when many millions of people have already invested huge chunks of their future earnings into the scheme? Explicitly saying "go pound sand" isn't going to work politically, but at the same time the government is implicitly saying that to people who don't own a house.
Yep. Keep price rises in check by slowly introducing wealth taxes (LVT, capital gains, whatever). Balance this with decreased tax-take from income. Also ensure that central bank remit takes proper account of property inflation to keep interest rates in check (i.e. not letting them get too low while house prices are rising too quickly).
> Been there, done that. I agree with this for the bay area, living in a vehicle seems like the only chance at getting ahead.
If you’re living in a van in the Bay Area to try and get ahead as a knowledge worker you’re doing the Bay Area backwards.
The point of living in the Bay Area is to get a higher paying job, not save money. How much you save on rent a month is pretty negligible when you’re competing with high earners when buying a home.
Saving 3k a month in rent nets you an additional 36k a year. It doesn’t matter, some people make this in as an after tax bonus within a month.
I wonder how much other things like urbanisation need to be controlled for. Eg skimming Wikipedia, over 40% of canadas population is in urban areas with a population over 500k whereas the percentage for the US is much lower. (Though my guess is that different classifications for ‘urban area’ mess up my quick counting).
For example if you plotted similar lines for each of the nine census divisions in the US, how much of an outlier would Canada still look like? What if one tried to make some synthetic Canada-like regions of the us where people are more clustered in big cities?
It seems plausible to me that Canada would still stick out, but I’m not sure by how much.
It may have something to do with urban design and zoning in the two countries. Candace has far fewer exurbs and higher suburban density. You can’t just add new housing stock by moving beyond a city’s boundaries.
Zoning laws have become weaponized. I would bet that the more zoning laws passed, the higher prices have increased. In places like San Francisco, neighbors can fight your permits and delay your building by years/decades depending on how much effort is put in. California stopped building enough housing supply to meet demand in the 1970s and since then has slowed new housing construction. We need to reverse this.
I can’t speak to SF, but there have been so many construction towers in Canadian cities. They are densifying rapidly, but a lot of it have been condos and apartments.
Implicitly, this speaks volumes about how much worse life is in other countries.
If somebody is willing to leave their home country, immigrate to Canada, and work hard enough to afford the rent/mortgage of those prices, it must be much worse in their home countries.
I can’t really explain it otherwise. It is obvious that it must be the increase in population increasing those prices, and people born in Canada do not have that many kids.
I have some familiarity with one prominent immigrant group in Canada. Shame keeps people already here from talking about how hard life is, because of the pre-conceived notion that Canadian life is easier. There is no feedback loop
I think this is an extremely important problem for progressive governments to solve because at the moment they’re doing an extremely bad job of it and opening up opportunities for someone to say: “I am willing to do what is necessary to solve the problem - restrict immigration, ban foreign ownership, eliminate environmental and bureaucratic review”
I have a wild guess that the entire Anglosphere experiences these kinds of housing inflation issues due to a kind of slow moving collective action problem w/r/t which languages to learn to get the big wages. Housing prices in non-Anglosphere cities worldwide rarely hit these same kinds of extremes.
This is an issue that matters to me a lot. According to StatCan, I was within the 10% income for my age group in 2017 and I wanted to have a home in Ottawa. Condo, townhouse, or detached didn't matter to me much. I went on Zillow and Kijiji to find near 0 availability. I compared homes to Seattle and found beautiful homes that I could afford, In safe neighborhoods with school with good ratings nearby. I did some more research and became resentful. My core question became: why can I make 2x the salary in the US and pay less for better homes? I became and still am resentful. I feel like I am nothing in Canada.
Housing becoming so incredibly unaffordable in Canada in recent years (average rents in Vancouver for a one bedroom now touching $2700) are making it a very tenuous argument that any engineer working in Canada should be being paid any less than one in a higher cost of living area of the United States.
Vancouver not quite NYC/SF yet, but seems pretty damn expensive compared to many jurisdictions in the USA!
Last time I visited Toronto I was shocked by the amount of not just homeless people but loud and disruptive or mentally ill homeless people. I remember hearing a blood curdling scream coming from a crowd. I ran over to look, it was just this homeless man screaming at the top of his lungs as people walked past him.
My friend told me it didn't used to be this bad (we've known each other for years and he used to complain about how many homeless people there were in American cities when he visited me), but the population, at least from his perspective, seems to have surged in recent years. At the time he blamed COVID, which I am sure had an effect, but I had no idea how bad affordable housing had gotten in that country (although maybe I should have noticed since he always gripes about making STEM money and not being able to afford to live alone in Toronto).
I remember something he said once that has really stuck with me. Last time I visited he told me the homeless used to be the fringes of society that fells through the social safety net. But now in Toronto they seem to be a class all their own.
“Canada is on track to host around 900,000 international students this year, Miller said in an interview that aired Saturday on CBC's The House. That's more than at any point in Canada's history and roughly triple the number of students who entered the country a decade ago.”
There is a perverse incentive to attend what amount to for-profit scams in Canada owing to their immigration policies giving preference to folks with Canadian degrees.
Sounds like someone's not been paying attention to how the international student game works. If you think luring international students by for-profit academia is a Canada thing, you have some learning to do.
Also the idea that Canada can retain folks with a Canadian degree is hilarious: the location factor for backwater rural Washington is higher than the location factor for Vancouver or Toronto: you think those students are gonna stay in Canada after they graduate instead of moving South and getting paid twice the amount for the same position? Because if you do, that's another bit where you have some learning to do.
You are unfamiliar with the Canadian international student game. For reference, the Unites States has roughly the same number of international students as Canada (~1 million) at 10x the population. This large number has created an industry of “strip mall” for-profit colleges that award degrees which provide a preferred path to citizenship because Canada’s immigration system offers additional points for having a Canadian degree (technically any degree but a Canadian degree is automatically qualified while foreign degrees are not). These people are often not looking to get an education and then get a job in America - they are often trying to immigrate and the cost of attending the Canadian college is just part of the paperwork for them.
America’s immigration system, in contrast, is generally merit-blind. You do not get extra points for a degree and so there is no incentive to pursue a qualified American degree. The US path for an international student seeking citizenship is based on work after the degree: sponsorship by an employer. The Canadian path for an international student IS the degree.
Yeah. Here in Vancouver you need 250k+ yearly household income to afford a very average detached single-family house (3 bed, 1 floor) anywhere in the metro area. A typical senior engineer salary here, for a local company, is $200k/year on the high end. AWS/MS might pay a bit more but not significantly.
The larger houses in "nice" neighborhoods are going for 4/5 million, so they're not getting purchased by anyone in the working class, by which I mean anyone who relies on regular employment income to live.
It's lower, yes, but in Toronto and Vancouver it has definitely improved in the last decade.
Amazon opened big offices in both cities (bias: I was one of the early Amazon people in Toronto) and quickly grew by outbidding other employers on good developers. Then other companies opened offices to do the same to Amazon. Now there's a pretty big dev economy.
Top end is not the same as average. Not everyone can work at FAANG and no one else in the sector pays like FAANG. What's healthy is a top end that can afford 90% of housing and a median that can afford 50%. Instead we have a top end that can afford 50% and a median that can barely afford 10%. That's what's out of whack.
It's still substantially lower. I know some talented devs who got offers from Amazon within the past couple years, and Amazon's internal HR rules placed a strict comp ceiling on their offer that could be doubled if they'd agree to work from Seattle rather than Vancouver. Same developer, same role, and a very short distance to move. So they moved.
Taxes are a pretty big difference too. Even though the California top federal + state isn't that far off of Ontario the income bands are much wider. At 300k USD(410 CAD) you'll have about an extra 21k USD take home in California. Then sales taxes are 13% in Ontario vs 7-10% in Cali(local taxes).
Right. I think a lot of foreigners are completely oblivious to how little people with good jobs have to pay for insurance premiums and max out of pockets. Everyone seems to think it’s nothing but $100K bills for having a paper cut.
Some people with good jobs have that. The huge majority of Americans don’t, and average out of pocket healthcare costs are around $1600 yearly per person.
Before I moved to Canada I never had a company that covered all my deductibles and only one that covered my entire premium. That kind of benefit is extremely rare. It is truly a privilege of the rich to not have to think about the cost of health care in America.
Meanwhile in Canada I can go to any doctor in the province and know that I will never see a bill, and never be told that my insurance won’t cover the cost, and never have to argue on the phone about whether a procedure ordered by a doctor was necessary. It doesn’t matter if I am employed by Facebook, unemployed, or taking a few months of paternity leave.
Foreigners don’t think that everybody goes bankrupt for a few stitches. They think it’s a travesty that anybody is in that position.
That is very rare, you should consider yourself lucky. I work for a 100,000+ person software company and my [health + dental + HSA] is over $10k to cover my family of 4.
You are correct, but I don't think we can ignore the massive drug abuse problem, that has progressively gotten worse over the past 50 years, and especially 20.
I would argue that the rise in drug abuse is a consequence of societal issues - not the cause.
In my experience many people use drugs. Those that abuse drugs almost always had existing problems prior (mental health, destitution, a sense of hopelessness, etc).
Generally you don't solve homelessness with affordable housing. We might call it "homelessness" but that's just the bullshit word we use based on the symptom, it's actually destitution, and the help they need extends so far beyond just getting them their own place that that part is actually the easiest problem to solve compared to all the other parts that also need solving.
The fact that Toronto and Vancouver haven't even set up container apartments in several places around the city is all the proof you need that folks don't care, which means they shouldn't be given a choice on whether or not to solve the problem. This should get mandated with fines for the city itself if it doesn't help the people who can't help themselves because the system's been designed to prevent them from getting help.
I disagree that the root problem is "destitution" rather than affordable housing.
I haven't seen much good research on the best way to solve homelessness, but most cross-city analyses suggest that high rent (and low housing density) is the main determinant of homelessness rates: https://sci-hub.ee/10.1111/1467-9906.00168
Note that "extreme poverty," "low-wage jobs," and welfare recipients were not significant factors.
A second study claims the "the availability of low income housing and of mental health care are the strongest predictors. Relatively modest investments in improving availability of these services would provide considerable payoff in reducing homelessness": https://sci-hub.ee/10.2307/800641
A third study I can't find now concluded that 25th-percentile-rent (rather than median rent) was the most significant factor (ie, availability of affordable housing).
That sounds like confusing the cause for the solution: there's a very big difference between "why someone became homeless" (i.e. no affordable housing) and helping "who they are now that they've been living on the street". You don't magically get those folks back on their feet purely by getting them housing, even if getting them housing is a critical step. There are so many more steps that are now necessary.
It's more cost-efficient and effective long-term to prevent people from falling into homelessness. And affordable housing is widely viewed as a major root cause. [1]
Yes, people on the streets should be helped. But if 4 people fall into homelessness for every 1 person place in permanent supportive housing (this is the ratio in SF [2]), we will never "solve homelessness."
> Generally you don't solve homelessness with affordable housing.
I think in some part, you do. I think a significant portion of homeless became that way through the stress and despair of affording $2k+ rents on a meager income, dealing with the lack of hope by turning to alcohol and possible other drugs, leading to a downward spiral where they end up on the street, abusing drugs for years, and eventually turning into the destitution you see.
you don't solve what homelessness actually is just with (almost always temporary) housing, you just get people off the street, which is a necessary step one in a multi step process, because just getting them off the street and then going "k, now make it work yourself" would be about as effective as not getting them off the street.
> This should get mandated with fines for the city itself if it doesn't help the people who can't help themselves because the system's been designed to prevent them from getting help.
The problem is that "help" means different things to different people.
For years, the general view was that addicts in Canada got help via safe injection sites, first responders trained in administering naxolone, free housing available, and no real consequences for petty crime. Keeping them out of jail and making sure they had housing and clean drugs was seen as helping them.
It's only been in the past ~2 years, now that it's spiraled out of control during COVID, that some are redefining "help" to mean forced rehabilitation and/or institutionalization and keeping them off the streets if they commit crime. But there's no consensus on this.
There is certainly a housing problem in Canada, but isn't some of this attributable to the Canadian dollar getting weaker since 2009? It went from 1=1 to $1.4CAD to $1 USD today. Real housing prices will increase as wages in Canada decrease in USD, and asset prices increase in CAD.
The Canadian market is crazy, but comparing it to the US is not very illustrative. The US market is far more expansive, due to the amount of usable land and having 10x the population.
A better comparison might be Canada to California.
Canada is a country filled with risk averse people who have been brainwashed into thinking real estate as the only investment which "smart" people do. The result is a country which severely lacks innovation, has huge problems of oligopoly at every level, healthcare and social nets falling apart at the seams and housing which is out of control. But hey, look at how much the 50 year old risk averse granddad has through sitting on properties for 30 years like some perverted dragon.
It's a shame really. Canada could have been a great country like one of the Scandinavian ones. Instead it is like watching a trainwreck in slow motion.
It seems like societies start to have issues when they become too risk averse and comfortable. Humans are actually really good at handling risk and even negative outcomes and it's very central to our nature. The problem is when the risk probabilities become so small that we can't actually assess them so we start doing absolutely ridiculous things to continue mitigating them.
We can explain this without "brainwashing": Risk-taking Canadians move to the United States, leaving behind the risk-averse. ;)
In reality, Canada and the U.S. have a "common market" of sorts that allows talent to move back and forth fairly easily. On top of this, cities tend to "specialize" in certain industries, and it's much easier to move the talent to the industry than move then industry to the talent.
This means that Hollywood stays in Los Angeles, and Canadian actors move south; Silicon Valley stays in San Francisco and Canadian programmers move south; Wall Street stays in New York and (some) Canadian Bankers move south.
>>In reality, Canada and the U.S. have a "common market" of sorts that allows talent to move back and forth fairly easily.
Unfortunately, it's not really a two-way net-zero exchange, but majority one-way from Canada to the US. This is the main reason that the brain drain has been discussed since, well, forever, but the earliest that an easy Google search refers to brain drain acceleration since '89[1].
To be fair, the US has been draining brains via the seductive American Dream from all countries around the world since it's founding, but it's particularly painful because of the cultural overlap that you referred to in your comment that make migrating down south so particularly tempting.
The (not) funny part is that some suggestions to combat brain drain is to aggressively increase immigration of skilled immigrants[2], which brings us back full circle.
Immigration will help (and Canadians begrudgingly like this solution because it also shores up the income-tax “hole” caused by low a birthrate/large retired population and generous social benefits to pay for) but it can’t fix the problem because it ultimately comes down to capital and risk: Canadian companies must service international markets in order to generate an equivalent return on investment that rivals U.S. companies in order for investors to be able to deploy capital at the same volume. If successful, it ends up looking more like “an outsized proportion of FAANG-sized companies are Canadian”, and less like “Canada has an equivalent company for every FAANG but each has an outsized return” because the latter is much harder to achieve, for various reasons I won’t get into.
Crazy to see how the second largest country in the world by surface is so dysfunctional when it comes to housing (similar point could be made about Australia, a continent in itself).
Yes, I know that people can’t live in the Yukon Territory, but, even so, there’s a lot and lot of space to build housing further South.
Canada is committed to absurd levels of immigration relative to population. The crucial difference between population growth by birth versus by immigration is that you get ~20 years for housing supply to catch up to every new person. With growth by immigration, every new person needs housing _today_. The Canadian government isn’t creating housing at anywhere near the same rate as immigration. It’s really not complicated to understand what’s happening.
It's quite an outlier for having 500k immigrants per year, with a population of 39m. That's 1.25% per year. In 20 years, less than a generation, 25% of the population is entirely new. There's already a housing crisis and they're set to add 10 million people in 20 years? Build the housing first, otherwise you're just playing musical chairs and jettisoning people onto the street.
Updated numbers. Canada is on track to accept one million permanent residests in a year, PLUS 800,000 international students who tend to arrive and stay for years thus also need housing.
Canada passed 40 million population this year and will hit 41 in a few months.
A large percentage of immigrants are becoming pregnant the year they immigrate. Let's assume there is no interaction with the native population. For the example's sake, let's assume 500k is evenly split men and women. let's assume 40% of the immigrants have a child in the first year.
Total immigrants divided by gender times 40% percent having a child in the first year:
500k / 2 * 0.4 = 100k
That means a theoretical 500k immigration rate is actually 600k after one year.
And, in fact, for the hypothetical sake assume the same thing happens in year two as the original women have a second child in year 2 and now the original population has become 700,000.
It’s a shell game. A less informed population won’t notice that the political dynasties continue to live luxurious pompous lives off everyone’s backs, and the informed will be too busy in an unfair competition over scraps. Unless there is a huge surplus of housing, college space, and well paying jobs…your leadership is selling you out in a gambit to take in people who will gladly keep voting for them in return for 10% of the typical Canadian lifestyle. You need new leaders who put citizens first, not last.
60% of Canadians are home owners, the majority of those being baby boomers. Their retirement relies on downsizing and living off their remaining capital. The demand for buying their overly priced detached homes will exist so long as we immigrate the qualified uber-wealthy. It is a ponzi-scheme, and I have observed that anti-immigration retorts were met with racism up until recent years where the remaining 40% of Canadians renters learned they will never be able to buy
How come you construe more housing as being a government responsibility? That is strange, especially when your government is causing these issues in the first place. Housing supply normally gets built to satisfy demand. If the regulations are too stifling for construction to be profitable for builders and workers, you won’t have houses. Period. Magic funny money only works for so long before the house of cards comes crashing down.
Interesting that some in Canada respond to the problem by expecting the government to do something all the time. They serve the poison and you want their antidote too? Canada’s leaders are doing a pretty great job of setting the stage for a housing takeover so they can conveniently come up with a solution that makes them more central and more powerful.
Do they overly regulate construction and make it hard to do business?
Can't speak to Canada's situation specifically,
For your comment on housing as a government responsibility. You're correct that housing, for the most part, is privately financed and constructed.
However the limiting agent in this environment is governments willingness to zone and permit new housing construction. The aggregate supply of housing is mostly a function of government policy. One issue is that while it may be popular at federal level to boost housing supply, housing policy is mostly enacted through local government.
> However the limiting agent in this environment is governments willingness to zone and permit new housing construction.
Yep. So they cause the problem in order to be the ones who conveniently have the solution. One that has the added benefit of keeping them more and more central and overreaching over your lives.
In addition to the point made by xienze that if its government policy causing increased need for housing it makes sense for them to also help with that issue, I'd add a more general point:
Many people (including me) believe it should be government's responsibility to make sure its citizens can have a reasonable standard of living, including housing, water, food, etc.
Whether that's by directly providing it (building and managing social housing, state-run energy provider, etc.) or by managing policies that enable private companies to offer stuff to a satisfactory level, both can work and it's debatable (and the debate varies depending on the specific areas).
But if private companies aren't doing as much as is needed then it should be the government's job to fix that, regardless of whether the fix is providing services directly to the people who need it or providing support to private companies so that they can do so.
If "getting the hell out of the way" means removing red tape that was previously a case of the government causing there to be less housing then, then yes that's one way they can help.
If they're already at an ideal low of red tape (keeping in mind we probably don't want to get rid of laws that require things like making sure buildings are safe both for the occupants and for the builders), and aren't restricting the market in any foolish ways, but the market still isn't providing enough housing, then I disagree that the government shouldn't actively try to improve the situation.
Citing an example of a government apparently doing a bad job doesn't mean that every job a government does has to be bad. Otherwise seeing a private building company doing a bad job leads to also thinking private businesses shouldn't be allowed either.
At the end of the day both companies and governments are run by humans, who are capable of doing great things and terrible things, and of doing them both well and badly.
The response should be to argue about what a good government initiative could consist of, not to say that if there's a problem they should just throw their hands up in the air and pray that it improves by itself.
> How come you construe more housing as being a government responsibility?
Well, official government policy is creating immense housing demand and adversely affecting citizens. If you want population growth via infinity immigration, you as the government need to do something about creating additional housing, simple as that.
On account of the cold, I guess. And of the tundra there, kind of difficult to build lots of stuff on it, such as roads or railways. The dark during winter-time, too.
All this to say that that makes it difficult to potentially set up big human settlements in there.
The housing market in the Anglosphere is a gigantic Ponzi scheme. That these countries shortsightedly decided to make housing the primary driver of middle class wealth will go down as of the the greatest own-goals in history.
Worse yet, these nonsense housing and zoning policies have no end in sight, as homeowners are disproportionately those richer, older, and more established, and so will continue to vote in greater numbers for these policies.
The incentives are hilariously broken. 60-70% of the population owns homes and want to restrict new construction, while the federal government wants to solve economic problems with 2.5% immigration.
Is restricting new construction the problem? I believe the problem is airbnb, mega-corporations/banks buying up and renting out homes, homes that sit empty trying to get exorbitant rental rates, vacation homes and non-homestead homes that sit empty...
When I was in LA, I met up with a friend who brought another friend as a tagalong. He had a job at a software company nearby which we got a tour of, but he lived with his parents 40 minutes away. That night I stayed at an airbnb a three minute drive from the office that would have been perfect for the guy to own and live in. The airbnb was a 2br/2bath with electric locks on the outside and inside doors so they could double-rent it for the night.
Landlords, empty houses, and airbnb are destroying the lives of young people.
> I believe the problem is airbnb, mega-corporations/banks buying up and renting out homes, homes that sit empty trying to get exorbitant rental rates, vacation homes and non-homestead homes that sit empty...
The number of owner-occupied housing units in the USA has gone from 70m in 2001 to 86m today [1]. The number of total housing units has gone from 118m to 145m over the same period [2]. 70/118 is 59.3%. 86/145 is ... also 59.3%!
I agree that it feels counterintuitive. I share the sense that there are more entities playing landlord than there used to be, but it doesn't seem to be borne out in data. A possible contributing factor is that AirBNBs are more prevalent in the cities that attract visitors, for free market reasons.
IMO an underrated part of the US housing crisis (in addition to construction's failure to keep up with population growth, which I think is most of the story) is the fact that the fraction of households consisting of only one person more than doubled from 1960 to 2020, from 13% to 27% [3]. That same article notes that 25% of LA households consist of one person.
What? No? Short term rentals are under 1% of housing stock. Population growth in the US is somewhere between 0.5-1% per year, so even if you got rid of all short term rentals that solves your housing issues from just population growth for two years at most.
> mega-corporations/banks buying up and renting out homes,
This I don't know about. I think at least 25% of housing rental stock total, something like 10-15 million units, is just individual owners.
I don't know to what extent that forces market prices.
> homes that sit empty trying to get exorbitant rental rates,
The vacancy rate is what like 5% for rentals? 5% rental vacancy for rentals is a little high, but e.g. a 2% vacancy rate would exist if people move on average once every four years and it takes only a month to turnaround to a new tenant. 5% isn't all that high.
> vacation homes and non-homestead homes that sit empty...
Vacancy rate for housing that isn't rentals is under 1%.
Yes, lack of new constructions is the main problem. For example, housing vacancy rates are near historic lows [1]. The existence of Airbnb and other short-term rentals should increase the demand for housing, which in turn should lead to new construction. The fact this is not happening is the problem,, and we should look into why.
People are renting/living in groups or with parents, are unemployed or underemployed, and can't live in the areas where they would want to live. Building more houses is not simply the answer since they are unaffordable to the people who need them.
The problem is the for-profit housing industry.
Skyrocketing Rents & Skyrocketing Homelessness: Why Are US Homes for Profit Not for Living In?
The problem is compounded by the fact that new entry-level housing isn't built and that the old stock is deterioriating. Please, no fairytales about hand-me-downs here, you cannot subdivide an exurban 3600 sqft cardboard palace into 3 1200 sqft condominia. Zoning regulations are against it, and the infrastructure (water, electric, roads, schools) would require a massive upgrade.
Up until the mid-1980's average new construction was 1.8 million units/year, afterwards it dropped off, while the population grew from 240 millions in 1985 to 330 millions today. The fact that household sizes have shrunk, and the rural depopulation only exacerbate the problem. There is a grave supply problem.
People love coming up with all sorts of ideas trying to find a suitable bogeyman that's the cause of all this - rich foreigners, investors, BlackRock, AirBnB, etc and since There have been many policies actually implemented in many places (vacancy tax in Vancouver, foreign owner tax in both Toronto and Vancouver etc etc). None of them have worked and the housing crisis just keeps getting worse.
The reason people don't want new construction is because it's ideologically comforting. For increasingly large swathes of the population (largely young, urban, leftist), it's far more important to denounce BlackRock, TechBros and Gentrification than to save $1000/month in housing costs. It's pretty incredible.
I'm not against new housing, I bought new construction two years ago. It's in a place that was owned by the city and the locals used it as a park. There is considerable anger that it was allowed to be built in the first place.
I am just not onboard that new housing is the crux of the problem when there are perfectly good existing houses that are being misused. We should fix the exploitation and also build new housing, but focusing only on new housing as a solution misses the problems of renting and airbnb and excessive hoarding by the well-off.
Imagine what would happen to the housing market if people were forced to sell off their excess rental houses and only keep one house. The people who can afford to own these excesses can afford to deal with the consequences of having to downsize.
Look into Vancouvers vacancy tax. People were convinced there were tons of empty houses sitting around and a lot of political capital and bureaucratic effort spent and the result was practically nothing. 500 vacant homes in a city of 2 million is not a meaningful contributor to the housing crisis, and certainly worthless compared to the amount of effort spent on it. It's the tens of thousands of units not being built that's the issue.
No new housing is the crux of issue, but the issue has compounded over the decades. It should have happened 10, 20, 30, 40 years ago. If there had been enough supply back then, the misuse now would not matter.
For past decades we should have been tearing down single family houses near core and replacing them with better density. And building new denser suburbs with good connectivity to core while also offering necessary services for regular living.
> Landlords, empty houses, and airbnb are destroying the lives of young people.
Those things certainly aren't helping, but they represent only a small number of total housing units. The main cause is lack of new units. We fall further behind every year.
"The" implies one driving issue but like most big problems, the current housing crisis has a number of drivers.
Think of a grease fire where the people throwing water on it are making it worse. So are the people pouring gas on it. So are the idiots with the big fans trying to blow it away from their own stuff.
I wouldn't say restricting new construction is negligible but it seems more like an SF/bay area problem. New housing is going up everywhere but if the airbnb rentals all went to new owners who lived there you would not need the new housing for awhile.
Another search states that there are 329,283 airbnbs in California in 2021. These should go to families first.
New York has 955,437 empty houses according to a quick search, and it's 4th behind Florida, California, and Texas. Take away renting out houses, short-term or otherwise, and sell those houses to people who don't have a first house, the crisis would away. It's simply greed.
If Airbnb was the major problem, we would only have a housing crisis in California, NY and other highly touristic places. We don't, we have it even in mid-sized non-touristic cities in the US, Canada and Europe.
There are houses for $50k in the Canadian prairies on nice big lots. They will need some work, and there probably isn’t much around for jobs and services. The old saying location location location stands
> New York has 955,437 empty houses ... 4th behind Florida, California, and Texas. Take away renting out houses, short-term or otherwise, and sell those houses to people who don't have a first house, the crisis would away. It's simply greed.
But not this particular greed - only. Maybe not even mostly. Whatever (temp) relief would be found by (permanently) forcing owners of empty dwellings to divest - that relief would be quickly overrun by the issues of an overly-constrained housing supply.
Tangential to the broader topic here, but what's just happened in NYC with Airbnb, provided enforcement actually takes place, is going to be very telling in the coming months and could have far-reaching implications for the housing market, specifically in those markets that are popular Airbnb destinations. I have a very small, entry-level apartment in a popular downtown neighborhood in NYC (yep, I'm a landlord--guilty!). Tenants usually only stay for a year or two given a bunch of different reasons, but the reason I bring that up is that I have a long history with the NYC rental market.
I had a tenant move out this summer and for the first time in years (barring 2020 when Covid was in full swing), the place usually rents out within days of it being listed. This year, however, it not only didn't rent out right away, but required decreasing the rental rate to finally find a tenant. And this when all the industry stats stated that comparable apartment rental rates, as of June, were up 8% yoy. Now there are of course myriad reasons this particular apartment could be facing headwinds, but I am more or less convinced that the magnitude of the shift from short-term to long(er) term rentals that has been happening in anticipation of the Airbnb ban is the reason for this drop in rental rates. And just to quantify this n=1 data point, the price drop from last year's rental rate was 5%. If you believe the industry stats saying that prices were up 8% yoy in June, which likely were based on Q2 stats, well before short-term landlords would've been faced with the Airbnb ban, this may actually mean that the rental rate drop was ~12%.
Nothing about what I wrote above is scientific, but if these numbers (https://www.wired.com/story/airbnb-ban-new-york-numbers/) are to be believed, it seems likely that the drop in rental rate is largely attributable to the Airbnb ban. The yoy Q4 '23 numbers, when the ban will have been in place for the entire quarter, will confirm or deny all of this. If confirmed, though, will be interesting to see if other cities start to aggressively cut back on Airbnb in an effort to reduce rental rates. Again, not saying this is hard data, but if regulating Airbnb more or less out of existence resulted in a 12% drop in rental rates across major markets nationwide, that would be an amazing lever to almost-immediately decrease rental rates, even though the knock-on effects of declining real estate valuations would potentially cause significant problems. And I say that as a happy Airbnb user, a landlord and a homeowner. Things have just gotten too out of whack with the housing market so you have to somewhat cheer the possibility that there's actually a (low-caliber) silver bullet to reduce rents more or less overnight.
The real estate market in the US is one of the cheapest in the world relative to incomes. Perhaps real estate is actually more valuable than you’ve been lead to believe.
The US was still riding high off the post-war boom.
In the 40's - 60's, the US was the manufacturing powerhouse while Europe and Asia were rebuilding. The US had the baby boom and the enormous natural resources to lean into that growth.
After some decades, we grew to a point that labor became increasingly expensive. Workers wanted more, consumers wanted more for less. So we outsourced the lower-end manufacturing jobs to lower cost of living areas, and ultimately shipped them overseas to developing economies.
The US now does mostly high-cost, value-add. We're sitting at the top of the production food chain and labor costs a tremendous amount. Fewer people, as a percentage of the population, are able to fill these jobs due to the high skill required.
20-30 years ago the end of the post-war tailwinds. We've been experiencing the US operate in a global economy where our lower class doesn't have access to what were once well-paying jobs. We moved those over to cheap overseas labor, and we benefitted greatly from the lower cost of goods.
Our highly compensated knowledge workers are pushing prices up at the high end, and there's less middle ground.
The middle and upper classes will be fine. It's those at the bottom that are suffering. Instead of providing means to lift our poor up and into the middle class, we're lifting laborers in India, Vietnam, and Mexico out of poverty and into their own growing middle classes. (Which I think is absolutely great for them. I just wish we could also help our own lower class.)
Labor costs are high primarily because the USD is kept artificially propped up by other countries depreciating their currencies faster (I.e. see China’s manipulations). If we allowed USD to drop, American labor could become competitive again.
How would you categorize it as being different 20-30 years ago than today? I ask because my observations of friends and family who were buying / selling in that era is that the more things change, the more they stay the same. When I think about the baby boomers I know who have real wealth, every one of them will tell you a story of buying real estate in the 70s and 80s…
I was curious about this, so here's a bit more detail.
Interest rates were quite high (and surprisingly variable, as a modern observer) in the early 1980s, peaking at almost 20% and spending a lot of time in the teens [1]. However, the median house price [2] was still low relative to median household income -- at the interest rate peak of 18.9% at the end of 1980, the median house sale price was 66k, and the median household income was 21k [3], for a ratio of about 3.1. In 2022 the median house sale price was about 450k, and the median household income was $71k [4], for a ratio of about 6.3!
I think the mortgage rate difference does mean the 80s were still worse if you took out a long mortgage at the given rates. However, 1) you could also save for much less time and buy a house with a smaller mortgage, and 2) there seem to have been a lot of since-closed loopholes [5] like assumable mortgages (from my limited understanding: you essentially take over the current owner's mortgage, along with its lower rates from when they bought house) that meant a lot of people were technically buying houses with much lower effective rates.
So ... I question the claim that the early 80s were easily as unaffordable as now.
Yes, and yet people bought and sold properties and those that held eventually saw their asset appreciate. And that’s my point - “Before all was the land…” is the start of many opening chapters on real estate, because oil, mining, timber, housing, commerce - it all ties back to this physical asset. It is innately an immovable asset thus it will always have value and that value will fluctuate (generally increasing…) based on its marketability and use. So sure - real estate is different in each decade, but overall the treatment of it as an investment has been true as long as there has been civilization. It ain’t a coincidence that retiring Roman soldiers were given land as thanks for their service.
> The real estate market in the US is one of the cheapest in the world relative to incomes.
This hints at a fairly incomplete puzzle.
For example :A low-end US residence requires 4+ typical income earners to meet minimal bills needed to stay housed.
That would imply that in most of the world, a typical household has a much higher number of income earners living in the residence - they have many earning-adults under one roof.
I'm skeptical that most of the world is dominated by 5-10 adults living in US sized houses. So what's the rest of the picture look like?
It's a double-edged sword. If RE values in the US "normalize" to income-ratio equivalents in other countries by rising and never falling again, the US is going to see a drain of wealth and talent to those other places - UK, Latin America, etc that are now on even competitive ground in terms of owned housing
Australia is afflicted by this insanity as well. We have Trillions tied up in housing. Yet productivity and economic complexity are on the decline because everyone is trying to flip houses and make housing into an investment vehicle rather that invest in new businesses.
A minor pedantic point: not "as well", since the comment you replied to talked about "in the Anglosphere" which by pretty much any definition certainly includes Australia :)
Indeed, a strange comment considering that Chinese property companies are the ones billions in debt and were using deposits buyers made on one property as leverage to build another somewhere else.
The problem isn’t housing and zoning. The problem is people absolutely refuse to go live in places where housing is cheap because they’d rather live in the popular hotspots.
You want a cheap house? Sub 300k? Come to the Midwest, you’ll get one easy. Oh what’s that? You’d rather live right in downtown San Francisco or Manhattan? Well…
Sometimes I think about just selling my expensive city apartment and moving out to a small rural mountain town and finding a wife there.
What a disgustingly materialistic and capitalist way to write off entire communities of people as worthless simply because you can’t find a six figure job there. No wonder the coastal elites get hated so much.
I think it can be more simply explained with supply and demand when it comes to labour. Or, if you’re a cook, for example, you’re going to find a more robust market for your skills in Vancouver rather than Castlegar. Because of that, cities can often be more attractive for the working class.
I do have a lot of respect for the people who are able to make a sustainable living in a less dense area, but it’s not a reliable path for everybody.
This is pretty much it, at least in the US. Lots of places in the Midwest where the median house is less than 2.5x the median income. But if you want to live in San Jose, that ratio is 10x. Even in Portland it's over 5x.
A remote tech worker can buy quite a lot of house in the midwest if they keep all or most of the salary they were getting while living in a coastal city.
Perhaps remote work will reduce this disparity. I'd expect it to happen in "waves" as high-paid remote workers move from cities with "tier N" CoL+culture to "tier N+1."
I'd just add that, while it's hard to drive out of expensive real estate in the Bay Area, that's actually not true of a lot of major cities. While there are expensive towns, there are also some pretty reasonable towns within 60-90 minutes of Boston for example. Not living downtown can buy you a lot of weekends on the town in a hotel.
But then you'd have to live in the midwest. There's a reason the costal cities are popular -- culture, weather, people with similar political views, exposure to other races and cultures.
Especially if you didn't grow up there, the weather is killer.
And there is still plenty of space in the popular places, if people were allowed to build there.
But the people who are already there do everything in their power to prevent it.
For many people living in coastal cities, moving to the areas of the midwest where housing is affordable will definitely involve exposure to other cultures.
In the case of California climate specifically though, you have to ask yourself how much you're willing and able to pay to live in the only Mediterranean climate in the US versus e.g. somewhere that gets snow in the winter. (Lots of California can get pretty hot too.)
People value things differently, including the things you mentioned, and cost is a large driver of that.
The only thing cities dislike more than an increasing population is a decreasing one. Given homeostasis is essentially traffic, suburban sprawl, etc we should let areas organically grow and shrink as people make choices. And areas that are appealing now will become unappealing either by cost or changing economies.
You aren’t wrong, but I also want to throw out a challenge to anyone with similar thinking: help us. You might be surprised by the number of people living in deep red areas who crave political change. We can’t do it without political and financial support from the more liberal parts of each state / the country. There’s even the option of moving here and being part of boots-on-the-ground change. Some of these communities can and will change in my lifetime, even if it is a slow process. And the housing is cheaper too.
I am not going to sacrifice my children's happiness so that I can move back to Oklahoma and somehow stick my finger in the dike against theocracy. It's all well and good to propose that an influx of reasonable people would help reform a state's politics, but when it comes down to your own family you are talking about specific people, not averages.
Your children don’t give a damn. They’re children. They will live wherever you live and be completely oblivious to whatever adults argue about on forums and the news. Don’t prop your children up as an excuse.
You live a life of sheltered ignorance if you aren't aware of what young people go through in such places when they are of minority races, minority religions, not heterosexual, or not conforming to gender binaries.
Really? Painting all of the Midwest as a "racist theocracy?" Those $300k homes are also Nebraska, Kansas, the Dakotas, even blue states like Minnesota, Illinois, and Michigan.
Wow, spoken like a truly superior progressive where the only morally good place to live in the world is SF. And, apparently every other city will get you killed due to racism. Please consider never leaving your ‘liberal democracy’ because folks like you destroy cities.
-1 for abusing the term "Ponzi scheme" but otherwise I'm with you. Ponzi implies this was some elaborate conspiracy with a puppeteer at the top when it reality it's an emergent property of 50 years of misaligned incentives playing out in similar ways across multiple nations in similar ways.
The postwar years saw a huge boom in housing construction which created a few decades of housing availability that may just never exist again nor should it. Housing as a vehicle for building wealth and housing becoming unaffordable for the younger generation are two sides of the same coin.
>The postwar years saw a huge boom in housing construction which created a few decades of housing availability that may just never exist again nor should it.
More importantly, the proliferation of the personal automobile made suburbs possible and unlocked a one-time dividend of cheap housing that was "close" to the city (in terms of travel time, not distance). That suppressed prices for a while, but now we're returning back to historical trends.
> The postwar years saw a huge boom in housing construction which created a few decades of housing availability that may just never exist again nor should it.
There's plenty of demand for housing. There's no reason we can't build more to meet that need, other than regulation.
This is true and not true. Desirable land aka location is where everyone wants to buy. This drives the price up. Building in the middle of nowhere increases available housing, but doesn't solve the problem really, because no one wants to live there.
In theory remote work could help with this problem, but honestly it's really only available to workers who work in offices. People with physical jobs like Amazon warehouse workers and restaurant staff and construction workers...all have to live somewhere near where they work.
>In theory remote work could help with this problem, but honestly it's really only available to workers who work in offices.
And I daresay that even most of the professional class who could live anywhere in the country they wanted to probably don't want to live in or near some small midwestern city or many of the other places where housing is relatively cheap. (Some of that is preserving future employment options but even if you take that off the table, there's still almost certainly a common preference for at least the general vicinity of large mostly coastal cities--and tons of excuses why this location or that location is a non-starter.)
There's also plenty of relatively inexpensive housing in many areas of the US (can't really speak to Canada) but many people are less inclined to live in those areas for a variety of reasons.
There was in Canada, too, before the pandemic. But it was a fairly small amount in terms of actual housing units, and in 2020-2021 it was almost completely swallowed up by people leaving Toronto and Vancouver for places like the Maritimes and Vancouver Island. They could build more capacity, but the price of land has risen in advance of that.
"Housing as a vehicle for building wealth and housing becoming unaffordable for the younger generation are two sides of the same coin."
That's a great insight.
> Housing as a vehicle for building wealth and housing becoming unaffordable for the younger generation are two sides of the same coin.
To be sure, there's a distinct difference between housing as a vehicle for preserving wealth vice building it, where the underlying grift of the real estate industry is in having normalized the country to the perverse idea that the latter is both healthy and sustainable.
The problem here is capitalism generally and neoliberalism specifically.
The idea of private property (as distinct to personal property) is fundamentally flawed. Every aspect of your life becomes financialized, including basic needs like food, water and shelter as well as education and health care. All of this becomes simply a means of extracting every last possible dollar from you through mountains of debt and sky-high rents.
Withholding shelter in the wealthiest countries in the world just so a handful of people can have $120 billion instead of $100 billion in net wealth is beyond coercion. It's state-sanctioned violence.
The solution is social housing. In places like Vienna the majority of people (~60%) live in state-owned housing. The state essentially guarantees housing (mostly), as it should.
The provincial governments of Canada should build a pool of housing through a combination of building, eminent domain and taking ownership of foreclosed properties. You could even have a scheme where people who are in arrears on their mortgage get to convert their house to being state-owned (which they can continue living in) where the mortgage gets bought out at a discounted value, which is what would happen anywya if it were underwater.
No, the problem isn't capitalism, since many other countries that are capitalist don't have the same problem with housing prices (e.g. Japan).
The problem is the government interfering with the housing market by giving handouts under the guise of affordability, which just pushes prices even higher. Combine that with restrictions around building new houses, and nobody should be shocked we're in the situation we are.
No need to come up with a complex scheme for public housing. Vienna's system is already a big shitshow with a ton of people unable to access public housing.
Far better for the government to just get out of the way, and build enough supply that we don't see such a massive increase in prices.
The problem with the Canadian housing market can be summarized in:
- The housing market never crashed, it never reset like the US one in 2008, The government instead kept duct-taping the issue by printing more money, increasing and decreasing the interest rates, and now they are even increasing the period of mortgages to up to 70 and 80 years, all of that so the bubble won’t burst.
- Interest rates are not fixed, even the fixed ones will/can be changed after 5 years.
- The individual in Canada is 40% less productive than the one in the US (Statistics Canada and US Bureau of Labor)
- Canada barely manufactures or produces any industrial products, Canada's economy shifted from that as well as oil and the stock market into investing in housing, basically buying and selling houses became the core of Canada's economy.
- Over immigration, the country is accepting immigrants at a very high rate, Those immigrants are not construction workers but are skilled ones, they won’t work to build more houses, but they need to buy or at least rent, putting extra salt to the injury there, less supply and more demand will definitely increase the prices. This is without mentioning the ones who buy these as an investment, sometimes even without being a Canadian resident or citizen, making it even worse for locals, especially with Canadian low wages.
- Because we never had a crisis due to interest rates dropping to zero, boomers and GenX managed to buy houses, the country now has around 2/3 are actually owning a house, the problem with that is, your voter base majorities are AGAINST taking any action to reduce housing prices because it’s their investment, and they would even use that investment to buy more houses, while the ones who never bought one are not able to afford even the rent, right now, only 10% can afford to buy houses and those are already owners or just corporates.
I highly recommend watching this video it goes into more details
Solutions? None will be taken by any government as none wants to piss off their voters, but it should be just like the Japanese model, a harsh, non-democratic approach will surely fix it, also, Canada has a lot of land but still owned by the crown, and there’s basically not much of construction workers either, plus banning anyone who’s not citizen or resident to buy houses, all of that should bring up some solutions.
If we can’t have a discussion without people accusing others of being racist or xenophobic instead of refuting their arguments with data and concrete analysis, then we can’t have a discussion at all.
And yes, the majority (and growing) in this case would be called racist and xenophobic, because they have not been shown a single fact that runs counter to their argument. Not even an attempt. And you know what? They’re probably right.
Similar units in the same building now sell for $1.2m.
This means that my family's wealth has increased by $75,000 per year just from owning our home. That's more than the median income in Canada!
I don't say this to gloat. I say this as an example of how badly wrong things are. Nothing about this is sustainable. If it continues for another decade, we can presume no young person today will ever be able to afford a home.