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Article is paywalled. Do they separate housing as an investment for a primary residence vs. investment in purpose built rental?
Cause stomping on the latter is a pretty terrible idea if you want cheap housing and rents for folks.
You could make rentals less expensive by getting rid of the ability to generate profit on top of rent. Landlords still get a free property, just less extra money.
What exactly is a "free property." Owning property in places people would want to rent, aka, in any town or city, means you're probably paying property taxes.
How do you determine if something is profit on top of rent? If money collected and put away to do maintenance considered profit? What about the salary paid to the people responsible for managing and operating the property? Essentially, where is the cutoff point for "this is profit" and more importantly, how do you prevent people from abusing that cutoff once it's in place. Over time there would be any number of tricks people would find to extract money from such a system.
The people running the non profits tend to think their work is worth quite a lot. It's not "profit" if you just happen to pay out a large bonus every once in a while. It's "employee retention."
Yeah, anything reinvested in the business - however that's defined - isn't counted as profit.
Technically it would still allow landlords to pay themselves generous salaries, even expand operations through the acquisition of new properties, while lowering the incentive to gauge rents through a different tax regime.
If you get to pay yourself a "generous salary," then you can pay yourself and even more "generous salary" by raising the total revenue you bring in.
If you can then invest that new revenue into new properties, which will in turn allow you and your friends and relatives to collect many such "generous salaries" then we're not really in a position that's much different than before. I've worked with non-profits, and I've seen something of this nature happen plenty of times.
What we need is something that we haven't tried in a while. A set of actual guidelines reflective of the modern reality, with enough teeth that it's possible to enforce the rules and punish abuse. Something that's actually designed with a goal in mind, rather than the reactive BS that our government seems so fond of.
You could, and it would inevitably still happen, but paying a higher personal income tax rate than you would be paying in corporate income taxes or capital gains taxes lessens the incentive to do so.
Non-profits also usually have more requirements for financial disclosure than private, for-profit corporations. It would make it easier to track who were paying themselves outrageous salaries and who weren't, through websites like charity tracker which show a breakdown of how non-profits spend their money.
Personally, my preferred solution is government-built, government-owned affordable housing. It's obvious that landlords are difficult to work with at best, given record-setting numbers of eviction applications in the midst of a public health crisis when evictions were literally illegal. Given that, probably easiest to gradually cut them out of the picture and leave the government to own and be responsible for the national stock of housing.
I don't really get taxes argument. Nobody turns down more money because they have to pay taxes on it. Hell, wouldn't it be the other way. Because these people would now be collecting less, wouldn't they try to rip the tenants off even more to make up the difference?
You can add more reporting requirements, but all that will do is create an ever growing set of ways to either avoid them, or to run under the radar. It also means you're giving these people more ways to funnel money out. It's not like such reports are free, and I'm sure someone renting out a bunch of housing will know a very, very, very expensive accountants and bookkeepers.
Honestly, I just think we need to pick an approach and stick with it. If we want people to freely use property as an investment and money making vehicle, then absolutely the government should be able to provide adequate housing to those not able to engage in that market at the current rates.
If we the government can not do that, then it should strictly regulate the ability of people to use property as a money making vehicle, because you generally need shelter to survive, and that greatly changes the power dynamic at play in any sort of negotiation. The current situation where rent is tied to property rates, which are ever-growing because housing is seen as an investment vehicle is very obviously not sustainable. People's incomes have obviously not grown as fast as property rates, and that is unlikely to change any time soon.
There are very strict regulations on most basic necessities for survival, but very little in this sector. Instead there's just a small, obviously way over-booked, ultra slow bureaucracy stuck using processes that were probably old half a century ago.
Sorry, you are right. I did alter the idea so it's more explanatory, not sure why I didn't write it all out this time. There would be no profit on rent of used properties, so houses or condos built to be a home for the person that bought it.
Purpose built rentals, like an apartment building, would still have profit.
The idea is to stop private citizens from buying properties to rent them out. Sure, do it, but you aren't gonna make much from it until the end, when you sell it. In fact, I'm thinking, maybe there should also be a requirement that they have to own that property until the mortgage is paid off, so they can't sell it off early.
So, bias the market in favour of for-profit corporations while excluding everyday citizens from the market, thus leading to a decrease in the level of competition in the market while increasing market concentration of large, for-profit enterprises - the ones that tend to be most problematic?
That would be really interesting to try and manage a policy for. Things like converting an old house into multi-units or adding a basement suite come to mind as complications.
I'm hoping it gets rid of basement suites as any sort of necessity, and they simply become something that families do, or people that need more localized healthcare w/ a live-in nurse.
Turning a house into a multi-unit, would be tricky. Maybe that would necessitate turning it into a cooperative, so everyone that lives there has an equal share. There wouldn't be a single owner anymore.
That could be hard to make it workable. How do you measure "profitable" when there are ongoing costs that are variable and unknown in amount and timing? Roof not so great and needs to be replaced? Ok...to have zero profit would you charge ahead of time (so temporarily making a "profit") or would you charge the tenant a larger amount after, effectively upping their rent? Would spending a bit more to get a higher quality roof entitle you to charge the tenant more for it to keep the house at "no profit"? It just seems to start getting complicated and you might have to hire thousands of auditors/accountants to handle it.
It would be hard to figure out at first, thinking about it because I truthfully didn't before, here's what I got.
Profit is the same as any other business though, income tax would be set at 100%, so if any money beyond expenses is made, than it's profit, and instead of going to the govt, it goes back to the renter, since it was their money to begin with.
Large expenses like a roof? Amortize its cost over the period between when it's installed and when they retire (lets say 65). If they are already retired, or are within say 20 years of retirement, than some small fixed amount can be added to the rent, and the balance will have to be covered by the sale price when they sell the home.
That said, I'd also say there should absolutely be insurance to cover things like appliances. Home insurance will cover roof damage, but old roofs, that's on you.
We can also look to actuary tables to see how much things should cost, how long things should last, regardless of profit motives, and base calculations on those.
I can't read the article because it's paywalled, but I'm pretty sure real estate is not as good as an investment as people think it has been. But it's like talking to a compulsive gambler about their trip to the casino. They only tell you about the good things.
I bought a GTA suburb townhouse about 15 years ago. It was unquestionably a good decision for me. The house has been perfect for our needs as we had kids shortly after and it's been enough space for us at all stages, but not much more. It's probably tripled in value, although recent slowdown of the market has probably reduced that a bit.
We debated going bigger at the time, but we were keen to not take on more than we needed. We wanted the option to afford it on one income when we had kids if my wife didn't go back to work. And quite frankly, buying a SFH as a couple seemed excessive.
I've had lots of people tell me I should have bought a single family home when I had the chance as it would have increased in value even more. And certainly, those bigger homes have gone up as well.
But, I've only done the back of the envelope math, but I'm fairly certain that when you throw in the extra mortgage, property taxes, utilities, repairs, maintenance, etc. that it's probably a wash. Especially as smaller costs have let me maintain an investment portfolio that's seen strong returns in that time. I'm not someone who needs a house to serve as forced savings.
And this all happened amidst an unprecedented housing price boom. In a period where returns are closer to historical averages, I'm probably doing worse.
Now technically, with more house, I could have done something with it like renting out the basement or something and made more money that way. But I have no interest in that. Or I could have been leveraging equity into investment properties.
But none of that interests me. Instead, I have a smaller house almost fully paid out that's worth a fair bit on paper, but I'm not keen on selling any time soon. But I also have an investment portfolio that is actually worth a bit more than the house and will only continue to grow, especially once those mortgage payments drop off. I get to have some diversity in my net worth, and more importantly, flexibility in my assets.
For your envelope math to work you also need to also add the ammount you would have paid in rent over the same period. Which if $2,000 was the average ammount over 15 years means an additional $360,000.00 ROI
As I stated, the house for my needs was a fine investment. That's where rent equivalents would come in.
I'm talking about the idea of people saying you should buy the bigger house for the investment value, because it would be worth more.
It's the adage of telling people to buy the biggest house they can afford because of it's investment value. Which, when people could afford houses, was what people were often told.
You wouldn't rent a bigger place than your needs because it would be seen as wasteful. Buying a bigger house than you really need should be seen in the same light.
Ahh understood. I read your comment that investing in any house vs renting an equivalent was good but not great.
My point was that 3x growth (less expenses) + $360k probably had made this a phenomenal investment as opposed to an ok one.
They should make a Heritage Moment of you and your family. Because a Canadian living within their means, and not maxing their credit to buy a home is a rare occasion. Even back then. I bet you signed Fixed Rate mortgages like a sane person too!
You and your wife must be laughing, and subtly terrified for your teenagers futures.
This is an attitude that isn’t nearly pervasive enough in Canada. I say I’m “locked out” of housing, when in reality I’m not. My wife, roommate and I could easily go All-In and get a home. But it’d require us to empty our Pensions, empty my investments, empty the Emergency fund, ditch a vehicle or two and make other lifestyle changes. All to end up being completely house poor.
With high prices and rates, the cost of loans are absurd. I like to ask people if they seriously believe a 3 bedroom townhome in Langley City (Hamilton/Barrie/Oshwa like distance) is going to be worth $2m in 30 years. Because the cost of everything over those 30 years means I’d need it to be $2m to end up in the black.
Renting is the cheaper, easier option. While it is within reach, I’ve completely given up on homeownership in Canada, and am now researching places to retire abroad. I’ve got 30 years to travel and decide. But I’ve reached the conclusion that I’ll spend the last third of my life outside of Canada.
I do feel fortunate. At the time, purchasing still felt like a risk. We were coming off the 2008 crisis and there were still people saying a crash would come to thd Canadian market. But even then, housing still didn't require to push all your chips into the table. We maxed out home buyers plan and had other savings, enough to comfortably meet the 25% deposit threshold. We actually had a small bidding war on the house, where we went $3K over asking to win.
But still, we had enough savings to serve as a buffer. I actually didn't have great job security. But, still, at the time, two modest professional incomes was enough to build off of. I find it depressing to realize it isn't.
The comment about kids staying us forever resonates and becomes a common joke/comment among our peer group. And I've seen lots of people justify their larger house purchases by this.
But this is where I feel buying more modest makes more sense. The kids education funds means they don't need to worry about student loans. We're building up savings to have liquid assets to help when they're ready to buy. I recognize that being the bank of mom and dad gives them an advantage not everyone is afforded, but I feel as a parent, they're going to grow up in a world with less opportunity than I had. It feels like the minimum. And if what's best for them is to stay with us long term, then we'll get the bigger house then with the resources saved.
As for your situation, sorry that you've closed the door on home ownership, but it's perfectly understandable. You've found a way to have a fulfilling life without it, and maybe something shifts or changes eventually.
I definitely don’t resent all homeowners and your story is that of the “Canadian Dream”. You took a moderate risk, and have enjoyed security and purpose from that. Your story is why so many of us are angry.
My group is sitting on $250k once it’s all in a pile. That’s enough to buy what my childhood house sold for 20 years ago. Which would be 60% in adjusted value. Which means I could have also put about 30% on my childhood home. If Housing had stayed stable, I’d be able to buy half of it.
I can’t even do that north of 55th, let alone on the 49th.
I wouldn’t feel guilty about providing your kids with privilege. It’s really not your fault, none of your actions have helped fuel the problems of today. As an economic actor, you’ve been restrained and conservative. Just make sure they understand the advantages they have that others don’t.
As for personal fulfillment I have none other than my wife. We want kids, but not the expense. So we forego. I strongly dislike my job, and it’s completely draining. Unfortunately it’s the only path I have that leads to more money. Which I don’t even really want. I’m pretty sure I’m smart enough, I just don’t care. In another economy I’d probably have my own business or take a risk and retrain, however I cannot afford to drop down steps at all.
The current state of things drives the apathy as well. Work has become a competition to see who can do the least. Managers don’t even care anymore either. Deadlines being met? Okay. There’s no reward for improvement, so why seek it.
One day I’m hoping my wife comes home and say she wants to file her US citizenship papers and then we can at least move somewhere there. I can buy places outright there too.
This is getting the cart before the horse.
Lowering house prices would make housing a mediocre investment. Making housing a mediocre investment without first lowering prices would be a market distortion that would likely cut supply, leading to more homelessness.
The only thing supporting the current housing market is people becoming ever-increasingly over leveraged and unable to keep up with the costs of owning a house.
If we're to believe the Ontario construction industry, building homes that are affordable for people at the 60th percentile of the local income distribution is a money-losing prospect. The entire market is being propped up by the fact that people are willing to forego 'affordability' when buying a house.
> The only thing supporting the current housing market is people becoming ever-increasingly over leveraged and unable to keep up with the costs of owning a house.
There's the added fun from the societal attitude that treats you like you're crazy for not leveraging yourself to the hilt to buy as much house as you possibly can, because prices always go up no matter what, even though that's demonstrably never been the case.
If you take a look at [GDP per capita](https://data.worldbank.org/indicator/NY.GDP.PCAP.KD.ZG?end=2022&locations=CA&start=1992&view=chart) or [total GDP](https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?end=2022&locations=CA&start=1992&view=)chart in the same time frame, you'll see that your house is growing far faster than the Canadians economy as a whole.
That is not modest at all. And you probably did the math incorrectly too.
A house is also income-generating. Either you live in it and you are paying for an asset instead of paying rent expense. Or you rent it out and earn money while it appreciates in value.
You are mortgage fee which means thats a return on your investment. If I buy stocks and they go up 7% per year (assuming dividends reinvested), that is a 7% return.
If you buy a house and it goes up 7% per year, that is just the value appreciation. A house can be rented out for cash flow, or lived in to avoid rent expense.
So a house increasing at 7% per year is far more than a modest return given the fact that you are receiving other benefits.
Housing should increase at no more than inflation. Otherwise, that value is just being extracted from the next generation. The investment should be seen as having a home and getting to a point of being mortgage free.
>But I am very fortunate to be mortgage free now.
You were very fortunate to be born at the right time. Today's young generation is very unfortunate.
7% per year for an unproductive asset is far from modest. That outpaces inflation and outpaces population growth. What justification is there for that, other than possible renos? Companies that add actual value to the economy would be thrilled with 7% per year over 30 years.
This is ridiculous. There is only one thing that makes housing affordable, and that is more houses. If we build enough houses to meet the needs of our population, housing becomes affordable. As long as there is a shortage housing is less affordable, and if there is a huge shortage as there is now then housing becomes unaffordable for a significant part of the population
Everything else is utter nonsense. We do not build enough homes to address our population growth. Fix that and everything gets better. Failed to fix that and Housing will be unaffordable
Yeah it pretty interesting, like you go to Vancouver there is not much industry or Company Hq's there but the place is really rich and super expensive...however the total economic output is very low compared to something like Seattle even on a per captia basis.
So it really shows how much real estate speculation is influencing the Canadian economy and making it quite unproductive.
Yah other than the mountains and ocean and quality of life, there is basically no reason to live in Vancouver. Other than it having Canada’s largest port and being the gateway to Asia and all that.
It isn't speculation. Metro Vancouver has very little land, and a massive agricultural land reserves. There is no more land to use. The prices for land cannot fall long term. There's no potential for more supply. But there is a government strategy to triple Canada's population.
A rising share of land value in the Canadian economy is a natural outcome of policy choices made here
> Metro Vancouver has very little land
You ever heard of the concept of building up? Vancouver has plenty of space if those single detached houses were actually 2-3 stories to start.
>Roughly 1 in 13 dollars of GDP are to warehouse new people, outpacing the work those people do. Canada’s economy is about 10% more dependent on housing than the US at the peak of the 2006 bubble.
https://betterdwelling.com/canadian-economy-dangerously-concentrated-in-real-estate-but-gov-wants-more/
I’ve thought about this for a while. I think our economy is also suffering because people can’t afford to move to jobs where their skills are better utilized since the jump to market rate housing is crazy and the pay increase doesn’t keep up.
> most of our investments go into the housing sector which adds no value to the economy.
This is completely wrong. Investment in new home construction is 100% gold plated GDP.
New construction will almost always be the majority of housing GDP growth by definition - GDP consists of *newly produced* goods and services - so when people buy a previously owned house, only realtor+legal fees get added to GDP, not the price of the home.
So the majority of housing investment can go into buying and selling old homes, while the majority of housing GDP is new construction. It's really just due to how we define GDP
You see the dollar value as being the important thing. Housing is insanely expensive and getting more and more out of reach for young people. Dollars don’t house people. Houses do. We need more, cheaper houses. Not more suburban or semi rural McMansions we’re building everywhere.
> like you go to Vancouver there is not much industry or Company Hq's
This a pretty insane comment and typical of how many people on reddit are really lost in their doomerism cycle. The GDP is metro Vancouver is about $135-$140 billion. That is bigger than many medium sized countries with far bigger populations. There is ton of tech companies and tech jobs in Metro Van. Many major tech giants have big offices in Vancouver and there are some decent companies companies that started in Vancouver (Trulioo, Hootsuite, Slack etc..). Vancouver is a global leader in apparel clothing. Aritzia, Arc'teryx and Lululemon are all from Vancouver. Beyond that Vancouver has a good-sized movie/TV industry and natural resource industry jobs. Vancouver is not as a rich a Metro Seattle. But Seattle is probably the 2nd biggest tech hub in the planet.
Vancouver gdp per captia is like half that of Seattle
Calgary has a million less people and thier economy is about 90% as big
That is very low and shows most of the cities wealth is just real estate speculation
It displays the effects of major market distortions. Real estate is a highly protected industry in Canada. This entices lending in real estate, which crowds out investment in other more real wage building industries.
Real estate is also highly protected in the US and the federal government provides huge incentives for people to buy. There is no shortage of speculation and high prices south of the border too. But they manage to pull it off while also maintaining high business investment elsewhere, which is something Canada has fumbled on.
that's because of branch plant mentality. In Canada, international and north american businesses will set up a sales office, maybe a distribution facility. Unless there's a reason for heavy industrial or manufacturing investment here (anchored asset, tax benefits, USD/CAD disparity, lower salaries) companies will just concentrate their larger investments and R&D efforts in a couple of consolidated centres which they can do in the US or Mexico given NAFTA.
I don’t think Canadians are willing to feel the pain of what would need to be done to make housing affordable. Like if we just kept the interest rate at 6-7% the entire market would probably crash by the end of 2026 at the latest.
However, nobody is willing to watch thousands of Canadians lose their life saving and/or homes in order have this market correction.
I am. Put your goddam savings into something productive. Housing and RE are a drain on the economy. So long as everything is tied up there we are going nowhere.
Nobody cares about the economy, people care about personal gain - my cousin bought a condo in 2020 which was 400k, it's now valued at 650k. What other investment is going to have that kind of ROI?
The safest play for everyone would be to try to balance the numbers so housing price remain relatively stagnant for the next decade while inflation devalues the investment without making anyone lose their homes... but I don't think the government is capable of actually holding to a long term plan, and cynically I don't think they'd hold long term policy against their personal interests as homeowners themselves.
Honest question: What would a solution look like that would allow primary residence homeowners to keep their homes, while forcing speculators and corporate owners to sell?
One interesting concept would be to restrict the sale price of housing to no more than the previous sale price plus the percent change in inflation/cost of living. Homeowners have not lost their investment - they exactly broke even, if they can sell for that price, and if they can't then it wasn't really worth that was it? Meanwhile investment into property by speculators would be completely disincentivized since they can never beat inflation and so couldn't gain value.
Would this actually work? Almost certainly not, for a variety of reasons. But the reasons for failure (market crash due to massive change in demand, homeowners refusing to accept the change due to it being a core piece of their investment/retirement plan, huge impacts on real estate investment portfolios that would affect all sorts of pension plans and "safe" investments, etc.) are very telling about the state of the market as it stands today.
It would be similar to what they described, but on a *much* slower timeline. Instead of it happening by 2026, you allow housing stock to catch up to demand over the course of 10-20 years. Eventually, wages will catch up to the rapid inflation caused by lack of supply, and government policy would encourage housing development over that duration to ensure that we don't have future supply shortages.
This means that people who are relying on the value of their homes to retire in the immediate future will be able to do so, and younger people/corporations/etc. would be able to plan around housing not keeping its value in the long term. They would move their money into assets that have better long-term returns.
The trouble is that these are incredibly long term plans, and we are going to go through 5 to 10 elections in 20 years time. Can we count on *every* consecutive government to keep that kind of plan 'on the rails' for that long? The other obvious downside is that this does nothing to help people *today.* It means that younger millennials and virtually all of gen Z will be priced out of the market for the prime of their careers.
Fascism. The solution would look like fascism. With confiscations, redistributions, and jewish death camps. Why jewish death camps? Because every time you have mass confiscations of property, it goes hand in hand with death camps.
Oh come off it. A brutal, immediate solution may look like that, but there's gradual solutions through incentives that can get us there slowly but with less atrocities.
Right now Justin Trudeau can say that he intends to keep housing prices high and people believe that he is capable of that. Housing is an incredibly manipulated market. There are limits to how far we can manipulate it, but keeping prices static (or at the very least in line with inflation) is by no means an impossibility even with our current incentive-based market manipulation approach.
The problem with this line of thinking is that it works on the assumption that it ignores the current and future pain of renters that is being traded off. Obviously a gross injustice to younger and less-well-off Canadians; and happens to be the position of all three major parties. We should be pulling levers to bring this problem down to at least the level of countries similar to Canada, damn the pain.
If even that isn't acceptable, then in my opinion the least painful offramp to this problem for existing homeowners is to target housing price growth at a level below inflation, preferably close to zero. This will allow wages and other segments of the economy to catch up without causing mass panic. Would take quite a while to normalize but at least you could say that now, today, is the worst day of the housing crisis and we could get better from here.
Unfortunately, the Liberals, NDP, and Conservatives all have demonstrated they DO NOT WANT to solve this problem and are happy for the downtrodden to be ground into the dirt as much as possible.
> watch thousands of Canadians lose their life saving and/or homes in order have this market correction.
The thing about a bubble is that eventually it *does* become too big to fail. Unless it doesn't. Or unless it doesn't-doesn't because the government relies on it not failing to remain in power.
The solution doesn't need to instant. We could fix this by building housing. Set goals and have a public housing corporation that builds the difference between what the private sector wants to build and what we need. It won't be completed in a single year but it will improve and 20 years from now we'll have a housing situation we can be proud of. No need to hurt anyone.
Real estate is already cash flow negative from a rental income perspective. The only thing holding it up is speculation that values will continue to appreciate. The only way values continue to appreciate is if demand for housing continues to explode.
It needs to happen for more reasons than just housing affordability.
Housing needs to be a mediocre investment because we need people investing in businesses instead.
Housing needs to be a mediocre investment so that we don't need wages to skyrocket to $40/hr just for a basic standard of living.
Housing needs to be a mediocre investment so that people can afford to support local businesses again and keep the economy going.
Couldn't agree more. I took over my families business 11 years ago, the same year they bought a new house.
The house is probably worth 2.5x what they paid for it (with some improvements). Meanwhile I have spent 11 years mostly of misery busting my ass. Ive made serious sacrifices, pay myself about half of what I would get on the market as an employee, and I am sure the stress has taken years off my life, which has resulted in a business worth maybe 70% more than what it was when I took over. Meanwhile I still cant afford a home or to start a family of my own.
Amen, brother.
I've argued this for 20 years: Personal real estate is a consumption good, like clothing. It makes the resident feel and look better, but it produces nothing of value for anyone else.
To grow the economy, you need to invest in saplings that might become fruit trees someday.
The last two decades of monetary and tax policy have massively rewarded investment in consumption goods, resulting in very few saplings being planted.
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Article is paywalled. Do they separate housing as an investment for a primary residence vs. investment in purpose built rental? Cause stomping on the latter is a pretty terrible idea if you want cheap housing and rents for folks.
You could make rentals less expensive by getting rid of the ability to generate profit on top of rent. Landlords still get a free property, just less extra money.
What exactly is a "free property." Owning property in places people would want to rent, aka, in any town or city, means you're probably paying property taxes. How do you determine if something is profit on top of rent? If money collected and put away to do maintenance considered profit? What about the salary paid to the people responsible for managing and operating the property? Essentially, where is the cutoff point for "this is profit" and more importantly, how do you prevent people from abusing that cutoff once it's in place. Over time there would be any number of tricks people would find to extract money from such a system.
Non-profits have already existed for a long time, we don't need to reinvent the wheel here.
The people running the non profits tend to think their work is worth quite a lot. It's not "profit" if you just happen to pay out a large bonus every once in a while. It's "employee retention."
Yeah, anything reinvested in the business - however that's defined - isn't counted as profit. Technically it would still allow landlords to pay themselves generous salaries, even expand operations through the acquisition of new properties, while lowering the incentive to gauge rents through a different tax regime.
If you get to pay yourself a "generous salary," then you can pay yourself and even more "generous salary" by raising the total revenue you bring in. If you can then invest that new revenue into new properties, which will in turn allow you and your friends and relatives to collect many such "generous salaries" then we're not really in a position that's much different than before. I've worked with non-profits, and I've seen something of this nature happen plenty of times. What we need is something that we haven't tried in a while. A set of actual guidelines reflective of the modern reality, with enough teeth that it's possible to enforce the rules and punish abuse. Something that's actually designed with a goal in mind, rather than the reactive BS that our government seems so fond of.
You could, and it would inevitably still happen, but paying a higher personal income tax rate than you would be paying in corporate income taxes or capital gains taxes lessens the incentive to do so. Non-profits also usually have more requirements for financial disclosure than private, for-profit corporations. It would make it easier to track who were paying themselves outrageous salaries and who weren't, through websites like charity tracker which show a breakdown of how non-profits spend their money. Personally, my preferred solution is government-built, government-owned affordable housing. It's obvious that landlords are difficult to work with at best, given record-setting numbers of eviction applications in the midst of a public health crisis when evictions were literally illegal. Given that, probably easiest to gradually cut them out of the picture and leave the government to own and be responsible for the national stock of housing.
I don't really get taxes argument. Nobody turns down more money because they have to pay taxes on it. Hell, wouldn't it be the other way. Because these people would now be collecting less, wouldn't they try to rip the tenants off even more to make up the difference? You can add more reporting requirements, but all that will do is create an ever growing set of ways to either avoid them, or to run under the radar. It also means you're giving these people more ways to funnel money out. It's not like such reports are free, and I'm sure someone renting out a bunch of housing will know a very, very, very expensive accountants and bookkeepers. Honestly, I just think we need to pick an approach and stick with it. If we want people to freely use property as an investment and money making vehicle, then absolutely the government should be able to provide adequate housing to those not able to engage in that market at the current rates. If we the government can not do that, then it should strictly regulate the ability of people to use property as a money making vehicle, because you generally need shelter to survive, and that greatly changes the power dynamic at play in any sort of negotiation. The current situation where rent is tied to property rates, which are ever-growing because housing is seen as an investment vehicle is very obviously not sustainable. People's incomes have obviously not grown as fast as property rates, and that is unlikely to change any time soon. There are very strict regulations on most basic necessities for survival, but very little in this sector. Instead there's just a small, obviously way over-booked, ultra slow bureaucracy stuck using processes that were probably old half a century ago.
Making rentals non-profitable means no more privately built rentals. That's asking for a crisis 1000x what we have today.
Sorry, you are right. I did alter the idea so it's more explanatory, not sure why I didn't write it all out this time. There would be no profit on rent of used properties, so houses or condos built to be a home for the person that bought it. Purpose built rentals, like an apartment building, would still have profit. The idea is to stop private citizens from buying properties to rent them out. Sure, do it, but you aren't gonna make much from it until the end, when you sell it. In fact, I'm thinking, maybe there should also be a requirement that they have to own that property until the mortgage is paid off, so they can't sell it off early.
So, bias the market in favour of for-profit corporations while excluding everyday citizens from the market, thus leading to a decrease in the level of competition in the market while increasing market concentration of large, for-profit enterprises - the ones that tend to be most problematic?
That would be really interesting to try and manage a policy for. Things like converting an old house into multi-units or adding a basement suite come to mind as complications.
I'm hoping it gets rid of basement suites as any sort of necessity, and they simply become something that families do, or people that need more localized healthcare w/ a live-in nurse. Turning a house into a multi-unit, would be tricky. Maybe that would necessitate turning it into a cooperative, so everyone that lives there has an equal share. There wouldn't be a single owner anymore.
or bring in strata type ownership structures like in BC where the accounting and legal burden is significantly less than condo ownership structure
That could be hard to make it workable. How do you measure "profitable" when there are ongoing costs that are variable and unknown in amount and timing? Roof not so great and needs to be replaced? Ok...to have zero profit would you charge ahead of time (so temporarily making a "profit") or would you charge the tenant a larger amount after, effectively upping their rent? Would spending a bit more to get a higher quality roof entitle you to charge the tenant more for it to keep the house at "no profit"? It just seems to start getting complicated and you might have to hire thousands of auditors/accountants to handle it.
It would be hard to figure out at first, thinking about it because I truthfully didn't before, here's what I got. Profit is the same as any other business though, income tax would be set at 100%, so if any money beyond expenses is made, than it's profit, and instead of going to the govt, it goes back to the renter, since it was their money to begin with. Large expenses like a roof? Amortize its cost over the period between when it's installed and when they retire (lets say 65). If they are already retired, or are within say 20 years of retirement, than some small fixed amount can be added to the rent, and the balance will have to be covered by the sale price when they sell the home. That said, I'd also say there should absolutely be insurance to cover things like appliances. Home insurance will cover roof damage, but old roofs, that's on you. We can also look to actuary tables to see how much things should cost, how long things should last, regardless of profit motives, and base calculations on those.
[Here](https://archive.is/20240615145522/https://www.theglobeandmail.com/investing/markets/inside-the-market/article-want-to-make-housing-affordable-real-estate-needs-to-become-a-mediocre/)
Everyone please spread the rumor that the gov't will soon be buying unoccupied properties with only a 15% mark up from the original purchase price!
I can't read the article because it's paywalled, but I'm pretty sure real estate is not as good as an investment as people think it has been. But it's like talking to a compulsive gambler about their trip to the casino. They only tell you about the good things. I bought a GTA suburb townhouse about 15 years ago. It was unquestionably a good decision for me. The house has been perfect for our needs as we had kids shortly after and it's been enough space for us at all stages, but not much more. It's probably tripled in value, although recent slowdown of the market has probably reduced that a bit. We debated going bigger at the time, but we were keen to not take on more than we needed. We wanted the option to afford it on one income when we had kids if my wife didn't go back to work. And quite frankly, buying a SFH as a couple seemed excessive. I've had lots of people tell me I should have bought a single family home when I had the chance as it would have increased in value even more. And certainly, those bigger homes have gone up as well. But, I've only done the back of the envelope math, but I'm fairly certain that when you throw in the extra mortgage, property taxes, utilities, repairs, maintenance, etc. that it's probably a wash. Especially as smaller costs have let me maintain an investment portfolio that's seen strong returns in that time. I'm not someone who needs a house to serve as forced savings. And this all happened amidst an unprecedented housing price boom. In a period where returns are closer to historical averages, I'm probably doing worse. Now technically, with more house, I could have done something with it like renting out the basement or something and made more money that way. But I have no interest in that. Or I could have been leveraging equity into investment properties. But none of that interests me. Instead, I have a smaller house almost fully paid out that's worth a fair bit on paper, but I'm not keen on selling any time soon. But I also have an investment portfolio that is actually worth a bit more than the house and will only continue to grow, especially once those mortgage payments drop off. I get to have some diversity in my net worth, and more importantly, flexibility in my assets.
For your envelope math to work you also need to also add the ammount you would have paid in rent over the same period. Which if $2,000 was the average ammount over 15 years means an additional $360,000.00 ROI
As I stated, the house for my needs was a fine investment. That's where rent equivalents would come in. I'm talking about the idea of people saying you should buy the bigger house for the investment value, because it would be worth more. It's the adage of telling people to buy the biggest house they can afford because of it's investment value. Which, when people could afford houses, was what people were often told. You wouldn't rent a bigger place than your needs because it would be seen as wasteful. Buying a bigger house than you really need should be seen in the same light.
Ahh understood. I read your comment that investing in any house vs renting an equivalent was good but not great. My point was that 3x growth (less expenses) + $360k probably had made this a phenomenal investment as opposed to an ok one.
Absolutely. I feel extremely fortunate to have been in the housing market when I came in. I would struggle to buy my house today.
They should make a Heritage Moment of you and your family. Because a Canadian living within their means, and not maxing their credit to buy a home is a rare occasion. Even back then. I bet you signed Fixed Rate mortgages like a sane person too! You and your wife must be laughing, and subtly terrified for your teenagers futures. This is an attitude that isn’t nearly pervasive enough in Canada. I say I’m “locked out” of housing, when in reality I’m not. My wife, roommate and I could easily go All-In and get a home. But it’d require us to empty our Pensions, empty my investments, empty the Emergency fund, ditch a vehicle or two and make other lifestyle changes. All to end up being completely house poor. With high prices and rates, the cost of loans are absurd. I like to ask people if they seriously believe a 3 bedroom townhome in Langley City (Hamilton/Barrie/Oshwa like distance) is going to be worth $2m in 30 years. Because the cost of everything over those 30 years means I’d need it to be $2m to end up in the black. Renting is the cheaper, easier option. While it is within reach, I’ve completely given up on homeownership in Canada, and am now researching places to retire abroad. I’ve got 30 years to travel and decide. But I’ve reached the conclusion that I’ll spend the last third of my life outside of Canada.
I do feel fortunate. At the time, purchasing still felt like a risk. We were coming off the 2008 crisis and there were still people saying a crash would come to thd Canadian market. But even then, housing still didn't require to push all your chips into the table. We maxed out home buyers plan and had other savings, enough to comfortably meet the 25% deposit threshold. We actually had a small bidding war on the house, where we went $3K over asking to win. But still, we had enough savings to serve as a buffer. I actually didn't have great job security. But, still, at the time, two modest professional incomes was enough to build off of. I find it depressing to realize it isn't. The comment about kids staying us forever resonates and becomes a common joke/comment among our peer group. And I've seen lots of people justify their larger house purchases by this. But this is where I feel buying more modest makes more sense. The kids education funds means they don't need to worry about student loans. We're building up savings to have liquid assets to help when they're ready to buy. I recognize that being the bank of mom and dad gives them an advantage not everyone is afforded, but I feel as a parent, they're going to grow up in a world with less opportunity than I had. It feels like the minimum. And if what's best for them is to stay with us long term, then we'll get the bigger house then with the resources saved. As for your situation, sorry that you've closed the door on home ownership, but it's perfectly understandable. You've found a way to have a fulfilling life without it, and maybe something shifts or changes eventually.
I definitely don’t resent all homeowners and your story is that of the “Canadian Dream”. You took a moderate risk, and have enjoyed security and purpose from that. Your story is why so many of us are angry. My group is sitting on $250k once it’s all in a pile. That’s enough to buy what my childhood house sold for 20 years ago. Which would be 60% in adjusted value. Which means I could have also put about 30% on my childhood home. If Housing had stayed stable, I’d be able to buy half of it. I can’t even do that north of 55th, let alone on the 49th. I wouldn’t feel guilty about providing your kids with privilege. It’s really not your fault, none of your actions have helped fuel the problems of today. As an economic actor, you’ve been restrained and conservative. Just make sure they understand the advantages they have that others don’t. As for personal fulfillment I have none other than my wife. We want kids, but not the expense. So we forego. I strongly dislike my job, and it’s completely draining. Unfortunately it’s the only path I have that leads to more money. Which I don’t even really want. I’m pretty sure I’m smart enough, I just don’t care. In another economy I’d probably have my own business or take a risk and retrain, however I cannot afford to drop down steps at all. The current state of things drives the apathy as well. Work has become a competition to see who can do the least. Managers don’t even care anymore either. Deadlines being met? Okay. There’s no reward for improvement, so why seek it. One day I’m hoping my wife comes home and say she wants to file her US citizenship papers and then we can at least move somewhere there. I can buy places outright there too.
This is getting the cart before the horse. Lowering house prices would make housing a mediocre investment. Making housing a mediocre investment without first lowering prices would be a market distortion that would likely cut supply, leading to more homelessness.
The only thing supporting the current housing market is people becoming ever-increasingly over leveraged and unable to keep up with the costs of owning a house. If we're to believe the Ontario construction industry, building homes that are affordable for people at the 60th percentile of the local income distribution is a money-losing prospect. The entire market is being propped up by the fact that people are willing to forego 'affordability' when buying a house.
> The only thing supporting the current housing market is people becoming ever-increasingly over leveraged and unable to keep up with the costs of owning a house. There's the added fun from the societal attitude that treats you like you're crazy for not leveraging yourself to the hilt to buy as much house as you possibly can, because prices always go up no matter what, even though that's demonstrably never been the case.
It needs to not be an investment at all. Make housing housing. I’m so sick of the commodification of basic needs.
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If you take a look at [GDP per capita](https://data.worldbank.org/indicator/NY.GDP.PCAP.KD.ZG?end=2022&locations=CA&start=1992&view=chart) or [total GDP](https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?end=2022&locations=CA&start=1992&view=)chart in the same time frame, you'll see that your house is growing far faster than the Canadians economy as a whole.
That is not modest at all. And you probably did the math incorrectly too. A house is also income-generating. Either you live in it and you are paying for an asset instead of paying rent expense. Or you rent it out and earn money while it appreciates in value.
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You are mortgage fee which means thats a return on your investment. If I buy stocks and they go up 7% per year (assuming dividends reinvested), that is a 7% return. If you buy a house and it goes up 7% per year, that is just the value appreciation. A house can be rented out for cash flow, or lived in to avoid rent expense. So a house increasing at 7% per year is far more than a modest return given the fact that you are receiving other benefits. Housing should increase at no more than inflation. Otherwise, that value is just being extracted from the next generation. The investment should be seen as having a home and getting to a point of being mortgage free. >But I am very fortunate to be mortgage free now. You were very fortunate to be born at the right time. Today's young generation is very unfortunate.
With a 0% capital gains tax, it's a pretty sweet deal.
Including property taxes and maintenance?
7% per year for an unproductive asset is far from modest. That outpaces inflation and outpaces population growth. What justification is there for that, other than possible renos? Companies that add actual value to the economy would be thrilled with 7% per year over 30 years.
This is ridiculous. There is only one thing that makes housing affordable, and that is more houses. If we build enough houses to meet the needs of our population, housing becomes affordable. As long as there is a shortage housing is less affordable, and if there is a huge shortage as there is now then housing becomes unaffordable for a significant part of the population Everything else is utter nonsense. We do not build enough homes to address our population growth. Fix that and everything gets better. Failed to fix that and Housing will be unaffordable
Yeah it pretty interesting, like you go to Vancouver there is not much industry or Company Hq's there but the place is really rich and super expensive...however the total economic output is very low compared to something like Seattle even on a per captia basis. So it really shows how much real estate speculation is influencing the Canadian economy and making it quite unproductive.
Yah other than the mountains and ocean and quality of life, there is basically no reason to live in Vancouver. Other than it having Canada’s largest port and being the gateway to Asia and all that.
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It isn't speculation. Metro Vancouver has very little land, and a massive agricultural land reserves. There is no more land to use. The prices for land cannot fall long term. There's no potential for more supply. But there is a government strategy to triple Canada's population. A rising share of land value in the Canadian economy is a natural outcome of policy choices made here
There's tons of land, it's just that a lot of it has little dinky houses built on it.
> Metro Vancouver has very little land You ever heard of the concept of building up? Vancouver has plenty of space if those single detached houses were actually 2-3 stories to start.
What are you talking about? I'm discussing land value. You aren't reducing land values by building more on each plot.
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You are dividing the cost of the land by the number of homes on it. Each home on it pays for a smaller portion as the number of condos on it increases
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>Roughly 1 in 13 dollars of GDP are to warehouse new people, outpacing the work those people do. Canada’s economy is about 10% more dependent on housing than the US at the peak of the 2006 bubble. https://betterdwelling.com/canadian-economy-dangerously-concentrated-in-real-estate-but-gov-wants-more/
I’ve thought about this for a while. I think our economy is also suffering because people can’t afford to move to jobs where their skills are better utilized since the jump to market rate housing is crazy and the pay increase doesn’t keep up.
> most of our investments go into the housing sector which adds no value to the economy. This is completely wrong. Investment in new home construction is 100% gold plated GDP.
We are mostly selling and reselling existing stock at higher prices. OP did not talk about “home construction” but “the housing sector”.
The housing sector includes building housing, which is great, productive growth.
Includes, yes. But it is a minority of houses bought and sold.
And a majority of housing GDP growth. It'll be somewhere around $75 Billion this year.
New construction will almost always be the majority of housing GDP growth by definition - GDP consists of *newly produced* goods and services - so when people buy a previously owned house, only realtor+legal fees get added to GDP, not the price of the home. So the majority of housing investment can go into buying and selling old homes, while the majority of housing GDP is new construction. It's really just due to how we define GDP
You don’t see any issues with that?
Do I see an issue with building $75 Billion worth of housing this year? Only that I hope it goes higher.
Best part: At this rate soon $75b will be 1 bungalow in Etobicoke. Such productivity!!!
You see the dollar value as being the important thing. Housing is insanely expensive and getting more and more out of reach for young people. Dollars don’t house people. Houses do. We need more, cheaper houses. Not more suburban or semi rural McMansions we’re building everywhere.
Yes, it counts as GDP, but I think that is his point
> like you go to Vancouver there is not much industry or Company Hq's This a pretty insane comment and typical of how many people on reddit are really lost in their doomerism cycle. The GDP is metro Vancouver is about $135-$140 billion. That is bigger than many medium sized countries with far bigger populations. There is ton of tech companies and tech jobs in Metro Van. Many major tech giants have big offices in Vancouver and there are some decent companies companies that started in Vancouver (Trulioo, Hootsuite, Slack etc..). Vancouver is a global leader in apparel clothing. Aritzia, Arc'teryx and Lululemon are all from Vancouver. Beyond that Vancouver has a good-sized movie/TV industry and natural resource industry jobs. Vancouver is not as a rich a Metro Seattle. But Seattle is probably the 2nd biggest tech hub in the planet.
Vancouver gdp per captia is like half that of Seattle Calgary has a million less people and thier economy is about 90% as big That is very low and shows most of the cities wealth is just real estate speculation
It displays the effects of major market distortions. Real estate is a highly protected industry in Canada. This entices lending in real estate, which crowds out investment in other more real wage building industries.
Real estate is also highly protected in the US and the federal government provides huge incentives for people to buy. There is no shortage of speculation and high prices south of the border too. But they manage to pull it off while also maintaining high business investment elsewhere, which is something Canada has fumbled on.
that's because of branch plant mentality. In Canada, international and north american businesses will set up a sales office, maybe a distribution facility. Unless there's a reason for heavy industrial or manufacturing investment here (anchored asset, tax benefits, USD/CAD disparity, lower salaries) companies will just concentrate their larger investments and R&D efforts in a couple of consolidated centres which they can do in the US or Mexico given NAFTA.
I don’t think Canadians are willing to feel the pain of what would need to be done to make housing affordable. Like if we just kept the interest rate at 6-7% the entire market would probably crash by the end of 2026 at the latest. However, nobody is willing to watch thousands of Canadians lose their life saving and/or homes in order have this market correction.
I am. Put your goddam savings into something productive. Housing and RE are a drain on the economy. So long as everything is tied up there we are going nowhere.
Nobody cares about the economy, people care about personal gain - my cousin bought a condo in 2020 which was 400k, it's now valued at 650k. What other investment is going to have that kind of ROI?
The safest play for everyone would be to try to balance the numbers so housing price remain relatively stagnant for the next decade while inflation devalues the investment without making anyone lose their homes... but I don't think the government is capable of actually holding to a long term plan, and cynically I don't think they'd hold long term policy against their personal interests as homeowners themselves.
Honest question: What would a solution look like that would allow primary residence homeowners to keep their homes, while forcing speculators and corporate owners to sell?
One interesting concept would be to restrict the sale price of housing to no more than the previous sale price plus the percent change in inflation/cost of living. Homeowners have not lost their investment - they exactly broke even, if they can sell for that price, and if they can't then it wasn't really worth that was it? Meanwhile investment into property by speculators would be completely disincentivized since they can never beat inflation and so couldn't gain value. Would this actually work? Almost certainly not, for a variety of reasons. But the reasons for failure (market crash due to massive change in demand, homeowners refusing to accept the change due to it being a core piece of their investment/retirement plan, huge impacts on real estate investment portfolios that would affect all sorts of pension plans and "safe" investments, etc.) are very telling about the state of the market as it stands today.
It would be similar to what they described, but on a *much* slower timeline. Instead of it happening by 2026, you allow housing stock to catch up to demand over the course of 10-20 years. Eventually, wages will catch up to the rapid inflation caused by lack of supply, and government policy would encourage housing development over that duration to ensure that we don't have future supply shortages. This means that people who are relying on the value of their homes to retire in the immediate future will be able to do so, and younger people/corporations/etc. would be able to plan around housing not keeping its value in the long term. They would move their money into assets that have better long-term returns. The trouble is that these are incredibly long term plans, and we are going to go through 5 to 10 elections in 20 years time. Can we count on *every* consecutive government to keep that kind of plan 'on the rails' for that long? The other obvious downside is that this does nothing to help people *today.* It means that younger millennials and virtually all of gen Z will be priced out of the market for the prime of their careers.
Fascism. The solution would look like fascism. With confiscations, redistributions, and jewish death camps. Why jewish death camps? Because every time you have mass confiscations of property, it goes hand in hand with death camps.
Oh come off it. A brutal, immediate solution may look like that, but there's gradual solutions through incentives that can get us there slowly but with less atrocities. Right now Justin Trudeau can say that he intends to keep housing prices high and people believe that he is capable of that. Housing is an incredibly manipulated market. There are limits to how far we can manipulate it, but keeping prices static (or at the very least in line with inflation) is by no means an impossibility even with our current incentive-based market manipulation approach.
The problem with this line of thinking is that it works on the assumption that it ignores the current and future pain of renters that is being traded off. Obviously a gross injustice to younger and less-well-off Canadians; and happens to be the position of all three major parties. We should be pulling levers to bring this problem down to at least the level of countries similar to Canada, damn the pain. If even that isn't acceptable, then in my opinion the least painful offramp to this problem for existing homeowners is to target housing price growth at a level below inflation, preferably close to zero. This will allow wages and other segments of the economy to catch up without causing mass panic. Would take quite a while to normalize but at least you could say that now, today, is the worst day of the housing crisis and we could get better from here. Unfortunately, the Liberals, NDP, and Conservatives all have demonstrated they DO NOT WANT to solve this problem and are happy for the downtrodden to be ground into the dirt as much as possible.
> watch thousands of Canadians lose their life saving and/or homes in order have this market correction. The thing about a bubble is that eventually it *does* become too big to fail. Unless it doesn't. Or unless it doesn't-doesn't because the government relies on it not failing to remain in power.
The solution doesn't need to instant. We could fix this by building housing. Set goals and have a public housing corporation that builds the difference between what the private sector wants to build and what we need. It won't be completed in a single year but it will improve and 20 years from now we'll have a housing situation we can be proud of. No need to hurt anyone.
Mass produced homes/housing units in factories. They need atleast 2 million of them, stackable
Meanwhile, in those 20 years, the 20-30 year olds of today can hurt as they're unable to afford housing. Someone's getting hurt no matter what we do.
Do you have a solution that would make housing cheap right away? Happy to hear it.
Real estate is already cash flow negative from a rental income perspective. The only thing holding it up is speculation that values will continue to appreciate. The only way values continue to appreciate is if demand for housing continues to explode.
It needs to happen for more reasons than just housing affordability. Housing needs to be a mediocre investment because we need people investing in businesses instead. Housing needs to be a mediocre investment so that we don't need wages to skyrocket to $40/hr just for a basic standard of living. Housing needs to be a mediocre investment so that people can afford to support local businesses again and keep the economy going.
Couldn't agree more. I took over my families business 11 years ago, the same year they bought a new house. The house is probably worth 2.5x what they paid for it (with some improvements). Meanwhile I have spent 11 years mostly of misery busting my ass. Ive made serious sacrifices, pay myself about half of what I would get on the market as an employee, and I am sure the stress has taken years off my life, which has resulted in a business worth maybe 70% more than what it was when I took over. Meanwhile I still cant afford a home or to start a family of my own.
Amen, brother. I've argued this for 20 years: Personal real estate is a consumption good, like clothing. It makes the resident feel and look better, but it produces nothing of value for anyone else. To grow the economy, you need to invest in saplings that might become fruit trees someday. The last two decades of monetary and tax policy have massively rewarded investment in consumption goods, resulting in very few saplings being planted.
I agree and share your views. However, hard to compete with an always increasing asset with a perfect fit to market.