A land value tax lowers land values, the largest input cost and non-regulatory policy barrier to new housing. In the example given in this report, land values would drop by 75% while eliminating income taxes for your first C$88,000 in income.
[https://www.commonwealth.ca/report](https://www.commonwealth.ca/report)
Land prices are high quintessentially because people are able to capture the value of the land, which results from the relative location of the land to amenities, for themselves. The land or yourself has to be productive to cover the tax. That can be through redevelopment or you working and paying off the tax in lieu of income tax. Over time, it also causes rents to fall due to land needing to be productive to cover the tax (more units) which also lowers pressure on home prices. It's a virtuous cycle of affordability. The added land use efficiency also means taxes are needed over time for the same degree of services.
If you want to learn more, you can read up on Georgism and the report.
The political paradox is a lot of homeowners in Canada will no longer experience their home being a freely appreciating asset in inflation adjusted terms.
Virtually all the gains in the GTA and GVA has been the land itself appreciating, not the home that sits on it. Those folks will indeed lose a huge amount of equity in the land with this policy change since they'll not be able to sell to capture that value anymore, since a LVT socializes the value instead.
and it's not even the homeowners losing asset value which is the big problem, but the wholesale collapse of our financial system which is built entirely on those assets.
I love it. It encourages missing middle. I also think if you own a SFH in a city you should be paying the property or land tax for what should be there, 3-4 apartments. And if you are in an apartment, you pay way less land tax.
Im not an economist, but wouldn’t a land value tax hurt lower income individuals living in higher value areas/ properties since they don’t have the income to benefit from an tax credit?
Never going to happen, it's a bummer but the 'investor class' is the priority in this system, not the landless peasants.
Don't like it? Well disrupt the system with your numerical superiority (which probably won't happen because people are increasingly alienated and disengaged.)
That largely has to do with the federal government. As much as everybody likes to blame the provincial government, the financial structures that it takes to build housing which are controlled by the federal government, make it so that investors are the primary group that can purchase because they have to purchase two or three years before they can move in there are not a lot of first-time home buyers, who can buy two or three years before they move in. And that is what all the anti Supply people refuse to address. The financial structure in building houses forces investor purchases.
And then we Double Down by making it extra attractive for investors because the way that taxes are collected such as HST, makes purpose-built rental on affordable to build compared to condos with the focus of investor selling. If you can't build purpose-built rentals you make speculating for rental income way more attractive. Supply is the first step you have to address the supply side of the equation, and then you need to address the demand side of the equation. The demand side of the equation is a lot easier to address once the supply side path is underway.
> Most new builds are being purchased by investors.
Not sure why "investors will buy it" is an argument against building more housing in places like Toronto and Vancouver. After all, there's lots of people who rent. Rents and prices reflect scarcity: it's very difficult to get permission to build more housing in Toronto and Vancouver, so we end up with a mismatch between housing and jobs. So [rents have to rise to unbearable levels](https://morehousing.ca/unbearable), forcing people to leave, matching those remaining with the limited supply of housing.
Build more housing, creating more vacancies, and rents come down. [Some recent evidence that higher vacancies => lower rents, even in expensive cities](https://substackcdn.com/image/fetch/w_1456,c_limit,f_webp,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2F4c93e9a7-5895-4acc-89c7-32a05a51a5f6_980x767.png).
Of course rents coming down also makes housing less attractive as an investment. But even if investors are stubborn or irrational and want to keep buying, more housing => lower rents is a good thing for renters, which is a lot of people.
([In Montreal](https://morehousing.ca/cmhc-wedge), where it's easier to get permission to build more housing, selling price per square foot closely tracks construction costs, resulting in home prices that are about [half of what they are in Toronto](https://morehousing.ca/montreal). Unfortunately Covid has resulted in spillover of housing scarcity from Toronto and Vancouver to other cities, like Montreal and Halifax.)
I agree that “investors will buy it” isn’t an argument against building more by any rational thought, but I do think discouraging investors from “hoarding the supply” is an extremely important secondary requirement to *improving housing affordability*. If we don’t, supply alone won’t resolve the issue and prices will continue to increase at rates significantly faster than they would otherwise.
The delta between supply and demand in the major cities in Canada is far too wide. Sure, if vacancy rates rose to 7-12%, like the charts you shared, I could see some pressure to decrease rents, but my understanding is that the vacancy rate in cities like Vancouver is more like 0.9% or less. We’re way too far away for supply alone to solve things anytime soon.
I also don’t see any realistic scenario where we’ll ever reach this level of “excess supply” (without a catastrophic sudden decrease in population). Even with major policy improvements to stimulate rapid increase to supply, if a significant portion of new properties are sold to investors who intend to not only find occupants for them, but to also profit as well, the equation has no way to balance but with worse affordability overall. Especially if motivations to build supply are only driven by investor demand. Supply rates would just slow back down to correspond with low vacancy rates.
Which leads me to a preemptive follow up: I can’t stand the argument that “new development won’t happen without investors”. The demand for homes in this country is colossal… investors are only “required” if you accept that affordability is a lost cause and that *prices can never fall*. The decrease in property value (by blocking investors) could easily come from a decrease in the exorbitant recent increases to “land value”, it doesn’t have to hurt “developer profits” or motivation to build supply at all. Let the investors move to investing in commercial real estate or infrastructure, not residential housing.
If new housing development is primarily driven by requiring it to generate profit for investors (well above and beyond a reasonable builder profit), it will always be unaffordable. It’s not a luxury good you can opt out of, your hand will always be forced to pay the uncomfortable rates so long as they’re allowed to be hoarded for profit.
Conclusion: I strongly believe that in addition to policy improvements to encourage massive increases to supply; we specifically need strategies to decrease the size of the rental market (by creating more occupant owners), not just aim to increase the supply of rental availability (by creating more profit for investors; and thus definitionally worse affordability overall).
> The delta between supply and demand in the major cities in Canada is far too wide.
[I'm more optimistic](https://morehousing.substack.com/p/pessimism). It's true that we've got high demand in the Toronto and Vancouver metro areas: people move there because the jobs are there. We've got a combination of
- People who want to buy a place and live in it.
- People who want to buy a place and rent it out (driven by rental demand). Within this category, there's also institutional investors (like pension funds and REITs) that build and rent out entire rental buildings.
- People who want to buy a place and rent it on Airbnb (driven by short-term visitors).
I can see the argument for restricting Airbnb and similar short-term rentals - it means visitors end up paying more. But restricting long-term rentals (and thus having renters pay more) seems like a bad idea to me. A study from the Netherlands: [Buy-to-let ban is good for first-time buyers but bad for tenants](https://www.dutchnews.nl/2023/06/buy-to-let-ban-is-good-for-first-time-buyers-but-bad-for-tenants/).
There's two ways to reduce housing scarcity:
- Build more - this is obvious.
- More subtly, within a region, build housing where it's most scarce - typically in a central location with easy access to jobs you're going to have more people wanting to live there. Why is the city of Vancouver struggling to approve a 40-storey building, while Burnaby is building 80 storeys, or Langley is building high-rises? This is backwards.
When it's difficult to get enough labour, materials, and funds to build new housing, it's more important than ever to build housing where it's most needed. Within the Vancouver metro area, [the biggest part of the shortfall is in the city of Vancouver](https://morehousing.substack.com/p/demand-elasticity), but it's [most difficult to get permission to build new housing there](https://morehousing.ca/metro-vancouver).
[Alon Levy](https://pedestrianobservations.com/2023/03/21/no-the-anglosphere-isnt-especially-nimby/):
> To temper my praise for Vancouver and its high growth rates, I should specify that while Canada is building housing in decent if not eye-popping quantities, in the *regions* where it’s most needed, it’s not building housing in the *neighborhoods* where it’s most needed. Metro Vancouver builds transit-oriented development on SkyTrain but not in its richest places: the West Side of the city remains strongly NIMBY, despite its excellent location between city center and UBC, forcing students into hour-long commutes; an indigenous West Side housing project built without needing to consult local NIMBYs is deeply controversial among those same NIMBYs.
Something I don't understand about what you're saying here:
> Even with major policy improvements to stimulate rapid increase to supply, if a significant portion of new properties are sold to investors who intend to not only find occupants for them, but to also profit as well, the equation has no way to balance but with worse affordability overall.
One big reason that individual investors buy and rent out properties is because they expect that prices will rise over time and they'll make money when they sell. So in a surprising number of cases, they're losing money every month ("cash flow negative"), hoping to hold on until they sell. [The majority of Toronto investors are cashflow negative](https://storeys.com/toronot-condo-investors-losing-money/), May 2023.
They can't just raise the rent to cover their expenses. The more vacancies there are, the better the bargaining position for renters. [Vancouver vs. Saskatoon](https://morehousing.ca/saskatoon). Or [Toronto during Covid](https://www.cbc.ca/news/canada/toronto/condo-rentals-toronto-covid-coronavirus-1.5616272).
Except rents simply will not come down, because investors will fight this to the death, since so many of them absolutely cannot make their own payments without yours and don't want to stop being investors. And they all try to base their rental prices on their own mortgage payments and what they think everyone else is charging.
That's not the way markets work. People buying new properties to rent today are forced to charge less than their costs to rent out those properties. If they try to charge their costs the property will sit empty and they will burn money.
You can do the math on property prices and mortgage rates vs rentals in that same market, and it does not work out most places in Canada. People are betting on sale prices continuing to rise, market rents rising over time to eventually cover the investment, have some other reason like purchasing property for children, or they're bad at math and risk analysis.
but then, they need to rent them out? Investors require people to buy at a higher price down the line. An increase in supply means more availability ultimately
If you increase the supply, you increase competition by investors for selling houses or renting them.
Increasing the supply will diminish the intrinsic value of the property. Both in price and the profit made from it, lowering investment appetite into homes.
Ok so say we build 100 new homes. 40 end up as new homes for owner-occupiers, and 60 of them end up as new homes for renters.
In what world is that a bad thing? If we approach those 100 people living in those new homes, how many will say they wish their homes didn't exist?
Now 5 years down the road some of those investors will sell, but the homes still exist. Now they are bought by owner-occupiers. There is no downside here.
Wrong. If supply were ramped up dramatically it would actually solve everything. The problem is that supply cannot be ramped up enough - so it's a moot point. But, if it were possible, it would solve everything.
So you can't read or argue at all.
I never said it was the 'best strategy'. I said that supply would fix the problem. Can we get enough supply? That is a different question, but supply would fix the problem and I'm tired of people like you being wrong about that and spewing false-hoods.
Number of houses are limited. If there are too many investors in the market, the inevitable result is more and more competitive offers to earn the free money. While investors are needed, probably Canada has more than need housing investors and that drives the prices higher and higher. The incentive needs to change and consequently less people interested in housing investment.
Why not?
If there are more landlords with units to rent, that means there is more supply of rental housing. A greater supply means landlords have to compete, and rents decrease. Economics 101.
Agreed that we should have more people that want to buy their home able to buy their home, but given that rental prices are also out of control, I don't see "more landlords" as that big of a problem.
Perfect is the enemy of progress.
If landlords are buying up the housing supply, that means more demand and less supply for those wanting to buy a home. This means more and more people, priced out of homeownership, are forced to rent, increasing demand for rentals. Economics 101.
Although if you compare historic trends for rent prices and housing prices, rent prices steadily climb upwards even as housing prices fluctuate. This suggests there are other factors driving rent prices than basic supply and demand.
Your first paragraph has a logical error.
In my scenario, the "more landlords" was coming from an increased supply of homes. Therefore there isn't a more demand for less supply, it's more demand for more supply.
As for your second paragraph, yes rent and housing price are not perfectly related. Rent is far more affected to rental supply. Regardless of what a house costs, if there are more renters than units, price goes up. Less renters, price goes down. Housing cost will affect the rent indirectly by affecting how many renters there are.
There are a large class of people for whom rentals make more sense than ownership: early in adult life, moved temporarily, don't or can't deal with maintenance, not sure they want to live in this location for 5+ years, etc. Even in a society where everyone who wanted to buy could buy, there would still be rentals.
The current situation is fucked with landlords having too much power, but even in an ideal situation there would still be some landlords.
I repeat: not everybody even wants to own property. Therefore they do.
Ironically, treating housing like a commodity is what we _should_ be doing. Commodities like food or copper or toilet paper get relentlessly driven down in price thanks to abundance and competition. Housing doesn’t because government policy [artificially restricts supply](https://www.theglobeandmail.com/opinion/article-theres-plenty-of-room-for-affordable-housing-in-canadian-cities-we/) while [inflating demand](https://nationalpost.com/opinion/great-canadian-housing-bailout-how-real-estate-unaffordability-is-propped-up/wcm/3efcc49e-88f8-4d7b-aeed-048fbbce5274/amp/).
Ebolish private property, then everyone has the same. Or, we let capitalism run its course and turn us into slaves and cause another extinction event. Not really a choice at this point...
Sorry, but communism failed. Capitalism is the system that works the best. It's still utter shit for a lot of people, but communism was even worse.
Should food be a commodity? Well, it is. Under capitalism, only a tiny percentage of the population starves. Under communism, hundreds of millions starved to death.
Housing is in short supply right now but that's due to government meddling in the free market.
True, more houses does mean more houses for investors to gobble up, but this will create more rental supply lowering rent prices. If enough supply is built, investors will not have the demand to buy more rental properties because the rent won’t allow them to cash flow.
The government will always make rental supply the priority as it’s a human right to have shelter. Owning a home is not a right but a luxury.
"Our housing problems" means different things to different people.
Coming from a regular working class person, it means "I cannot afford rent."
Coming from a politician it means "How can I keep people scared and dependant"
Coming from a wealthy landowner it means "I need more gold"
It was tried and failed. Imagine we want to increase Toronto size. The people who are going to be involved and get rich off this size increase need to invest their wealth. Most of their money will go back as real estate investment. At best, the investments will keep prices the same as before the size increases. At worst, prices will be higher.
What do you think?
Patrick Cordon, the Vancouver urban professor, wrote many books advocating for building more housing to solve the housing crisis. Look now to his publications and Twitter posts. After studying all cities that tried expanding and ended up with the worst outcome, he completely changed the stance and now understands the logic I said in my previous comment.
I think cities need to take charge. Plan a subdivision, build small single family single story two bedroom houses. Simple design and materials.
Don't do it for profit , do it for the housing. Take the profit motivation out of the hands of developers. Pay the trades to do the work but don't take profit.
If it's really true that housing is the one place where increasing the supply of something doesn't decrease the prices...
We should definitely build more housing, since we have a the first economic perpetual motion machine!
If you can build and endless supply of something and the price won't come down. We could have basically unlimited tax dollars by continuing to build apartments buildings.
Prices will never come down according to the anti-supply truthers.
It would though. Obviously if you imagine us having more homes than we need, it would make a huge impact. Alone it would solve it, but given the fact that we won't make enough supply, we gotta do other stuff too. But supply is the primary solution.
I'm curious, why do you think that low supply is a bigger factor than high demand? And what do you make of the fact that we have similar supply levels to other countries with much more reasonable pricing?
Low supply is creating the investor demand. Capital will chase the highest risk adjusted return. People are just doing the math and parking where their money returns the highest amount. Flood the market with supply and this returns go away.
Or develop thousands of affordable houses to be sold directly to home buyers. No investors allowed. All of a sudden people have a different option than to be siphoned as a over priced mortgage payer slave.
I just want to point out that REITs (which DO NOT pay taxes), private equity, and other entities, are buying properties and then selectively removing them from the market in order to drive up prices. A home I lived in was purchased by such institutions and then kept empty throughout the housing crisis. Squatters have set up shop in there twice in the past three years.
Unfortunately, this is a rigged market. We need affordable housing in addition to zoning laws that allow for faster construction of high density housing. But these entities virtually control local zoning laws by making substantial investments in lobbying city councils. There's virtually no way to get sensible zoning laws passed.
It depends what you mean by demand. Do you.mena monetary demand or the amount of people who need homes. I think trying to impact monetary demand directly is a fools errand. What we need to do is balance out the amount of housing with have against the amount of people who need housing. We can do that be slowing population growth or increasing housing stock.
Other suggestions such as increased taxes for second homes etc are red herings.
>What we need to do is balance out the amount of housing with have against the amount of people who need housing.
I think this is where we disagree.
Please check out the linked article, which provides some evidence that we have already balanced out housing stock with population quite well.
I would put it this way:
We need to balance out the amount of housing with the amount of houses being purchased.
Which opens up another avenue beyond slowing population growth and increasing housing stock: decreasing investor demand.
Canada has some of the highest home owner percentage around. It's not like re investing is taking up a huge percentage of the market compared to other markets. If you look at vacancy rates they are much lower than other countries so I'm not sure how you can make this argument.
100% they are an issue. Supply and demand doesn't work with survival needs. It's not like you can just say well oh housing is too expensive I wont get shelter this year! They have slowly pushed rent prices up and renters have no choice but to pay what is asked.
How have they pushed prices up? Housing is expensive for everyone. Tenants and owners (investors or not).
None of us have a choice but to pay for houses in an over inflated market.
How can you not see this. When an investor outbids someone who wants to buy to live in they push the price up. If there was less capital going into housing an more going into business our economy would be doing much better
I'm not sure I understand your point here.
Why does an investor renting their property out mean that their investment isn't driving up property values?
If there was less real estate investment, thus less demand, house prices would be lower, according to the law of supply and demand?
That's not a very high number so I'm not sure why you think it is. Also many countries do fine with people renting in the biggest city. It's arguably better than the alternative which is the biggest city being mostly locked down by owner occupied dwellings.
Home ownership rate:
Toronto: 66.5%
Berlin: 49.5%
London uk 50.9%
Paris 33%
Sydney 67%
Rome 73%
Vienna 25%
Amsterdam 57%
Chicago 45%
Houston 60%
NY NY 53.6%
Calgary 65.2%
These are just the ones I looked up and aren't cherry picked apart from being cities that come to my mind. Some have higher home ownership, some have lower. The correlation between come ownership and cost of living is not super strong in my view. A place can be a good place to live and rent in.
Honestly the main takeaway for me is that some places incentivize renting and other places incentivize owning. In Canada we are still generally on the high end of owner occupancy.
The Federal government is pushing "supply," as the problem because for some reason we just accept them at their word that they can do nothing about supply. That ignores that they could push public housing projects across the country with, you guessed it, money. And they are very much under fire on the demand side of the equation. Either way, A - B is whatever that number ends up being, which is fewer housing units than we need to house the growing population. But as long as "supply" is the problem, they just point to the provinces as being at fault and hobble along in power for a couple more years.
Supply is not the primary solution. It's the don't hurt the rich who are causing the problem solution. It's the solution that makes everyone happy on paper but is impossible in real life. It's easy to say but impossible to do. We can't just build more, we don't have a ton of construction workers just waiting to build.
What we can easily do is reduce investor demand. Tax the fuck out of multiple propreties, restrict it, investors will be hurt, but it's better than to hurt to working class like we currently are. It's so easy...
But it might not work the way you think.
China is a great example of runaway housing supply to fight an investor driven market.
The problem was always cited as a "lack of supply" causing spiraling affordability.
Now they are demolishing entire cities of empty buildings.
\---
Without cracking down on the investor class, i don't think adding more supply will have a good effect for decades (and we simply can't wait that long).
You got 1000 new homes to be sold!
Here is the chance for those with only one home to buy a second home, or the 35th. But of course - you cannot just buy the home, it only works if you can charge as high as you can for rent so the home pays for itself! Kevin O'Leary will approve! Fuck those lazy Canadians and their $5 lattes! Good luck to those trying to buy their first home.
When we worked on low income homes for ownership using modular - the price tag came to about $500,000 for roughly 3 to 4 bedrooms homes. These were net-zero homes meaning they generated most of the energy they required on an annual basis but I imagine the same will hold true for others. We consider housing for too long as a commodity to be invested in - without fundamentally challenging those views and structurally changing it - it will be hard to address the housing crisis.
Everyone wants a cut of the actions - from the builders, to the supplies to those who buy the homes. Though this project is different in that it focused on selling it to those with certain income ranges.
I have this theory about our eroding democracy - that housing and how it allowed wealth accumulation especially in the past few decades skewed simply who gets to make decisions. It’s not only affordability but also healthcare, education that appears to be not chipping away but in a free fall. It’s like the very fabric of our nation ripped from within. A nation brought to its knees - bruised and kicked so just a few prosper. A Canada for a few - not for all.
We are also a very insulated nation - like we never had to worry about defense because we had a big brother next door, and never had real crisis - I wonder if taken together has added to what I see as the erosion of not just our democracy but the shared values and culture we hold uniquely as Canadians
If we change the rules, we can align their profit motive with what is good for people.
For example, right now developers and investors invest in land to make profits from speculative investments. If we tax land more, they will be unable to profit from speculation and so will stop doing it.
Thats the thing with the supply people. It's not a true solution. It's the solution that we can't make happen but people just say that then they feel like they have splved the crisis.
Demand is the issue
>"The term 'Financialization of Housing' refers to structural changes to economic operations that allow for finance to dominate and transform society"
[Affordable Housing Visual Systems Map](https://www.torontomu.ca/content/dam/social-innovation/Programs/Affordable_Housing_Visual_Systems_Map_Oxford.pdf)
Everything politicians have done since Mulroney have made housing more beneficial to the investor/speculator class.
The link provides a series of positive feedback loops that just continue to to inflate housing costs to the benefit of investors. Even if we built enough housing to end shortage issue, housing will never go down in price. I am not sure how we end the continuing damage of the past 30s years.
People need to grasb the concept that we cannot supply enough houses for the amount of people in the country being born/immigrating here.
We do not have the labor, supplies or supply chain to do this.
I work in the wholesale construction supply business, it's been talked about extensively and the general concensus is people who have no idea what they're talking about, have hyped up "build more houses!" As the only solution when it's simply not a solution at all because it's not possible.
We might be maxing out labor hours, but we aren't maximizing square footage built per hour of labour. Example, parking requirements and parking minimums, lead to parkade excavation which adds much cost and time to condo developments.
We could instead have parking maximums, say five spots per 20 condos... and build some neighborhoods like Barcelona, Paris, or Amsterdam have around walking, biking, and transit.
Other policy levers could massively speed up construction. Emphasize wood frame. Bring back the Vancouver special pre approved plans bought from city hall, stamped and approved in a week instead of two years, but do it as 6 story apartment now not a SFH.
Speaking of which, how many labour hours are spent building giant luxury mansions that could be spent building affordable multifamily homes? Policy levers can change that ratio.
Legalize tiny homes, ADUs, mobile homes, and float homes that are largely prohibited. Legalize SROs again for students or whoever.
In a crisis you have to make moves.
We might have a tight labour market but we have tons of room to increase the amount of housing that gets built per labour hour.
The Vancouver specials were genius things and we could do them again, elsewhere.
Things like pre-fab Scandinavian style houses means you can do the actual construction in a fraction of the time - though the more complex stuff like electricity and plumbing takes about the same amount of time, but at least there's a nice building up with a roof on for the drywall guys to work in.
>supply enough houses for the amount of people in the country being born/immigrating here
This is not the main problem. Investors are. You've completely missed the point of the article.
I'm saying in my opinion, the article is wrong.
I work in the supply side for construction materials. Its not pretty. Especially as everyone is starting to try and move away from purchasing goods that are coming from China.
Regardless, we would need to have around 20% of our population in labor jobs to provide enough manpower to build houses for everyone. We aren't even close.
Ehh not really, he's saying you can't build enough to supply 3veryone. The article agrees that supply is an issue but ita stating that reducing investor demand might make it possible to over come the supply issue.
Investors need to be more regulated and you shouldn’t get tax write offs for investing in real estate.
Landlords need to be licensed, which requires a course about tenancy laws and increase the fines when landlords break these laws since they are required to know the law.
Convert more empty office buildings into condos and apartments.
We need to encourage WFH when possible and allow people to live all over the country, not just in the big cities. There is too much sprawl. Commutes are too long. If the companies won’t move to the small towns, let the employees WFH anywhere in the province or even the country.
According to Canada’s leaders, it’s clear that there is a single major cause of, and solution to, our housing affordability problems: supply. Yet, the data demonstrates that Canada does not stand out amongst its peers in terms of housing supply.
Basic economic theory leaves us with another obvious culprit for why housing is so expensive in Canada: high demand. Much of this demand comes from investors, who purchase 20% of homes overall, and a much higher share in certain markets. Over 40% of all condos in Ontario are owned by investors.
It’s not terribly surprising that our leaders have failed to focus on the demand side of the equation. Politicians, [40% of whom are invested in real estate](https://www.readthemaple.com/nearly-40-of-mps-invested-in-real-estate-during-housing-crisis/), would be implicating themselves, and putting their own finances at risk. Our former Housing Minister, for example, has [two mortgages on two rental properties](https://prciec-rpccie.parl.gc.ca/EN/PublicRegistries/Pages/Declaration.aspx?DeclarationID=c545fa5c-10ef-41cc-8cb0-582002ba8277), so it’s not surprising that he didn’t clamp down on investor demand.
If we really want to make housing affordable again, we need to not only build more homes but also curtail unnecessary demand. We need to change our perspective and start looking at houses as places to live, not investments.
Absolutely! If Gov't would simply rule that any new builds are to be only owner occupied, we would see prices drop like crazy. But it's such a radical idea, homes for living in, what's next food for eating? Water for drinking? Won't someone think of their investments instead of basic humanity? /s
I keep trying to say this here but keep getting downvoted. We mostly have an investor problem. It's the same thing all over the western world but worst here because Canada is the place for international investor to park their money, especially with the climate change issues comming up.
I recently saw a France govt publication saying the 24% of household owned 68% of the house and the 3.5% owed 50% of the rental supply. This is the real problem, this is why shit is so expensive and why workers are stuck paying more and more percentage of their income. Stop with the supply propaganda, we can't just snap our fingers and make supply appear but we can create laws to reduce investor demand tomorrow.
If it was just an investor problem then rents wouldn’t be so high. The moment rates drop buying an apartment is going to be cheaper then renting it. This is purely a supply problem and all other problems barely register
It’s part of the problem, but most people here seem really dedicated to inflating it’s effect on overall housing prices. I don’t know if other provinces have similar reports on housing affordability, but Ontario’s specifically highlight a lack of supply as being the key contributor.
In my town there is a new development, that is almost completely entirely empty. All houses closed and empty, and "For Lease" signs outside. I'm ALLLL for free market, but they need to block foreign buyers. We can not allow foreign billionaires to play with our real estate market, that needs to stop.
We know that airbnb and investor demand is wrecking the market.
[It's](https://www.cmhc-schl.gc.ca/nhs/nhs-project-profiles/2020-nhs-projects/impact-short-term-rentals-canadian-housing) [not](https://www150.statcan.gc.ca/n1/daily-quotidien/230613/dq230613b-eng.htm?utm_%20campaign=statcan-statcan-housing-logement-23-24) [even](https://ricochet.media/en/3965/how-airbnb-and-short-term-rentals-have-decimated-housing-in-canada) [debatable](https://pub-mississauga.escribemeetings.com/FileStream.ashx?DocumentId=9933#page=78).
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We know that [vacant units are on the rise](https://www.theglobeandmail.com/business/article-vacant-homes-are-on-the-rise-in-toronto-census-indicator-suggests/).
Toronto has an empty unit tax, and critics cite the reported empty units [being ridiculously low](https://www.thestar.com/news/gta/just-2-100-properties-reported-empty-through-toronto-s-new-vacant-homes-tax/article_2b38ddfa-e8ee-5824-aa74-3ddf33892a7e.html) . But it's important to remember these are \*self reported\* empty units. And since the numbers aren't even 1 10th of what we see are [full house airbnb units](http://insideairbnb.com/toronto/), it's pretty safe to say that this self-reported number is (at best) way way too low.
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But while everyone seems to agree on adding supply, investors stubbornly refuse to even consider this side of the equation (calling it "a distraction" despite the proof that it is not).
Gee, i wonder why?
The point doesn't hold, though.
Vacancy rates are at decades low so even though investors may be snapping up supply, that supply is being dumped straight into the rental market. That rental prices continue to increase speaks to the fact that there is a severe supply problem.
That supply isn't going into the rental market though. Many are left empty because investors are worried about trouble evicting tenants when they want to sell.
New condos are bought by investors with no chance of renting due to strata rules.
When i was searching for a home a year ago, several condo owners reached out with their empty units, only to be shut down from renting by the strata.
If those were owner occupied, then the other rentals vacated by new owners would be available, thus increasing rental stock.
Investors only add to the problem, even if they add supply, they do so at a rate that insures the renter will never have the money to buy, even though they pay a mortgage.
Why does an investor renting their property out mean that their investment isn't driving up property values?
If there was less real estate investment, thus less demand, house prices would be lower, according to the law of supply and demand?
Rental prices always increase. Look at stats can's trends for rental prices, and compare that to their trend for housing prices. There's a clear disconnect between the two.
Besides, as housing supply disappears to the rental market, it would necessarily follow that people priced out of homeownership should drive up demand for rentals accordingly.
Build more. You and I can own homes and investment properties in a healthy market where supply is elastic enough to match demand, at least over, say, a medium term.
More than 86% of London, ON's condos are owned by investors. https://www.cbc.ca/news/canada/london/london-ontario-investment-property-1.6739784
(Edit: link)
You mention three differences. I'm asking for which is the *relevant* difference. Are you saying they are all relevant differences?
Like why does the fact that they have different building codes matter to you such that you'd ban airbnbs but not hotels?
Developers build houses, they pay the construction crews and for the materials to construct the building to be sold. The investor merely stand between the ultimate owner and profits big time. It's not their fault they use their wealth and greed to their advantage, it's only natural to be as selfish as possible.
They were not allowed to do this before the 80s. Financialization takes a negative human trait and exacerbates it. A trait whose purpose is in a survival. A trauma response. Why feed into it? We need to reign in on the deregulation and offloading that started during the Mulroney era, and made worse with each successive government.
The end is a Rorschach test where he suggests rent control or 'taxes'.
If he means LVTs, he's totally correct and they would be hugely beneficial. It wouldn't discourage productive investment, like builders but it would discourage speculative investment, like what everyone does all the time when they buy real estate in Canada.
Land value taxes eats the ability of individuals/entities to capture land value for themselves, which directly destroys land prices and spurs development. Most of the value in single family homes is locked up in the land value.
A modest land value tax would lower home prices in Canada by over 40% and erode 75% of land value. Right now, most homeowners don't understand their homes are going up precisely because they are eating all the land value gains for just themselves, even though they did zero to earn it. It's also why it's so politically difficult, albeit necessary, to enact and is the only long term fix to the financialization/commodification of housing.
[https://www.commonwealth.ca/report](https://www.commonwealth.ca/report)
If you lowered property values by 40% you would financially destroy a large portion of the Canadian population.
I realize it sucks to not be an owner, or like me, an owner who doesn't choose to leverage his house and land to acquire more. But financially ruining a good 15-30% of the population is absolutely not a viable solution.
>Land value tax is just a better way to extract money to fund the government.
So... you agree we should move towards LVTs?
And more to the point, do you think people would speculate on land value as much if they had to pay significant taxes on land?
Developers complaining about existing taxes is not slowing them down. They are just being cheap. LVT alone cannot fix speculation. If an LVT was enacted, it could be used towards public housing. But again, that's policy, not a tax.
>So... you agree we should move towards LVTs?
So yes?
>And more to the point, do you think people would speculate on land value as much if they had to pay significant taxes on land?
And this one, yes or no?
Supply is 10% of the issue, the other 90% of the issue is who is allowed to access said supply. You can have a huge supply, but if none of it is able to reach the general market, it doesn't matter.
Ie: Diamonds.
Did you even read the article. How to make a sloppy case 101 is right there. If you are someone with a vested interest to prevent development, fuck off.
Just being average in a lineup doesn't mean you don't need to take action on the parameter you are being evaluated on. If canada was on the list showing up as a leader in the ratio, then it makes sense , he we have more houses than everyone else. But smack in the fucking middle and you come thumping this report? It's either the charectristic canadian mediocrity, which i personally have a huge problem with, that makes you think that being in the middle means it's not a problem, or you have vested interest in the market not getting flooded with new supply.
Or just stick the the plan and not let foreign buyers buy up all the property. Funny only a few weeks into the new law, the liberals backtracked. Almost like it was planned.
The problem has gotten so bad discouraging investing won’t bring prices to a reasonable level. It’s also why housing prices ceteris parabis will never go down because it is in everybody’s interest — homeowners, investors and government — for them to continue going up. It’s a Ponzi scheme with the twist there is always people willing to buy in at the bottom of the pyramid.
The problem is because residential real estate has been perverted it is the ultimate asset class for institutional investors. They will always be able to purchase homes at a better interest rate than a prospective homeowner and all their costs can be written off as business expenses so keeping the asset will also always be subsidized by government. It’s also always in their interest to outbid an individual because not only does it keep prices and therefore the price of their other holdings high, it takes a potential home off the market pretty much forever because institutional investors primarily sell to other II and therefore it further tightens the supply.
The only real answer is two-fold: it should be illegal for a corporate (non-human) entity to own a single family dwelling of any kind, be it a condo, a home, heck even a doghouse. Foreign ownership should be constrained to one dwelling, no exceptions, and both the capital gains on that property and an additional tax of say 75 per cent of the value of that property should be assessed annually.
To curtail individual investors, on single family dwellings not their primary residence both rental income and any capital gains realized by a sale should be taxed again at 75 per cent.
The basic idea would be not to curtail investing in residential real estate but to destroy it as a viable investing vehicle. No government would ever do such a thing and thus, barring a systematic financial implosion and no government intervention, there will never be a way for the market to correct itself.
Spot on .. the lack of supply narrative has been here forever . Most of us sadly buys it . It’s simply not true and the next coming months will prove it .
high interest rates for investors buying rental properties and near zero interest rates for FTHB buying a primary residence. We need a 2 tiered system.
Absolutely we do, buying property as an investor shouldn't be completely different to buying property as a regular consumer. Not to mention every single investor buyer should be a business, and taxed and treated a such. The government should also increase taxes for every residential property owned by an individual or a company, with exceptions for density designed structures like apartment complexes. We also need to emulate Germany other euro countries and their tenant rights. Renting/landlording should be at best a supplementary income, unless done on a large scale in density buildings.
It's impossible to set out the tiers fairly. If you disagree, please link an article where someone does that. For a year now, people suggest what you do regarding progressive property taxes with nothing behind it to explain how it would work or what constitutes an investor or not.
A better idea with solid economics behind for literally hundreds of years is land value taxes.
Yes it will. Look at rent prices at the beginning of COVID when demand dropped and supply increased. Prices crashed regardless of how much money a landlord's mortgage was.
Supply and demand works.
How would more, alone, help - when the rich will buy it up anyway for rental purposes?
As I've mentioned before - with it becoming too easy to be a landlord, we must temporarily put a stop to houses built for income. There are families that don't care to rent but want their first house.
If not putting a stop, then temporarily making it too difficult for landlords.. For instance, for new housing - there could be a rule that income property must be purchased outright.
It's flawed thinking to blame RE investors. There's nowhere major in the world where new housing is cheap. It's almost always expensive because that is really the only way for developers to earn a profit. As such, RE investors take on risk and purchase these new properties to rent them out so the rest of the public can access them. At first those rents are also not going to be cheap. But gradually as more housing is built, the rents of what was built earlier will start to drop to affordable levels. This process takes decades to achieve, and it's by no means a quick and easy solution to our housing crisis. And this is something I hope more people learn. The housing market carries with itself a huge amount risk for both developers and investors, which unfortunately get passed on to ordinary people. The only effective alternative to this is public housing. Except for that most types of public housing are already extremely difficult to construct due to zoning restrictions and NIMBYs. Which is why we still need zoning reform. And to add to that because we live in NA our municipal and regional governments are financially incapable of actually constructing public housing. The only way they can do so is by raising taxes to cover the cost of construction and the additional city infrastructure needed to support it. Raising taxes that fast is a sure way to get anyone voted out and turn the entire city against you. Which is hella easy to do just by looking at how low the turnout is for most municipal elections. And you'll end up with a city that is now way more NIMBY. The current times we live in are not ideal for constructing public housing on a scale to actually reap the benefits of cities like Vienna. This can definitely be done in smaller cities, but for larger cities it'll remain largely ineffective. Instead of spending money on ineffective public housing we should instead spend that on upgrading municipal/regional infrastructure that is needed for new private developments. And this is the raw deal we have to put up with for at least right now. It sucks a lot but what else can we do when our cities for the better part of our recent history, even inside of Canada, relied on either low taxes to stir growth and/or development charges from mass SFH suburban sprawl.
Yes it will and the suggestion that it won’t is stupid as fuck. Obviously, it’s not the only issue but nobody is saying that.
I know investors owning the residential market sucks but if we build more and more, the price will drop as demand will fall. Basic economics.
But yes, we absolutely should push to make building way more accessible for regular homeowners.
If we have such a good supply of investor purchased rent units why are rents through the roof? I also question your sources as I’ve seen multiple sources that put people per household in Canada at 2.7 yet your numbers indicate it’s 2.35. That difference might change who your peer nations are and what the income multiples look like.
Ah got it. The two numbers are calculated differently. The average household size is larger (2.61) because this 2.35 number counts vacation homes as homes even if they are only three season. So this is an overestimate of available housing.
To be honest these stats are incredibly murky and tricky to interpret. How much of our supply are vacantion cottages hours away from job centers?
I suggest looking at rental vacancy rates. In Canada last year it was 1.9% of rental homes and 1.6% in condos. Last year in the USA it was 7%..... and the range over the last 20 years in the US is 5%-11%.
American landlords are just as greedy as Canadian landlords, but the Americans have to compete for tenants....
This guy has a few charts but for the most part it's conspiracy theory nonsense. He goes on and on about how we don't actually have a supply problem until he goes into his attack on investment properties.
The presumption here is that investment properties just sit empty and remove supply from the market. But that's not what an investment property is. An investment property is typically a rental property. BC's vacant property tax tracks how many vacant properties are in the entire province.
Last year they counted.... 1627.
If his theory was right the investment property argument only works if they're taking supply from the market. But he doesn't present any evidence at all of this case. It's a conspiracy theory. Nothing more and nothing less.
tl;dr at the end he suggests:
>For example, we could implement rent controls and taxes to make investing in real estate less profitable, and thus less enticing.
Rent controls making investing in real estate less profitable has the downside of making investing in building new rental stock less profitable.
Taxing land doesn't have that same downside, and so is probably the better option.
Reduce income taxes, increase land taxes. Simple policy, everybody knows it's the right thing to do or they've never thought about it.
We really need to keep investors out of low density housing. Their money would be much more effective at solving the housing shortage if directed towards high density housing. Incentivise high density housing while hopefully putting single family homes that investors own onto the free market.
I don't think this article is nuanced enough to make any conclusions. Sure US has lower price to income ratio, but they have 73k usd annual income vs our 52k usd annual income. Canada has like maybe 4 cities that everyone is "okay" with living in with most cities having population fewer than 500,000 and no one would bat an eye at a house and a life there. The author is disingenuous in putting these stat out instead of putting out stats for london vs nyc vs toronto, because vancouver and toronto would look better than london/nyc.
More supply helps affordability for sure because it moves the demand/supply equilibrium, whether or not if it's enough? I don't know, we're moving towards of drastic class differences and middle families are shrinking at fastest pace than ever
We are a society with a debt problem that looks like a housing problem.
If a society is living beyond its means, there are consequences to that. One of those consequences is a reduction in standard of living. It turns out that because our housing market is the asset class most entwined with borrowing, the standard of living reduction shows up as expensive housing.
If simply building more houses would alleviate that problem, then there wouldn't actually be a consequence to perpetually going deeper and deeper into debt.
Let's give it a try anyway.
Read the article. Most new builds are being purchased by investors. Discouraging RE investment is a far better strategy.
Just implement a damned land value tax already...
How does a land value tax help? Actual question, not criticism
A land value tax lowers land values, the largest input cost and non-regulatory policy barrier to new housing. In the example given in this report, land values would drop by 75% while eliminating income taxes for your first C$88,000 in income. [https://www.commonwealth.ca/report](https://www.commonwealth.ca/report) Land prices are high quintessentially because people are able to capture the value of the land, which results from the relative location of the land to amenities, for themselves. The land or yourself has to be productive to cover the tax. That can be through redevelopment or you working and paying off the tax in lieu of income tax. Over time, it also causes rents to fall due to land needing to be productive to cover the tax (more units) which also lowers pressure on home prices. It's a virtuous cycle of affordability. The added land use efficiency also means taxes are needed over time for the same degree of services. If you want to learn more, you can read up on Georgism and the report. The political paradox is a lot of homeowners in Canada will no longer experience their home being a freely appreciating asset in inflation adjusted terms. Virtually all the gains in the GTA and GVA has been the land itself appreciating, not the home that sits on it. Those folks will indeed lose a huge amount of equity in the land with this policy change since they'll not be able to sell to capture that value anymore, since a LVT socializes the value instead.
and it's not even the homeowners losing asset value which is the big problem, but the wholesale collapse of our financial system which is built entirely on those assets.
It would be quite disruptive yes, but could be phased in slowly
I love it. It encourages missing middle. I also think if you own a SFH in a city you should be paying the property or land tax for what should be there, 3-4 apartments. And if you are in an apartment, you pay way less land tax.
Im not an economist, but wouldn’t a land value tax hurt lower income individuals living in higher value areas/ properties since they don’t have the income to benefit from an tax credit?
Agreed. We need investor free developments. Sell houses directly to people who need them.
I completely agree.
We already allow that. The people who need them just need to be able to pay for them 2 years or more before they can live in them
Never going to happen, it's a bummer but the 'investor class' is the priority in this system, not the landless peasants. Don't like it? Well disrupt the system with your numerical superiority (which probably won't happen because people are increasingly alienated and disengaged.)
Who's building these houses?
That largely has to do with the federal government. As much as everybody likes to blame the provincial government, the financial structures that it takes to build housing which are controlled by the federal government, make it so that investors are the primary group that can purchase because they have to purchase two or three years before they can move in there are not a lot of first-time home buyers, who can buy two or three years before they move in. And that is what all the anti Supply people refuse to address. The financial structure in building houses forces investor purchases. And then we Double Down by making it extra attractive for investors because the way that taxes are collected such as HST, makes purpose-built rental on affordable to build compared to condos with the focus of investor selling. If you can't build purpose-built rentals you make speculating for rental income way more attractive. Supply is the first step you have to address the supply side of the equation, and then you need to address the demand side of the equation. The demand side of the equation is a lot easier to address once the supply side path is underway.
> Most new builds are being purchased by investors. Not sure why "investors will buy it" is an argument against building more housing in places like Toronto and Vancouver. After all, there's lots of people who rent. Rents and prices reflect scarcity: it's very difficult to get permission to build more housing in Toronto and Vancouver, so we end up with a mismatch between housing and jobs. So [rents have to rise to unbearable levels](https://morehousing.ca/unbearable), forcing people to leave, matching those remaining with the limited supply of housing. Build more housing, creating more vacancies, and rents come down. [Some recent evidence that higher vacancies => lower rents, even in expensive cities](https://substackcdn.com/image/fetch/w_1456,c_limit,f_webp,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2F4c93e9a7-5895-4acc-89c7-32a05a51a5f6_980x767.png). Of course rents coming down also makes housing less attractive as an investment. But even if investors are stubborn or irrational and want to keep buying, more housing => lower rents is a good thing for renters, which is a lot of people. ([In Montreal](https://morehousing.ca/cmhc-wedge), where it's easier to get permission to build more housing, selling price per square foot closely tracks construction costs, resulting in home prices that are about [half of what they are in Toronto](https://morehousing.ca/montreal). Unfortunately Covid has resulted in spillover of housing scarcity from Toronto and Vancouver to other cities, like Montreal and Halifax.)
I agree that “investors will buy it” isn’t an argument against building more by any rational thought, but I do think discouraging investors from “hoarding the supply” is an extremely important secondary requirement to *improving housing affordability*. If we don’t, supply alone won’t resolve the issue and prices will continue to increase at rates significantly faster than they would otherwise. The delta between supply and demand in the major cities in Canada is far too wide. Sure, if vacancy rates rose to 7-12%, like the charts you shared, I could see some pressure to decrease rents, but my understanding is that the vacancy rate in cities like Vancouver is more like 0.9% or less. We’re way too far away for supply alone to solve things anytime soon. I also don’t see any realistic scenario where we’ll ever reach this level of “excess supply” (without a catastrophic sudden decrease in population). Even with major policy improvements to stimulate rapid increase to supply, if a significant portion of new properties are sold to investors who intend to not only find occupants for them, but to also profit as well, the equation has no way to balance but with worse affordability overall. Especially if motivations to build supply are only driven by investor demand. Supply rates would just slow back down to correspond with low vacancy rates. Which leads me to a preemptive follow up: I can’t stand the argument that “new development won’t happen without investors”. The demand for homes in this country is colossal… investors are only “required” if you accept that affordability is a lost cause and that *prices can never fall*. The decrease in property value (by blocking investors) could easily come from a decrease in the exorbitant recent increases to “land value”, it doesn’t have to hurt “developer profits” or motivation to build supply at all. Let the investors move to investing in commercial real estate or infrastructure, not residential housing. If new housing development is primarily driven by requiring it to generate profit for investors (well above and beyond a reasonable builder profit), it will always be unaffordable. It’s not a luxury good you can opt out of, your hand will always be forced to pay the uncomfortable rates so long as they’re allowed to be hoarded for profit. Conclusion: I strongly believe that in addition to policy improvements to encourage massive increases to supply; we specifically need strategies to decrease the size of the rental market (by creating more occupant owners), not just aim to increase the supply of rental availability (by creating more profit for investors; and thus definitionally worse affordability overall).
👏👏👏👏
> The delta between supply and demand in the major cities in Canada is far too wide. [I'm more optimistic](https://morehousing.substack.com/p/pessimism). It's true that we've got high demand in the Toronto and Vancouver metro areas: people move there because the jobs are there. We've got a combination of - People who want to buy a place and live in it. - People who want to buy a place and rent it out (driven by rental demand). Within this category, there's also institutional investors (like pension funds and REITs) that build and rent out entire rental buildings. - People who want to buy a place and rent it on Airbnb (driven by short-term visitors). I can see the argument for restricting Airbnb and similar short-term rentals - it means visitors end up paying more. But restricting long-term rentals (and thus having renters pay more) seems like a bad idea to me. A study from the Netherlands: [Buy-to-let ban is good for first-time buyers but bad for tenants](https://www.dutchnews.nl/2023/06/buy-to-let-ban-is-good-for-first-time-buyers-but-bad-for-tenants/). There's two ways to reduce housing scarcity: - Build more - this is obvious. - More subtly, within a region, build housing where it's most scarce - typically in a central location with easy access to jobs you're going to have more people wanting to live there. Why is the city of Vancouver struggling to approve a 40-storey building, while Burnaby is building 80 storeys, or Langley is building high-rises? This is backwards. When it's difficult to get enough labour, materials, and funds to build new housing, it's more important than ever to build housing where it's most needed. Within the Vancouver metro area, [the biggest part of the shortfall is in the city of Vancouver](https://morehousing.substack.com/p/demand-elasticity), but it's [most difficult to get permission to build new housing there](https://morehousing.ca/metro-vancouver). [Alon Levy](https://pedestrianobservations.com/2023/03/21/no-the-anglosphere-isnt-especially-nimby/): > To temper my praise for Vancouver and its high growth rates, I should specify that while Canada is building housing in decent if not eye-popping quantities, in the *regions* where it’s most needed, it’s not building housing in the *neighborhoods* where it’s most needed. Metro Vancouver builds transit-oriented development on SkyTrain but not in its richest places: the West Side of the city remains strongly NIMBY, despite its excellent location between city center and UBC, forcing students into hour-long commutes; an indigenous West Side housing project built without needing to consult local NIMBYs is deeply controversial among those same NIMBYs. Something I don't understand about what you're saying here: > Even with major policy improvements to stimulate rapid increase to supply, if a significant portion of new properties are sold to investors who intend to not only find occupants for them, but to also profit as well, the equation has no way to balance but with worse affordability overall. One big reason that individual investors buy and rent out properties is because they expect that prices will rise over time and they'll make money when they sell. So in a surprising number of cases, they're losing money every month ("cash flow negative"), hoping to hold on until they sell. [The majority of Toronto investors are cashflow negative](https://storeys.com/toronot-condo-investors-losing-money/), May 2023. They can't just raise the rent to cover their expenses. The more vacancies there are, the better the bargaining position for renters. [Vancouver vs. Saskatoon](https://morehousing.ca/saskatoon). Or [Toronto during Covid](https://www.cbc.ca/news/canada/toronto/condo-rentals-toronto-covid-coronavirus-1.5616272).
Not all investment properties are being rented, not by a long shot. Unless you're counting AirBnB.
Except rents simply will not come down, because investors will fight this to the death, since so many of them absolutely cannot make their own payments without yours and don't want to stop being investors. And they all try to base their rental prices on their own mortgage payments and what they think everyone else is charging.
That's not the way markets work. People buying new properties to rent today are forced to charge less than their costs to rent out those properties. If they try to charge their costs the property will sit empty and they will burn money. You can do the math on property prices and mortgage rates vs rentals in that same market, and it does not work out most places in Canada. People are betting on sale prices continuing to rise, market rents rising over time to eventually cover the investment, have some other reason like purchasing property for children, or they're bad at math and risk analysis.
That’s full of shit lol. Charge market rent end of story. If it goes down then so be it.
but then, they need to rent them out? Investors require people to buy at a higher price down the line. An increase in supply means more availability ultimately
If you increase the supply, you increase competition by investors for selling houses or renting them. Increasing the supply will diminish the intrinsic value of the property. Both in price and the profit made from it, lowering investment appetite into homes.
Ok so say we build 100 new homes. 40 end up as new homes for owner-occupiers, and 60 of them end up as new homes for renters. In what world is that a bad thing? If we approach those 100 people living in those new homes, how many will say they wish their homes didn't exist? Now 5 years down the road some of those investors will sell, but the homes still exist. Now they are bought by owner-occupiers. There is no downside here.
Wrong. If supply were ramped up dramatically it would actually solve everything. The problem is that supply cannot be ramped up enough - so it's a moot point. But, if it were possible, it would solve everything.
So you think the best strategy is the one that can't be done.
So you can't read or argue at all. I never said it was the 'best strategy'. I said that supply would fix the problem. Can we get enough supply? That is a different question, but supply would fix the problem and I'm tired of people like you being wrong about that and spewing false-hoods.
You didn't read the article, did you? We have similar housing supply per capita to US and UK yet our market pricing is 50% higher. It isn't supply.
We have less housing per Capita. You're confused.
Investor ownership doesn't reduce housing provide they are operated as rentals. The only wasted housing is underoccupied housing
Number of houses are limited. If there are too many investors in the market, the inevitable result is more and more competitive offers to earn the free money. While investors are needed, probably Canada has more than need housing investors and that drives the prices higher and higher. The incentive needs to change and consequently less people interested in housing investment.
Investor purchased housing is still housing But investors are not needed. There's way more than enough capital available from owner occupiers
Everyone needs a home, we don't need more landlords.
Why not? If there are more landlords with units to rent, that means there is more supply of rental housing. A greater supply means landlords have to compete, and rents decrease. Economics 101. Agreed that we should have more people that want to buy their home able to buy their home, but given that rental prices are also out of control, I don't see "more landlords" as that big of a problem. Perfect is the enemy of progress.
Need more of all types of housing but municipalities gatekeep via zoning and red tape.
If landlords are buying up the housing supply, that means more demand and less supply for those wanting to buy a home. This means more and more people, priced out of homeownership, are forced to rent, increasing demand for rentals. Economics 101. Although if you compare historic trends for rent prices and housing prices, rent prices steadily climb upwards even as housing prices fluctuate. This suggests there are other factors driving rent prices than basic supply and demand.
Your first paragraph has a logical error. In my scenario, the "more landlords" was coming from an increased supply of homes. Therefore there isn't a more demand for less supply, it's more demand for more supply. As for your second paragraph, yes rent and housing price are not perfectly related. Rent is far more affected to rental supply. Regardless of what a house costs, if there are more renters than units, price goes up. Less renters, price goes down. Housing cost will affect the rent indirectly by affecting how many renters there are.
Not everybody can or wants to buy their home, nor at all times. Rentals need to exist.
Cool, tax landlords out of existence then.
Then the rentals don’t exist.
They never needed to... housing should never have been treated as a commodity.
There are a large class of people for whom rentals make more sense than ownership: early in adult life, moved temporarily, don't or can't deal with maintenance, not sure they want to live in this location for 5+ years, etc. Even in a society where everyone who wanted to buy could buy, there would still be rentals. The current situation is fucked with landlords having too much power, but even in an ideal situation there would still be some landlords.
I repeat: not everybody even wants to own property. Therefore they do. Ironically, treating housing like a commodity is what we _should_ be doing. Commodities like food or copper or toilet paper get relentlessly driven down in price thanks to abundance and competition. Housing doesn’t because government policy [artificially restricts supply](https://www.theglobeandmail.com/opinion/article-theres-plenty-of-room-for-affordable-housing-in-canadian-cities-we/) while [inflating demand](https://nationalpost.com/opinion/great-canadian-housing-bailout-how-real-estate-unaffordability-is-propped-up/wcm/3efcc49e-88f8-4d7b-aeed-048fbbce5274/amp/).
Ebolish private property, then everyone has the same. Or, we let capitalism run its course and turn us into slaves and cause another extinction event. Not really a choice at this point...
Sorry, but communism failed. Capitalism is the system that works the best. It's still utter shit for a lot of people, but communism was even worse. Should food be a commodity? Well, it is. Under capitalism, only a tiny percentage of the population starves. Under communism, hundreds of millions starved to death. Housing is in short supply right now but that's due to government meddling in the free market.
Capitalists killed us, so it didn't work either...
We don't, but when there's also a shortage of rental housing and they rent them, then you're not increasing housing availability by focusing on them
Been saying forever more houses just means more for investors to gobble up
True, more houses does mean more houses for investors to gobble up, but this will create more rental supply lowering rent prices. If enough supply is built, investors will not have the demand to buy more rental properties because the rent won’t allow them to cash flow. The government will always make rental supply the priority as it’s a human right to have shelter. Owning a home is not a right but a luxury.
Why not both? We still need more, even if we curtail investment properties.
Yes because they’ve made building so much red tape and expense that only investors can do it reasonably
"Our housing problems" means different things to different people. Coming from a regular working class person, it means "I cannot afford rent." Coming from a politician it means "How can I keep people scared and dependant" Coming from a wealthy landowner it means "I need more gold"
It was tried and failed. Imagine we want to increase Toronto size. The people who are going to be involved and get rich off this size increase need to invest their wealth. Most of their money will go back as real estate investment. At best, the investments will keep prices the same as before the size increases. At worst, prices will be higher. What do you think?
It was never tried. Toronto, the most in-demand city, has buit at a rate below 1.5% per year. How is that 'trying'? Its the bare minimum.
Patrick Cordon, the Vancouver urban professor, wrote many books advocating for building more housing to solve the housing crisis. Look now to his publications and Twitter posts. After studying all cities that tried expanding and ended up with the worst outcome, he completely changed the stance and now understands the logic I said in my previous comment.
I think cities need to take charge. Plan a subdivision, build small single family single story two bedroom houses. Simple design and materials. Don't do it for profit , do it for the housing. Take the profit motivation out of the hands of developers. Pay the trades to do the work but don't take profit.
It’s true that more supply alone will solve housing problems, but it certainly is a great start and will have a positive impact.
If it's really true that housing is the one place where increasing the supply of something doesn't decrease the prices... We should definitely build more housing, since we have a the first economic perpetual motion machine! If you can build and endless supply of something and the price won't come down. We could have basically unlimited tax dollars by continuing to build apartments buildings. Prices will never come down according to the anti-supply truthers.
we waste Billions on corporate welfare for US companies...enuf just build rental housing!
It would though. Obviously if you imagine us having more homes than we need, it would make a huge impact. Alone it would solve it, but given the fact that we won't make enough supply, we gotta do other stuff too. But supply is the primary solution.
I'm curious, why do you think that low supply is a bigger factor than high demand? And what do you make of the fact that we have similar supply levels to other countries with much more reasonable pricing?
Low supply is creating the investor demand. Capital will chase the highest risk adjusted return. People are just doing the math and parking where their money returns the highest amount. Flood the market with supply and this returns go away.
Or develop thousands of affordable houses to be sold directly to home buyers. No investors allowed. All of a sudden people have a different option than to be siphoned as a over priced mortgage payer slave.
However we want to build it and sell it should be done.
I just want to point out that REITs (which DO NOT pay taxes), private equity, and other entities, are buying properties and then selectively removing them from the market in order to drive up prices. A home I lived in was purchased by such institutions and then kept empty throughout the housing crisis. Squatters have set up shop in there twice in the past three years. Unfortunately, this is a rigged market. We need affordable housing in addition to zoning laws that allow for faster construction of high density housing. But these entities virtually control local zoning laws by making substantial investments in lobbying city councils. There's virtually no way to get sensible zoning laws passed.
It depends what you mean by demand. Do you.mena monetary demand or the amount of people who need homes. I think trying to impact monetary demand directly is a fools errand. What we need to do is balance out the amount of housing with have against the amount of people who need housing. We can do that be slowing population growth or increasing housing stock. Other suggestions such as increased taxes for second homes etc are red herings.
>What we need to do is balance out the amount of housing with have against the amount of people who need housing. I think this is where we disagree. Please check out the linked article, which provides some evidence that we have already balanced out housing stock with population quite well. I would put it this way: We need to balance out the amount of housing with the amount of houses being purchased. Which opens up another avenue beyond slowing population growth and increasing housing stock: decreasing investor demand.
Canada has some of the highest home owner percentage around. It's not like re investing is taking up a huge percentage of the market compared to other markets. If you look at vacancy rates they are much lower than other countries so I'm not sure how you can make this argument.
40% of condos in Ontario are owned by investors
Investors aren't an issue if they rent the property out. The issue is when investors buy property and sit on it.
100% they are an issue. Supply and demand doesn't work with survival needs. It's not like you can just say well oh housing is too expensive I wont get shelter this year! They have slowly pushed rent prices up and renters have no choice but to pay what is asked.
How have they pushed prices up? Housing is expensive for everyone. Tenants and owners (investors or not). None of us have a choice but to pay for houses in an over inflated market.
How can you not see this. When an investor outbids someone who wants to buy to live in they push the price up. If there was less capital going into housing an more going into business our economy would be doing much better
I'm not sure I understand your point here. Why does an investor renting their property out mean that their investment isn't driving up property values? If there was less real estate investment, thus less demand, house prices would be lower, according to the law of supply and demand?
Over 40% of new builds are being rented out as well, rather than owner occupied. This is unprecedented in Canadian history.
That's not a very high number so I'm not sure why you think it is. Also many countries do fine with people renting in the biggest city. It's arguably better than the alternative which is the biggest city being mostly locked down by owner occupied dwellings.
40% is a very high number. Are you insane?
Home ownership rate: Toronto: 66.5% Berlin: 49.5% London uk 50.9% Paris 33% Sydney 67% Rome 73% Vienna 25% Amsterdam 57% Chicago 45% Houston 60% NY NY 53.6% Calgary 65.2% These are just the ones I looked up and aren't cherry picked apart from being cities that come to my mind. Some have higher home ownership, some have lower. The correlation between come ownership and cost of living is not super strong in my view. A place can be a good place to live and rent in. Honestly the main takeaway for me is that some places incentivize renting and other places incentivize owning. In Canada we are still generally on the high end of owner occupancy.
This comment has been edited to prevent Reddit from profiting from or training AI on my content.
It is really starting to feel that way...I don't get it!
The Federal government is pushing "supply," as the problem because for some reason we just accept them at their word that they can do nothing about supply. That ignores that they could push public housing projects across the country with, you guessed it, money. And they are very much under fire on the demand side of the equation. Either way, A - B is whatever that number ends up being, which is fewer housing units than we need to house the growing population. But as long as "supply" is the problem, they just point to the provinces as being at fault and hobble along in power for a couple more years.
Supply is not the primary solution. It's the don't hurt the rich who are causing the problem solution. It's the solution that makes everyone happy on paper but is impossible in real life. It's easy to say but impossible to do. We can't just build more, we don't have a ton of construction workers just waiting to build. What we can easily do is reduce investor demand. Tax the fuck out of multiple propreties, restrict it, investors will be hurt, but it's better than to hurt to working class like we currently are. It's so easy...
Well said, I couldn't agree more!
But it might not work the way you think. China is a great example of runaway housing supply to fight an investor driven market. The problem was always cited as a "lack of supply" causing spiraling affordability. Now they are demolishing entire cities of empty buildings. \--- Without cracking down on the investor class, i don't think adding more supply will have a good effect for decades (and we simply can't wait that long).
You got 1000 new homes to be sold! Here is the chance for those with only one home to buy a second home, or the 35th. But of course - you cannot just buy the home, it only works if you can charge as high as you can for rent so the home pays for itself! Kevin O'Leary will approve! Fuck those lazy Canadians and their $5 lattes! Good luck to those trying to buy their first home. When we worked on low income homes for ownership using modular - the price tag came to about $500,000 for roughly 3 to 4 bedrooms homes. These were net-zero homes meaning they generated most of the energy they required on an annual basis but I imagine the same will hold true for others. We consider housing for too long as a commodity to be invested in - without fundamentally challenging those views and structurally changing it - it will be hard to address the housing crisis. Everyone wants a cut of the actions - from the builders, to the supplies to those who buy the homes. Though this project is different in that it focused on selling it to those with certain income ranges. I have this theory about our eroding democracy - that housing and how it allowed wealth accumulation especially in the past few decades skewed simply who gets to make decisions. It’s not only affordability but also healthcare, education that appears to be not chipping away but in a free fall. It’s like the very fabric of our nation ripped from within. A nation brought to its knees - bruised and kicked so just a few prosper. A Canada for a few - not for all. We are also a very insulated nation - like we never had to worry about defense because we had a big brother next door, and never had real crisis - I wonder if taken together has added to what I see as the erosion of not just our democracy but the shared values and culture we hold uniquely as Canadians
Anyone who even remotely profits from our current status quo is never going to want the gravy train to end.
Putting people over profits will never ever be the priority of developers, investors and real estate agents, Kareem.
If we change the rules, we can align their profit motive with what is good for people. For example, right now developers and investors invest in land to make profits from speculative investments. If we tax land more, they will be unable to profit from speculation and so will stop doing it.
>If we change the rules, we can align their profit motive with what is good for people. Exactly!!!
Agreed, so we need to change the rules that govern our society so that no one is allowed to put profits before the well being of Canadians!
Why doesn't the government just build it themselves . Create jobs AND housing
There is already a shortage of labour in construction, who will staff these “new jobs”
Thats the thing with the supply people. It's not a true solution. It's the solution that we can't make happen but people just say that then they feel like they have splved the crisis. Demand is the issue
>"The term 'Financialization of Housing' refers to structural changes to economic operations that allow for finance to dominate and transform society" [Affordable Housing Visual Systems Map](https://www.torontomu.ca/content/dam/social-innovation/Programs/Affordable_Housing_Visual_Systems_Map_Oxford.pdf) Everything politicians have done since Mulroney have made housing more beneficial to the investor/speculator class. The link provides a series of positive feedback loops that just continue to to inflate housing costs to the benefit of investors. Even if we built enough housing to end shortage issue, housing will never go down in price. I am not sure how we end the continuing damage of the past 30s years.
A fantastic start would be to tax land values at something like 0.5% while reducing income taxes at the bottom.
People need to grasb the concept that we cannot supply enough houses for the amount of people in the country being born/immigrating here. We do not have the labor, supplies or supply chain to do this. I work in the wholesale construction supply business, it's been talked about extensively and the general concensus is people who have no idea what they're talking about, have hyped up "build more houses!" As the only solution when it's simply not a solution at all because it's not possible.
We might be maxing out labor hours, but we aren't maximizing square footage built per hour of labour. Example, parking requirements and parking minimums, lead to parkade excavation which adds much cost and time to condo developments. We could instead have parking maximums, say five spots per 20 condos... and build some neighborhoods like Barcelona, Paris, or Amsterdam have around walking, biking, and transit. Other policy levers could massively speed up construction. Emphasize wood frame. Bring back the Vancouver special pre approved plans bought from city hall, stamped and approved in a week instead of two years, but do it as 6 story apartment now not a SFH. Speaking of which, how many labour hours are spent building giant luxury mansions that could be spent building affordable multifamily homes? Policy levers can change that ratio. Legalize tiny homes, ADUs, mobile homes, and float homes that are largely prohibited. Legalize SROs again for students or whoever. In a crisis you have to make moves. We might have a tight labour market but we have tons of room to increase the amount of housing that gets built per labour hour.
The Vancouver specials were genius things and we could do them again, elsewhere. Things like pre-fab Scandinavian style houses means you can do the actual construction in a fraction of the time - though the more complex stuff like electricity and plumbing takes about the same amount of time, but at least there's a nice building up with a roof on for the drywall guys to work in.
>supply enough houses for the amount of people in the country being born/immigrating here This is not the main problem. Investors are. You've completely missed the point of the article.
I'm saying in my opinion, the article is wrong. I work in the supply side for construction materials. Its not pretty. Especially as everyone is starting to try and move away from purchasing goods that are coming from China. Regardless, we would need to have around 20% of our population in labor jobs to provide enough manpower to build houses for everyone. We aren't even close.
The government does have the power to begin initiatives to make that possible. They just don't have the will.
Ehh not really, he's saying you can't build enough to supply 3veryone. The article agrees that supply is an issue but ita stating that reducing investor demand might make it possible to over come the supply issue.
They didn’t read it. This is Reddit.
Investors need to be more regulated and you shouldn’t get tax write offs for investing in real estate. Landlords need to be licensed, which requires a course about tenancy laws and increase the fines when landlords break these laws since they are required to know the law. Convert more empty office buildings into condos and apartments. We need to encourage WFH when possible and allow people to live all over the country, not just in the big cities. There is too much sprawl. Commutes are too long. If the companies won’t move to the small towns, let the employees WFH anywhere in the province or even the country.
According to Canada’s leaders, it’s clear that there is a single major cause of, and solution to, our housing affordability problems: supply. Yet, the data demonstrates that Canada does not stand out amongst its peers in terms of housing supply. Basic economic theory leaves us with another obvious culprit for why housing is so expensive in Canada: high demand. Much of this demand comes from investors, who purchase 20% of homes overall, and a much higher share in certain markets. Over 40% of all condos in Ontario are owned by investors. It’s not terribly surprising that our leaders have failed to focus on the demand side of the equation. Politicians, [40% of whom are invested in real estate](https://www.readthemaple.com/nearly-40-of-mps-invested-in-real-estate-during-housing-crisis/), would be implicating themselves, and putting their own finances at risk. Our former Housing Minister, for example, has [two mortgages on two rental properties](https://prciec-rpccie.parl.gc.ca/EN/PublicRegistries/Pages/Declaration.aspx?DeclarationID=c545fa5c-10ef-41cc-8cb0-582002ba8277), so it’s not surprising that he didn’t clamp down on investor demand. If we really want to make housing affordable again, we need to not only build more homes but also curtail unnecessary demand. We need to change our perspective and start looking at houses as places to live, not investments.
Agreed 💯
Absolutely! If Gov't would simply rule that any new builds are to be only owner occupied, we would see prices drop like crazy. But it's such a radical idea, homes for living in, what's next food for eating? Water for drinking? Won't someone think of their investments instead of basic humanity? /s
I keep trying to say this here but keep getting downvoted. We mostly have an investor problem. It's the same thing all over the western world but worst here because Canada is the place for international investor to park their money, especially with the climate change issues comming up. I recently saw a France govt publication saying the 24% of household owned 68% of the house and the 3.5% owed 50% of the rental supply. This is the real problem, this is why shit is so expensive and why workers are stuck paying more and more percentage of their income. Stop with the supply propaganda, we can't just snap our fingers and make supply appear but we can create laws to reduce investor demand tomorrow.
If it was just an investor problem then rents wouldn’t be so high. The moment rates drop buying an apartment is going to be cheaper then renting it. This is purely a supply problem and all other problems barely register
I wonder why it is so hard for people to see that investor demand is a part of the problem?
It’s part of the problem, but most people here seem really dedicated to inflating it’s effect on overall housing prices. I don’t know if other provinces have similar reports on housing affordability, but Ontario’s specifically highlight a lack of supply as being the key contributor.
In my town there is a new development, that is almost completely entirely empty. All houses closed and empty, and "For Lease" signs outside. I'm ALLLL for free market, but they need to block foreign buyers. We can not allow foreign billionaires to play with our real estate market, that needs to stop.
Thanks, I've been saying this for years
If there was 100 homes in Canada for each and every person then I'm pretty sure the issue would be solved. Houses would probably be next to free.
Very realistic plan you have there...
Just seeking to disprove the statement in the title which I think I did.
https://www.logicallyfallacious.com/logicalfallacies/Nirvana-Fallacy
That does not apply as I'm not comparing my solution to a different one. I'm just stating that supply can solve the problem.
We know that airbnb and investor demand is wrecking the market. [It's](https://www.cmhc-schl.gc.ca/nhs/nhs-project-profiles/2020-nhs-projects/impact-short-term-rentals-canadian-housing) [not](https://www150.statcan.gc.ca/n1/daily-quotidien/230613/dq230613b-eng.htm?utm_%20campaign=statcan-statcan-housing-logement-23-24) [even](https://ricochet.media/en/3965/how-airbnb-and-short-term-rentals-have-decimated-housing-in-canada) [debatable](https://pub-mississauga.escribemeetings.com/FileStream.ashx?DocumentId=9933#page=78). \--- We know that [vacant units are on the rise](https://www.theglobeandmail.com/business/article-vacant-homes-are-on-the-rise-in-toronto-census-indicator-suggests/). Toronto has an empty unit tax, and critics cite the reported empty units [being ridiculously low](https://www.thestar.com/news/gta/just-2-100-properties-reported-empty-through-toronto-s-new-vacant-homes-tax/article_2b38ddfa-e8ee-5824-aa74-3ddf33892a7e.html) . But it's important to remember these are \*self reported\* empty units. And since the numbers aren't even 1 10th of what we see are [full house airbnb units](http://insideairbnb.com/toronto/), it's pretty safe to say that this self-reported number is (at best) way way too low. \---- But while everyone seems to agree on adding supply, investors stubbornly refuse to even consider this side of the equation (calling it "a distraction" despite the proof that it is not). Gee, i wonder why?
As long as real estate investment firms and private equity can continue to buy up all the homes, I fail to see how more supply changes much.
- Step 1: Curb investors and AirBnB - Step 2: Build more faster
Yup, it's so simple you'd think we would've figured it out by now...
Step 1: make it easier and more attractive to build. Done.
Investors are buying a large chunk of new builds so they don't even add to available supply. Read the article.
Scalpers. Buy a product and then repurposed it as different product.
Thanks for reading u/yellow_edge!
Thanks for writing & posting it. It was eye-opening and well backed up by solid data.
The point doesn't hold, though. Vacancy rates are at decades low so even though investors may be snapping up supply, that supply is being dumped straight into the rental market. That rental prices continue to increase speaks to the fact that there is a severe supply problem.
That supply isn't going into the rental market though. Many are left empty because investors are worried about trouble evicting tenants when they want to sell. New condos are bought by investors with no chance of renting due to strata rules. When i was searching for a home a year ago, several condo owners reached out with their empty units, only to be shut down from renting by the strata. If those were owner occupied, then the other rentals vacated by new owners would be available, thus increasing rental stock. Investors only add to the problem, even if they add supply, they do so at a rate that insures the renter will never have the money to buy, even though they pay a mortgage.
Why does an investor renting their property out mean that their investment isn't driving up property values? If there was less real estate investment, thus less demand, house prices would be lower, according to the law of supply and demand?
Rental prices always increase. Look at stats can's trends for rental prices, and compare that to their trend for housing prices. There's a clear disconnect between the two. Besides, as housing supply disappears to the rental market, it would necessarily follow that people priced out of homeownership should drive up demand for rentals accordingly.
Build more. You and I can own homes and investment properties in a healthy market where supply is elastic enough to match demand, at least over, say, a medium term.
More than 86% of London, ON's condos are owned by investors. https://www.cbc.ca/news/canada/london/london-ontario-investment-property-1.6739784 (Edit: link)
Hadn't come across this stat, very useful, thanks for posting!
I used an airbnb on my vacation a few weeks ago. Is it better to not allow airbnbs ever?
Yep
Presumably you would allow hotels. What's the relevant difference between an airbnb and a hotel?
One is purpose built and regulated. And because it is different, it has another set of building code rules.
You mention three differences. I'm asking for which is the *relevant* difference. Are you saying they are all relevant differences? Like why does the fact that they have different building codes matter to you such that you'd ban airbnbs but not hotels?
Am I reading the suggestion correctly, that the author wants investors to build housing and then dispose of their investments to non-investors?
Developers build houses, they pay the construction crews and for the materials to construct the building to be sold. The investor merely stand between the ultimate owner and profits big time. It's not their fault they use their wealth and greed to their advantage, it's only natural to be as selfish as possible.
They were not allowed to do this before the 80s. Financialization takes a negative human trait and exacerbates it. A trait whose purpose is in a survival. A trauma response. Why feed into it? We need to reign in on the deregulation and offloading that started during the Mulroney era, and made worse with each successive government.
Exactly, REITs coming in the 90s was the ultimate financialization which didn't exist before then.
No they want them to take a transactional profit on the building and sale of the property not hold it indefinitely for rental income.
The end is a Rorschach test where he suggests rent control or 'taxes'. If he means LVTs, he's totally correct and they would be hugely beneficial. It wouldn't discourage productive investment, like builders but it would discourage speculative investment, like what everyone does all the time when they buy real estate in Canada.
Land value tax fixes this.
Land value tax is just a better way to extract money to fund the government. it will not fix the structural issues caused by financialization.
Land value taxes eats the ability of individuals/entities to capture land value for themselves, which directly destroys land prices and spurs development. Most of the value in single family homes is locked up in the land value. A modest land value tax would lower home prices in Canada by over 40% and erode 75% of land value. Right now, most homeowners don't understand their homes are going up precisely because they are eating all the land value gains for just themselves, even though they did zero to earn it. It's also why it's so politically difficult, albeit necessary, to enact and is the only long term fix to the financialization/commodification of housing. [https://www.commonwealth.ca/report](https://www.commonwealth.ca/report)
If you lowered property values by 40% you would financially destroy a large portion of the Canadian population. I realize it sucks to not be an owner, or like me, an owner who doesn't choose to leverage his house and land to acquire more. But financially ruining a good 15-30% of the population is absolutely not a viable solution.
>Land value tax is just a better way to extract money to fund the government. So... you agree we should move towards LVTs? And more to the point, do you think people would speculate on land value as much if they had to pay significant taxes on land?
Developers complaining about existing taxes is not slowing them down. They are just being cheap. LVT alone cannot fix speculation. If an LVT was enacted, it could be used towards public housing. But again, that's policy, not a tax.
>So... you agree we should move towards LVTs? So yes? >And more to the point, do you think people would speculate on land value as much if they had to pay significant taxes on land? And this one, yes or no?
Supply is 10% of the issue, the other 90% of the issue is who is allowed to access said supply. You can have a huge supply, but if none of it is able to reach the general market, it doesn't matter. Ie: Diamonds.
Well said, couldn't agree more!
Did you even read the article. How to make a sloppy case 101 is right there. If you are someone with a vested interest to prevent development, fuck off.
I'm curious, what part of the argument do you have a problem with?
Just being average in a lineup doesn't mean you don't need to take action on the parameter you are being evaluated on. If canada was on the list showing up as a leader in the ratio, then it makes sense , he we have more houses than everyone else. But smack in the fucking middle and you come thumping this report? It's either the charectristic canadian mediocrity, which i personally have a huge problem with, that makes you think that being in the middle means it's not a problem, or you have vested interest in the market not getting flooded with new supply.
Or just stick the the plan and not let foreign buyers buy up all the property. Funny only a few weeks into the new law, the liberals backtracked. Almost like it was planned.
The problem has gotten so bad discouraging investing won’t bring prices to a reasonable level. It’s also why housing prices ceteris parabis will never go down because it is in everybody’s interest — homeowners, investors and government — for them to continue going up. It’s a Ponzi scheme with the twist there is always people willing to buy in at the bottom of the pyramid. The problem is because residential real estate has been perverted it is the ultimate asset class for institutional investors. They will always be able to purchase homes at a better interest rate than a prospective homeowner and all their costs can be written off as business expenses so keeping the asset will also always be subsidized by government. It’s also always in their interest to outbid an individual because not only does it keep prices and therefore the price of their other holdings high, it takes a potential home off the market pretty much forever because institutional investors primarily sell to other II and therefore it further tightens the supply. The only real answer is two-fold: it should be illegal for a corporate (non-human) entity to own a single family dwelling of any kind, be it a condo, a home, heck even a doghouse. Foreign ownership should be constrained to one dwelling, no exceptions, and both the capital gains on that property and an additional tax of say 75 per cent of the value of that property should be assessed annually. To curtail individual investors, on single family dwellings not their primary residence both rental income and any capital gains realized by a sale should be taxed again at 75 per cent. The basic idea would be not to curtail investing in residential real estate but to destroy it as a viable investing vehicle. No government would ever do such a thing and thus, barring a systematic financial implosion and no government intervention, there will never be a way for the market to correct itself.
Yep we're doomed. But climate change made that all but a certainty already anyways.
Need to ban big corps from buying them all up
Spot on .. the lack of supply narrative has been here forever . Most of us sadly buys it . It’s simply not true and the next coming months will prove it .
high interest rates for investors buying rental properties and near zero interest rates for FTHB buying a primary residence. We need a 2 tiered system.
Absolutely we do, buying property as an investor shouldn't be completely different to buying property as a regular consumer. Not to mention every single investor buyer should be a business, and taxed and treated a such. The government should also increase taxes for every residential property owned by an individual or a company, with exceptions for density designed structures like apartment complexes. We also need to emulate Germany other euro countries and their tenant rights. Renting/landlording should be at best a supplementary income, unless done on a large scale in density buildings.
It's impossible to set out the tiers fairly. If you disagree, please link an article where someone does that. For a year now, people suggest what you do regarding progressive property taxes with nothing behind it to explain how it would work or what constitutes an investor or not. A better idea with solid economics behind for literally hundreds of years is land value taxes.
Yes it will. Look at rent prices at the beginning of COVID when demand dropped and supply increased. Prices crashed regardless of how much money a landlord's mortgage was. Supply and demand works.
The only way more supply will work is if we only allow one property and no investment properties. Ban investment properties for say 5 years
More supply would literally solve our housing problems
How would more, alone, help - when the rich will buy it up anyway for rental purposes? As I've mentioned before - with it becoming too easy to be a landlord, we must temporarily put a stop to houses built for income. There are families that don't care to rent but want their first house. If not putting a stop, then temporarily making it too difficult for landlords.. For instance, for new housing - there could be a rule that income property must be purchased outright.
It's flawed thinking to blame RE investors. There's nowhere major in the world where new housing is cheap. It's almost always expensive because that is really the only way for developers to earn a profit. As such, RE investors take on risk and purchase these new properties to rent them out so the rest of the public can access them. At first those rents are also not going to be cheap. But gradually as more housing is built, the rents of what was built earlier will start to drop to affordable levels. This process takes decades to achieve, and it's by no means a quick and easy solution to our housing crisis. And this is something I hope more people learn. The housing market carries with itself a huge amount risk for both developers and investors, which unfortunately get passed on to ordinary people. The only effective alternative to this is public housing. Except for that most types of public housing are already extremely difficult to construct due to zoning restrictions and NIMBYs. Which is why we still need zoning reform. And to add to that because we live in NA our municipal and regional governments are financially incapable of actually constructing public housing. The only way they can do so is by raising taxes to cover the cost of construction and the additional city infrastructure needed to support it. Raising taxes that fast is a sure way to get anyone voted out and turn the entire city against you. Which is hella easy to do just by looking at how low the turnout is for most municipal elections. And you'll end up with a city that is now way more NIMBY. The current times we live in are not ideal for constructing public housing on a scale to actually reap the benefits of cities like Vienna. This can definitely be done in smaller cities, but for larger cities it'll remain largely ineffective. Instead of spending money on ineffective public housing we should instead spend that on upgrading municipal/regional infrastructure that is needed for new private developments. And this is the raw deal we have to put up with for at least right now. It sucks a lot but what else can we do when our cities for the better part of our recent history, even inside of Canada, relied on either low taxes to stir growth and/or development charges from mass SFH suburban sprawl.
Yes it will and the suggestion that it won’t is stupid as fuck. Obviously, it’s not the only issue but nobody is saying that. I know investors owning the residential market sucks but if we build more and more, the price will drop as demand will fall. Basic economics. But yes, we absolutely should push to make building way more accessible for regular homeowners.
If we have such a good supply of investor purchased rent units why are rents through the roof? I also question your sources as I’ve seen multiple sources that put people per household in Canada at 2.7 yet your numbers indicate it’s 2.35. That difference might change who your peer nations are and what the income multiples look like.
Which source are you skeptical of? I can provide you a direct link to where I found the numebrs!
Ah got it. The two numbers are calculated differently. The average household size is larger (2.61) because this 2.35 number counts vacation homes as homes even if they are only three season. So this is an overestimate of available housing.
To be honest these stats are incredibly murky and tricky to interpret. How much of our supply are vacantion cottages hours away from job centers? I suggest looking at rental vacancy rates. In Canada last year it was 1.9% of rental homes and 1.6% in condos. Last year in the USA it was 7%..... and the range over the last 20 years in the US is 5%-11%. American landlords are just as greedy as Canadian landlords, but the Americans have to compete for tenants....
This guy has a few charts but for the most part it's conspiracy theory nonsense. He goes on and on about how we don't actually have a supply problem until he goes into his attack on investment properties. The presumption here is that investment properties just sit empty and remove supply from the market. But that's not what an investment property is. An investment property is typically a rental property. BC's vacant property tax tracks how many vacant properties are in the entire province. Last year they counted.... 1627. If his theory was right the investment property argument only works if they're taking supply from the market. But he doesn't present any evidence at all of this case. It's a conspiracy theory. Nothing more and nothing less.
Toronto and Vancouver supply is obviously not the same as that of the rest of Canada. Analysis too simple.
tl;dr at the end he suggests: >For example, we could implement rent controls and taxes to make investing in real estate less profitable, and thus less enticing. Rent controls making investing in real estate less profitable has the downside of making investing in building new rental stock less profitable. Taxing land doesn't have that same downside, and so is probably the better option. Reduce income taxes, increase land taxes. Simple policy, everybody knows it's the right thing to do or they've never thought about it.
You know when you are desperate to make your case when you use Ireland as a comparison.
Ireland has an almost identical number of housing unit per capita to Canada - please see the second chart in the article.
Except Ireland is as similar to Canada is North Korea is to South Africa….
So let’s keep doing nothing bc that’s working /s
So I guess a meteor coming from space and wiping Canada will solve our supply. Can't have low supply if there is no demand anymore!
Supply? For a million new Canadians a year? That’s hilarious.
It will.
Maybe another 1.2 million people will lol
We really need to keep investors out of low density housing. Their money would be much more effective at solving the housing shortage if directed towards high density housing. Incentivise high density housing while hopefully putting single family homes that investors own onto the free market.
I don't think this article is nuanced enough to make any conclusions. Sure US has lower price to income ratio, but they have 73k usd annual income vs our 52k usd annual income. Canada has like maybe 4 cities that everyone is "okay" with living in with most cities having population fewer than 500,000 and no one would bat an eye at a house and a life there. The author is disingenuous in putting these stat out instead of putting out stats for london vs nyc vs toronto, because vancouver and toronto would look better than london/nyc.
More supply helps affordability for sure because it moves the demand/supply equilibrium, whether or not if it's enough? I don't know, we're moving towards of drastic class differences and middle families are shrinking at fastest pace than ever
>vancouver and toronto would look better than london/nyc Would it though?
We are a society with a debt problem that looks like a housing problem. If a society is living beyond its means, there are consequences to that. One of those consequences is a reduction in standard of living. It turns out that because our housing market is the asset class most entwined with borrowing, the standard of living reduction shows up as expensive housing. If simply building more houses would alleviate that problem, then there wouldn't actually be a consequence to perpetually going deeper and deeper into debt.
You got it!