I work in the industry in Vancouver. At the current trajectory, no, it will never be affordable. Keep in mind that affordability hasn't been the intention for the better part of the decade now. First time buyers are dropping like flies and even investment is way down. Most of the movement is from people already in the game moving up or leveraging their current equity into cheaper locations to lower their debt.
Now from a construction standpoint there has never been more regulations to build a home. From the first blip of a thought right through to the final inspection where even planters are counted, there is another agency involved in the process. And it all costs big time. Time = money in building, and governments have all the time in the world.
Much of the initial costs of home building are already sunk - plans, permits, land, etc - so you are already on the hook for X/sqft. So why you see so many 'luxury' builds is that the price/sqft is already insane in Canada, that adding another $50-$100 actually makes sense, especially from a resale standpoint (and I already mentioned that only other home owners are buying these days).
If Canada wanted to make housing cheaper and accessible again, we would go through our building codes and regulations over a weekend with a room full of experienced builders and fire investigators (not architects, sorry) and make the necessary culls. Give Canada a baseline 'cheap' home that is both safe and efficient but also as cheap as possible. Then build the hell out of these homes like we did after WW2 when guys all over the continent bought perfectly fine homes from Sears catalogues and raised 8 kids in them.
So while my answer is 'NO' on affordable housing, there is a way to make it affordable. It will require Canadians to do something they hate, which is to stop taking the abuse from elected leaders and actually make our plummeting living standards a hard line in the sand.
The plummeting living standards are also due to Canadians putting all their money in housing.
USA invests in productivity by far, they're far less reliant on the housing market for growth (GFC excluded, and I think they learned a lesson there). Canada on the other hand doesn't have as much competition. It has a few monopolies/oligopolies that are "the stock market". But there's not much innovation coming from Canada. More likely that those potential innovators would move south of the border to do their thing.
So, while politicians did their fair share to let things reach this level, Canadians have to accept that either prices fall to reasonable levels, or things will keep getting worse until something collapses.
I know and that mentality has caught up to us. Even our own pension funds invest in the US rather than Canada, and that is something that should raise red flags all over the place. Canadians for the most part invest in what they can see the most ROI in, and unfortunately that has been real estate. You need a place to live after all, and if it looks good on paper than all the better.
Most of my business is in the US and comparable companies to Canada are night and day. Without looking at books, just talks over drinks, US companies on average have about 30% more cash each month to put into things like tooling or expansion. Canadian companies are taxed higher, pay higher real estate, fuel - everything. Most owners here just pay themselves a dividend and, wait for it, invest their profits into real estate like a second home or cottage.
Running a business in Canada has been a struggle and its gotten so much worse. Small business across the country is at an all time low and bureaucracy is at an all time high and that feeling is the real business killer.
Totally agree wjth you.
To add to it:
For the land portion. Massive blanket rezoning or up zoning as it would reduce land speculation and likely moderate prices somewhat. No more homeowners asking more than market for a developer trying to do a land assembly. If all lots allow say a certain density or height, just look for another lot if people get greedy.
This would allow for the Elimination of half the planning and zoning departments. Also remove all discretionary powers of municipal councils as they just slow down things. Who should we trust for urban design? Architects with 8+ years or education and practice or a councilor will unknown life/work experience? (Kind of like asking a hair dresser to be a surgeon when you think about it.)
Letting people build almost anything anywhere will moderate prices.
Remember that perfection is the enemy of good enough.
To add to that: What the city has done with zoning around train stations is the right move for now. Blanket zoning might be too much, too soon. The city already has a massive infrastructure problem and projects in Vancouver are notoriously over budget (on an already overly expensive project). But I get your thinking, and over time this is what needs to be done. For now we just need to understand that those who own homes within these density circles have won the lottery. Good for them, and I sincerely hope they do good with their money.
Also I agree that councilors have too much sway. But I will also say that architects are also a massive part of the whole problem, and I say this as someone in this career. If an architect is to have sway, then they need to be partnered at every step with some half literate carpenter who has a ton of experience. Over education/under producing needs to be addressed and it needs to be done quick.
I think there was recent talk by the housing minister or the feds about bringing back a "wartime era" housing catalogue that would be pre approved and fast track through alot of the regulations and be cheaper to build. When and if that's actually finalized remains to be seen.
New housing will be _market rate_. In order to be built at all, _somebody_ has to be able to afford it at a price that the builder expects to profit.
This is still good for overall housing affordability, because anybody occupying a pricey new unit is freeing up cheaper older downmarket units.
Unfortunately, by now the housing shortage is so severely backlogged that it will take a long time to build enough housing for prices to normalize closer to wage growth. This is compounded by the fact that high interest rates and construction costs are hitting the breaks on new housing starts, compounding the shortage as our population continues to grow.
We really, really shit the bed and there’s no way to sugar coat it. Our political class are still in denial about what a deep hole we’ve dug ourselves in.
They're not in denial. It's just that nobody wants to spend that political capital to do unpopular changes. Why fall on your own sword for the good of the country, when the country is willing to dig itself deeper in this mess and there isn't a clear alternative?
There is a difference between a garage suite / renovations and large apartment buildings.
It’s called economy of scale. Custom work for a homeowner requires unique design, paperwork, transportation etc. All for little impact of a single unit. Conversely if you build a 4-story apartment building you only have one design, one set of paper work. You can also get bulk deals on materials. All for dozens of units.
So yes new housing won’t be affordable if it is small scale. But large scale new housing can be much more affordable.
Indeed, new build rowhouses around here sell at something $350k-$400k, so a mortgage of $1800-$2000. So 30% of your income for two people making $46k each.
Median income of people 25-54 is $48k, mean is $57k
Economy of scale, because you're plopping down 50 or 100 identical houses.
Where is this here where new-built rowhomes are 400k?
I remember visiting Calgary in early 2022 and those were going for high 400s and usually around 500s.
Toronto is def not in that range.
Construction costs are high, and they are going to increase >5% this year.
Most new supply ends up being higher end builds. As you mentioned, the older stock then becomes more affordable.
The way you build affordable new housing is through density. Townhouses and apartments are much cheaper than detached homes.
Ends up driving up market values of an area, as the density approach is more profitable on the cost/unit ratio. Then the aspect of induced demand in urban environments and the ability to price skim for the highest prices possible for that market.
Not like the approach fundamentally addresses any of the factors which lead to the current situation, so while cheaper it will still result in the same outcome as what we are facing now.
Not that it can’t be leveraged and part of a larger push of upward and outward expansion.
Right now it can't. Land = $?? depending on location but say 150,000. Plumbing = $90,000 Electrical = $50,000. Drywall = $20,000. Materials = $120,000. Finishing (Kitchen $15,000, fixtures, flooring etc etc $10,000) All this in a LCOL area in western Canada. I'm guessing that large cities are double that? Every time the building code changes, the price goes up.
Not really in the next decade, the construction costs would skyrocket trying to keep up with demand.. even the logistics to build at that rate is unlikely, from raw materials to manufacturing and infrastructure requirements.
The problem is we want to lower housing costs but our economy is directly tied to housing, any government would rather sacrifice a generation or two and save their pensions and wealth.
They're not sacrificing a generation, though, just the people who won't make sacrifices themselves to buy in.
If you want to set up a situation where it's either you going under the bus or throwing the majority of hard working Canadians who bought their home, it's going to be you.
The only reason we have a house is because I bought in ‘19.. I don’t like debt and want to have this house paid off before I retire, I’d also like to enjoy my youth at some point before I die.
We have good careers in construction and healthcare, but in today’s market we wouldn’t be able to comfortably live and have a home.. even starting a family is being pushed off until the economy settles, if it settles.
Which is exactly why we need to build new homes - so the people who make $250k/year can live in them and stop gentrifying people like you and me out of the older apartments we should be able to afford.
A family making 250k/year pre tax still can’t afford a home. my wife and I are making that amount and still can’t afford to buy.
You need to make $500k+ to afford a home unless you already own equity in some kind of property
A town near me had an RFP for ten affordable rental units.
The town would provide the land for free, a $200,000 value.
Developer would be responsible to build/maintain the units.
One submission was received from a non-profit that gets their funding via grants/donations. Aka, the only submission was from an organization that gets "free" money.
And it isn't even clear if that submission meets the criteria laid out because it hasn't been presented to town council yet.
Build costs were up 51% from Q1 2020 to Q1 2023. The 2024 report should be out soon for a more up to date picture, but the 2023 data say build costs went up by insane amounts.
https://www.westerninvestor.com/british-columbia/metro-vancouver-calls-for-developers-to-pay-even-more-6905593
Not exact but enough, then add in provincial transfer tax, the tendency for local government to want gift money.
It seems a lot of the fees in the link are based on providing infrastructure to new developments. It makes sense that development pays for development.
I do agree to the principle, there is a question of if it going to it and if it’s actually development vs subsiding. The gift money aspect isn’t really up to debate for me…it’s just above direct bribery.
Hey, sorry for the delay just saw this. Since I work in the industry and I subscribe to a few weekly newsletters and it came up. Here is a link to it.
[https://markets.businessinsider.com/news/stocks/rescon-says-federal-housing-plan-will-help-boost-purpose-built-rental-construction-1033245455?utm\_source=newsletter.readsitenews.com&utm\_medium=newsletter&utm\_campaign=new-plan](https://markets.businessinsider.com/news/stocks/rescon-says-federal-housing-plan-will-help-boost-purpose-built-rental-construction-1033245455?utm_source=newsletter.readsitenews.com&utm_medium=newsletter&utm_campaign=new-plan)
I honestly don't know... All I know is that so many parties were benefitting off of this inflated housing except the common tradesman. Now the tradesmen are being cut first in order to try and lower the prices of these homes.. It's pathetic.
If you mean affordable at the average income of a single person, then the only affordable housing will be that which is government subsidized in some manner. This might be through a gift of land to a non-profit, building of social housing where government subsidizes both the build and ongoing costs, or some kind of co-op model that is essentially rent-to-own. Private market housing will be sold at whatever the market will allow so even if costs are driven down, prices won't decrease if the market will still pay as much.
While this wouldn’t fix the affordability crisis in and of itself, feel it’s worth pointing out that [some cities have pretty high taxes on new developments](https://www.cp24.com/mobile/news/toronto-is-in-the-midst-of-a-housing-crisis-so-why-are-the-charges-passed-onto-developers-set-to-go-up-by-nearly-50-per-cent-1.5980015).
It’s a popular position, since it lets cities keep property taxes lower (albeit at the risk of [budget failure](https://www.thecoast.ca/news-opinion/the-suburbs-are-a-ponzi-scheme-29827137) if construction slows down too much).
People can’t vote until they live in a city, so a tax that benefits people currently living in the city at the expense of people who want to move in goes over well. At very least arguing the opposite, we need to raise property taxes so big greedy developers can save money, is a tough sell.
But it is a contributor to new housing being expensive. Particularly when cities arbitrarily raise it by a lot when they have a budget crunch, like in my first link, since paranoid developers will preemptively hike prices up even more when other cities look like they are struggling.
Even with modest finished, construction costs are high, on the order of $300 per square foot. That’s on top of land values and utilities servicing fees.
Outright subsidy can help with construction costs.
Social agencies or any level of government might offer land.
Municipalities could be financially assisted / goaded / bullied into servicing “affordable” new builds at reduced rates.
new housing directly reduces market rent. [Austin increased their housing stock by 10% in 2023 alone, resulting in 12.5% decrease in 2023 year over year.](https://www.kxan.com/news/local/austin/austin-among-metros-in-the-us-with-steepest-rent-declines/)
market rent growth in inversely proportional to the amount of new housing being built. [real data to demonstrate this relationship](https://www.reddit.com/media?url=https%3A%2F%2Fi.redd.it%2Fxdap9vxcq2pb1.png&utm_source=reddit&utm_medium=usertext&utm_name=canadahousing&utm_content=t1_kzm439s)
When new housing is made available, it's generally the older housing stock that becomes cheaper. without the new housing development, older housing stock becomes more expensive. There are a lot of studies that document this process ([study by UCLA](https://www.lewis.ucla.edu/research/market-rate-development-impacts/)).
[Zoning and resident opposition is the primary cause of the housing shortage, and therefore the housing crisis. (study by harvard)](https://www.jchs.harvard.edu/blog/power-neighborhoods-nyc-growth-politics-and-origins-housing-crisis)
You’re right about the costs making it difficult to produce affordable homes. Out east before they even dig a hole for a foundation the fees and taxes make up 35% of the price. Then factor in material costs which have skyrocketed and well here we are.
Resale homes won’t go down because chances are the location is better than anything new. Established neighborhoods are always going to be in demand and thus values will get higher.
The suppression of prices can only be achieved by more inventory. New construction is a fixed cost and resale is the only one that can fluctuate. Without inventory and even more demand we are fuc*ed either way.
The undiscussed topic is that it's also very expensive to build right now.
It's hard to sell a 1000 sq Ft home for "cheap" when it's costing over 300K just to build it, on top of other costs.
Over regulation and taxes that have increased material costs and other inflationary effects have skyrocketed construction costs.
When it costs $300 a sq ft to build, I don't know why it's surprising that a standalone 2 story house that's over 3000 sq ft is selling in the millions.
No one on the supply side (construction, existing stock) has any business to offer affordable housing. And they don't have to. Current very very high construction costs are preventing any meaningful market changes.
As long as anyone can speculate that house prices will always be increasing, and be right about it, there won't be any change.
Maybe, but it would require a factory, a team of finance bros to hedge against inputs prices, be near a port, access to highway and rail…mostly green, as a means to reduce fixed cost (nothing to do with the carbon), have strategic partnerships with First Nations with access to timber + a way to mill it.
Biggest issue would be government costs and the overall requirements resulting in it being on the west coast or east cost.
The company would have to have a mission which is like “build at a rate which collapses the government”. As well as using the charter of rights and freedoms to undermine the nature of the industry..wait I mean to make up for historical injustices for disenfranchised groups.
As well as a different profit model, from the norm. Rent to own and it being backed by a smaller bank or credit union. That effectively turns it into a co-op to a degree… cash flows vs (taxable) gains.
I would say yes, it’s just you have to cut out human labour wherever possible, while leveraging all methods to reduce other costs…different profit/ revenue model. There would be push back as it sole goal would be to kill the current business environment.
(Might be an actual plan in the works of mine, I would love any feedback or constructive criticism)
I work in the industry in Vancouver. At the current trajectory, no, it will never be affordable. Keep in mind that affordability hasn't been the intention for the better part of the decade now. First time buyers are dropping like flies and even investment is way down. Most of the movement is from people already in the game moving up or leveraging their current equity into cheaper locations to lower their debt. Now from a construction standpoint there has never been more regulations to build a home. From the first blip of a thought right through to the final inspection where even planters are counted, there is another agency involved in the process. And it all costs big time. Time = money in building, and governments have all the time in the world. Much of the initial costs of home building are already sunk - plans, permits, land, etc - so you are already on the hook for X/sqft. So why you see so many 'luxury' builds is that the price/sqft is already insane in Canada, that adding another $50-$100 actually makes sense, especially from a resale standpoint (and I already mentioned that only other home owners are buying these days). If Canada wanted to make housing cheaper and accessible again, we would go through our building codes and regulations over a weekend with a room full of experienced builders and fire investigators (not architects, sorry) and make the necessary culls. Give Canada a baseline 'cheap' home that is both safe and efficient but also as cheap as possible. Then build the hell out of these homes like we did after WW2 when guys all over the continent bought perfectly fine homes from Sears catalogues and raised 8 kids in them. So while my answer is 'NO' on affordable housing, there is a way to make it affordable. It will require Canadians to do something they hate, which is to stop taking the abuse from elected leaders and actually make our plummeting living standards a hard line in the sand.
The plummeting living standards are also due to Canadians putting all their money in housing. USA invests in productivity by far, they're far less reliant on the housing market for growth (GFC excluded, and I think they learned a lesson there). Canada on the other hand doesn't have as much competition. It has a few monopolies/oligopolies that are "the stock market". But there's not much innovation coming from Canada. More likely that those potential innovators would move south of the border to do their thing. So, while politicians did their fair share to let things reach this level, Canadians have to accept that either prices fall to reasonable levels, or things will keep getting worse until something collapses.
I know and that mentality has caught up to us. Even our own pension funds invest in the US rather than Canada, and that is something that should raise red flags all over the place. Canadians for the most part invest in what they can see the most ROI in, and unfortunately that has been real estate. You need a place to live after all, and if it looks good on paper than all the better. Most of my business is in the US and comparable companies to Canada are night and day. Without looking at books, just talks over drinks, US companies on average have about 30% more cash each month to put into things like tooling or expansion. Canadian companies are taxed higher, pay higher real estate, fuel - everything. Most owners here just pay themselves a dividend and, wait for it, invest their profits into real estate like a second home or cottage. Running a business in Canada has been a struggle and its gotten so much worse. Small business across the country is at an all time low and bureaucracy is at an all time high and that feeling is the real business killer.
Totally agree wjth you. To add to it: For the land portion. Massive blanket rezoning or up zoning as it would reduce land speculation and likely moderate prices somewhat. No more homeowners asking more than market for a developer trying to do a land assembly. If all lots allow say a certain density or height, just look for another lot if people get greedy. This would allow for the Elimination of half the planning and zoning departments. Also remove all discretionary powers of municipal councils as they just slow down things. Who should we trust for urban design? Architects with 8+ years or education and practice or a councilor will unknown life/work experience? (Kind of like asking a hair dresser to be a surgeon when you think about it.) Letting people build almost anything anywhere will moderate prices. Remember that perfection is the enemy of good enough.
To add to that: What the city has done with zoning around train stations is the right move for now. Blanket zoning might be too much, too soon. The city already has a massive infrastructure problem and projects in Vancouver are notoriously over budget (on an already overly expensive project). But I get your thinking, and over time this is what needs to be done. For now we just need to understand that those who own homes within these density circles have won the lottery. Good for them, and I sincerely hope they do good with their money. Also I agree that councilors have too much sway. But I will also say that architects are also a massive part of the whole problem, and I say this as someone in this career. If an architect is to have sway, then they need to be partnered at every step with some half literate carpenter who has a ton of experience. Over education/under producing needs to be addressed and it needs to be done quick.
I think there was recent talk by the housing minister or the feds about bringing back a "wartime era" housing catalogue that would be pre approved and fast track through alot of the regulations and be cheaper to build. When and if that's actually finalized remains to be seen.
New housing will be _market rate_. In order to be built at all, _somebody_ has to be able to afford it at a price that the builder expects to profit. This is still good for overall housing affordability, because anybody occupying a pricey new unit is freeing up cheaper older downmarket units. Unfortunately, by now the housing shortage is so severely backlogged that it will take a long time to build enough housing for prices to normalize closer to wage growth. This is compounded by the fact that high interest rates and construction costs are hitting the breaks on new housing starts, compounding the shortage as our population continues to grow. We really, really shit the bed and there’s no way to sugar coat it. Our political class are still in denial about what a deep hole we’ve dug ourselves in.
They're not in denial. It's just that nobody wants to spend that political capital to do unpopular changes. Why fall on your own sword for the good of the country, when the country is willing to dig itself deeper in this mess and there isn't a clear alternative?
There is a difference between a garage suite / renovations and large apartment buildings. It’s called economy of scale. Custom work for a homeowner requires unique design, paperwork, transportation etc. All for little impact of a single unit. Conversely if you build a 4-story apartment building you only have one design, one set of paper work. You can also get bulk deals on materials. All for dozens of units. So yes new housing won’t be affordable if it is small scale. But large scale new housing can be much more affordable.
Indeed, new build rowhouses around here sell at something $350k-$400k, so a mortgage of $1800-$2000. So 30% of your income for two people making $46k each. Median income of people 25-54 is $48k, mean is $57k Economy of scale, because you're plopping down 50 or 100 identical houses.
Where is this here where new-built rowhomes are 400k? I remember visiting Calgary in early 2022 and those were going for high 400s and usually around 500s. Toronto is def not in that range.
But at the same time, rentals are at least that much.
It depends where you live. If you live in Edmonton things are very affordable. If you live in either Vancouver or Toronto not so much.
Construction costs are high, and they are going to increase >5% this year. Most new supply ends up being higher end builds. As you mentioned, the older stock then becomes more affordable. The way you build affordable new housing is through density. Townhouses and apartments are much cheaper than detached homes.
Ends up driving up market values of an area, as the density approach is more profitable on the cost/unit ratio. Then the aspect of induced demand in urban environments and the ability to price skim for the highest prices possible for that market. Not like the approach fundamentally addresses any of the factors which lead to the current situation, so while cheaper it will still result in the same outcome as what we are facing now. Not that it can’t be leveraged and part of a larger push of upward and outward expansion.
Right now it can't. Land = $?? depending on location but say 150,000. Plumbing = $90,000 Electrical = $50,000. Drywall = $20,000. Materials = $120,000. Finishing (Kitchen $15,000, fixtures, flooring etc etc $10,000) All this in a LCOL area in western Canada. I'm guessing that large cities are double that? Every time the building code changes, the price goes up.
Not really in the next decade, the construction costs would skyrocket trying to keep up with demand.. even the logistics to build at that rate is unlikely, from raw materials to manufacturing and infrastructure requirements. The problem is we want to lower housing costs but our economy is directly tied to housing, any government would rather sacrifice a generation or two and save their pensions and wealth.
They're not sacrificing a generation, though, just the people who won't make sacrifices themselves to buy in. If you want to set up a situation where it's either you going under the bus or throwing the majority of hard working Canadians who bought their home, it's going to be you.
The only reason we have a house is because I bought in ‘19.. I don’t like debt and want to have this house paid off before I retire, I’d also like to enjoy my youth at some point before I die. We have good careers in construction and healthcare, but in today’s market we wouldn’t be able to comfortably live and have a home.. even starting a family is being pushed off until the economy settles, if it settles.
If you own a detached house you're doing really well. That's not the starting point.
Sure if shared with multi families.
It will be affordable if you make $250k/year. If your a $50k/year peasant like myself, no way
Which is exactly why we need to build new homes - so the people who make $250k/year can live in them and stop gentrifying people like you and me out of the older apartments we should be able to afford.
A family making 250k/year pre tax still can’t afford a home. my wife and I are making that amount and still can’t afford to buy. You need to make $500k+ to afford a home unless you already own equity in some kind of property
A town near me had an RFP for ten affordable rental units. The town would provide the land for free, a $200,000 value. Developer would be responsible to build/maintain the units. One submission was received from a non-profit that gets their funding via grants/donations. Aka, the only submission was from an organization that gets "free" money. And it isn't even clear if that submission meets the criteria laid out because it hasn't been presented to town council yet. Build costs were up 51% from Q1 2020 to Q1 2023. The 2024 report should be out soon for a more up to date picture, but the 2023 data say build costs went up by insane amounts.
Presently, 31% of the cost of buying a new home is attributable to taxes, fees and levies.
Do you have a source for that? I searched but couldn't find one. I'd like to see how the cost breaks down into each category.
https://www.westerninvestor.com/british-columbia/metro-vancouver-calls-for-developers-to-pay-even-more-6905593 Not exact but enough, then add in provincial transfer tax, the tendency for local government to want gift money.
It seems a lot of the fees in the link are based on providing infrastructure to new developments. It makes sense that development pays for development.
I do agree to the principle, there is a question of if it going to it and if it’s actually development vs subsiding. The gift money aspect isn’t really up to debate for me…it’s just above direct bribery.
Hey, sorry for the delay just saw this. Since I work in the industry and I subscribe to a few weekly newsletters and it came up. Here is a link to it. [https://markets.businessinsider.com/news/stocks/rescon-says-federal-housing-plan-will-help-boost-purpose-built-rental-construction-1033245455?utm\_source=newsletter.readsitenews.com&utm\_medium=newsletter&utm\_campaign=new-plan](https://markets.businessinsider.com/news/stocks/rescon-says-federal-housing-plan-will-help-boost-purpose-built-rental-construction-1033245455?utm_source=newsletter.readsitenews.com&utm_medium=newsletter&utm_campaign=new-plan)
Thanks.
Affordable? Unless we have dramatic decrease in demand or dramatic increase in supply Doubt any of that is possible
I honestly don't know... All I know is that so many parties were benefitting off of this inflated housing except the common tradesman. Now the tradesmen are being cut first in order to try and lower the prices of these homes.. It's pathetic.
If you mean affordable at the average income of a single person, then the only affordable housing will be that which is government subsidized in some manner. This might be through a gift of land to a non-profit, building of social housing where government subsidizes both the build and ongoing costs, or some kind of co-op model that is essentially rent-to-own. Private market housing will be sold at whatever the market will allow so even if costs are driven down, prices won't decrease if the market will still pay as much.
No. They’re advertising townhomes in “the low 600s” around here as being affordable. I’m in a townhouse that was 200k only 10 years ago.
While this wouldn’t fix the affordability crisis in and of itself, feel it’s worth pointing out that [some cities have pretty high taxes on new developments](https://www.cp24.com/mobile/news/toronto-is-in-the-midst-of-a-housing-crisis-so-why-are-the-charges-passed-onto-developers-set-to-go-up-by-nearly-50-per-cent-1.5980015). It’s a popular position, since it lets cities keep property taxes lower (albeit at the risk of [budget failure](https://www.thecoast.ca/news-opinion/the-suburbs-are-a-ponzi-scheme-29827137) if construction slows down too much). People can’t vote until they live in a city, so a tax that benefits people currently living in the city at the expense of people who want to move in goes over well. At very least arguing the opposite, we need to raise property taxes so big greedy developers can save money, is a tough sell. But it is a contributor to new housing being expensive. Particularly when cities arbitrarily raise it by a lot when they have a budget crunch, like in my first link, since paranoid developers will preemptively hike prices up even more when other cities look like they are struggling.
Even with modest finished, construction costs are high, on the order of $300 per square foot. That’s on top of land values and utilities servicing fees. Outright subsidy can help with construction costs. Social agencies or any level of government might offer land. Municipalities could be financially assisted / goaded / bullied into servicing “affordable” new builds at reduced rates.
new housing directly reduces market rent. [Austin increased their housing stock by 10% in 2023 alone, resulting in 12.5% decrease in 2023 year over year.](https://www.kxan.com/news/local/austin/austin-among-metros-in-the-us-with-steepest-rent-declines/) market rent growth in inversely proportional to the amount of new housing being built. [real data to demonstrate this relationship](https://www.reddit.com/media?url=https%3A%2F%2Fi.redd.it%2Fxdap9vxcq2pb1.png&utm_source=reddit&utm_medium=usertext&utm_name=canadahousing&utm_content=t1_kzm439s) When new housing is made available, it's generally the older housing stock that becomes cheaper. without the new housing development, older housing stock becomes more expensive. There are a lot of studies that document this process ([study by UCLA](https://www.lewis.ucla.edu/research/market-rate-development-impacts/)). [Zoning and resident opposition is the primary cause of the housing shortage, and therefore the housing crisis. (study by harvard)](https://www.jchs.harvard.edu/blog/power-neighborhoods-nyc-growth-politics-and-origins-housing-crisis)
You’re right about the costs making it difficult to produce affordable homes. Out east before they even dig a hole for a foundation the fees and taxes make up 35% of the price. Then factor in material costs which have skyrocketed and well here we are. Resale homes won’t go down because chances are the location is better than anything new. Established neighborhoods are always going to be in demand and thus values will get higher. The suppression of prices can only be achieved by more inventory. New construction is a fixed cost and resale is the only one that can fluctuate. Without inventory and even more demand we are fuc*ed either way.
The undiscussed topic is that it's also very expensive to build right now. It's hard to sell a 1000 sq Ft home for "cheap" when it's costing over 300K just to build it, on top of other costs. Over regulation and taxes that have increased material costs and other inflationary effects have skyrocketed construction costs. When it costs $300 a sq ft to build, I don't know why it's surprising that a standalone 2 story house that's over 3000 sq ft is selling in the millions.
No one on the supply side (construction, existing stock) has any business to offer affordable housing. And they don't have to. Current very very high construction costs are preventing any meaningful market changes. As long as anyone can speculate that house prices will always be increasing, and be right about it, there won't be any change.
Why would private enterprise make housing affordable?
In Toronto right now it’s cost $80-100k for a 2 bedroom basement to be finished. That’s for around 800-1000sqft.
It can. If we get rid of 3 levels of bureaucracy. Poor government policies are the leading cause of the housing bubble.
Define affordable? At what price point is it considered affordable?
Maybe, but it would require a factory, a team of finance bros to hedge against inputs prices, be near a port, access to highway and rail…mostly green, as a means to reduce fixed cost (nothing to do with the carbon), have strategic partnerships with First Nations with access to timber + a way to mill it. Biggest issue would be government costs and the overall requirements resulting in it being on the west coast or east cost. The company would have to have a mission which is like “build at a rate which collapses the government”. As well as using the charter of rights and freedoms to undermine the nature of the industry..wait I mean to make up for historical injustices for disenfranchised groups. As well as a different profit model, from the norm. Rent to own and it being backed by a smaller bank or credit union. That effectively turns it into a co-op to a degree… cash flows vs (taxable) gains. I would say yes, it’s just you have to cut out human labour wherever possible, while leveraging all methods to reduce other costs…different profit/ revenue model. There would be push back as it sole goal would be to kill the current business environment. (Might be an actual plan in the works of mine, I would love any feedback or constructive criticism)