Canada's 'housing bubble' deemed close to bursting

[someone123]

Originally Posted by suburbanite

I don't know that it's really anything secret or sketchy.

As a side point, I wasn't trying to suggest this. I am just pointing out that taxes tend exacerbate affordability problems, plus there are some political factors at play.

As far as municipalities go, property taxes are one of the top things that councillors get pressured on from their constituents while development fees are noticed by a small portion of the population who in some cases can't or don't vote when the rate is being set (you might not even live in the city yet when purchasing).

Beyond this, there is a tendency in government for scale to cause inefficiency. Once you have a $10B budget or whatever a lot of stuff is "peanuts" in comparison and there tends to be a greater magnitude of miscellaneous spending (maybe a greater percent as well). If this is built off of some kind of ballooning price at its root then it can increase the cost burden a lot.

Let's say we put a 3% "eco fee" on clothing and then we had some kind of cost disease (the clothing safety board is established to protect us and decides that Canada will only be supplied by 4 fully accredited clothing factories) and t-shirts went up to $3,000 each. It's likelier in that case that you'd see a massive clothing eco fee bureaucracy than a drop in the fee to 0.03%. And you'd have a bunch of people saying it's only 3%, or only $90 per t-shirt which isn't too bad in the scheme of things as we're talking about a big ticket item and we have a lot of major ecological problems in the world like climate change.

[swimmer_spe]

Originally Posted by ssiguy

One thing that makes matters much worse is what happens all across GV, pulling down ANY SFH pre-1980 and replacing it with a new monster SFH. It is a horrible waste of labour, land, and takes potentially affordable housing off the market.

NO SFH should be allowed to be pulled down unless they increase density by at LEAST triple.

For that to happen, you need to find a way to shut down NIMBY. Till then, good luck.

[Wigs]

Originally Posted by 1overcosc

I mean, look at the layout I posted above for 250 square feet.

I wouldn't have wanted to spend my whole life living there but that studio was perfectly fine for the phase of my life I was in. I paid $600 in rent for that. I would not have preferred an outcome where my rent was $1200 because the government mandated the unit be twice the size.

most micro units seem to be more like niwell posted and not your example
500 sq ft is only 20x25 feet or 6.1x7.6 metres. That's not exactly HUGE to have a bathroom, useable kitchen with decent appliances (an actual oven!), and separation between your bed and sitting/living/tv area.

[niwell]

Originally Posted by suburbanite

I don't know that it's really anything secret or sketchy. Development charges are broken down into the individual levies that are being raised. The biggest components are always transit, parks, roads, and sewers. Given that half of downtown Toronto is pretty much torn up for watermain replacements, road work, and soon a massive Queen Street subway I don't doubt that massive amounts of money are being sourced from DCs and deployed towards capital projects. The worst kept secret in town is that the City is sitting on some ridiculous $200 million+ war chest in park levies that have been raised over the course of the condo boom without any major investments into new or existing parks.

DCs are 100% the addictive drug that have let municipalities hit the sweet spot between accommodating growth and keeping property taxes down. The problem is that the state of infrastructure is getting worse every year, and even general maintenance costs are going to increase drastically over the next decade. As these costs go up and property taxes remain flat, the burden of funding new and existing infrastructure is borne by people who are just getting into the housing market, not those who have lived near and benefitted from said infrastructure for years.

Yep. At some point something needs to give, which is why I wouldn't be opposed to rethinking how the development charge process work entirely. It wouldn't be popular but so long as municipalities have to accommodate growth at ever-increasing costs it could be treated as any Provincial/municipal upload. Municipalities would have to prove costs are being borne by development and show that certain services are being covered by property taxes as opposed to being lumped in with services associated with development. Basically don't punish municipalities who are taking on the burden of growth when there are hard costs associated with it.
We already do similar stuff with Northern and rural municipalities through the Ontario Municipal Partnership Fund as a tool for redistribution.

RE: park levies - I believe a significant portion of this has been raised through Section 37 Community Benefits Charges? As opposed to development charges where it was clear what funds are being collected for, Section 37 could actually get pretty dodgy. Basically developers could be granted planning permissions for increased density/height etc in return for funds allocated towards community improvement. Not the worst idea in theory but it was a pretty opaque system of back and forth between the City and developers. North York Community Council tried to codify this to some extent where developers were granted planning permissions in return for specific improvements, but overall it ended up being pretty ad hoc. Not sure what's happening with the replacement to this process.

[niwell]

Originally Posted by 1overcosc

I mean, look at the layout I posted above for 250 square feet.

I wouldn't have wanted to spend my whole life living there but that studio was perfectly fine for the phase of my life I was in. I paid $600 in rent for that. I would not have preferred an outcome where my rent was $1200 because the government mandated the unit be twice the size.

There's nothing wrong with the size in of itself so long as the space is usable, and the cost is low. Emphasis on the latter. Though they should still probably make up a very small portion of overall units. I've been more than a bit wary of the promotion of chic "micro-units" that still manage to cost a fortune.

Those 3-4 storey townhouses with narrow footprints you brought up are another example of poorly utilized space. Can't imagine living in one with a family.

[Wigs]

Originally Posted by niwell

There's nothing wrong with the size in of itself so long as the space is usable, and the cost is low. Emphasis on the latter. Though they should still probably make up a very small portion of overall units. I've been more than a bit wary of the promotion of chic "micro-units" that still manage to cost a fortune.

Those 3-4 storey townhouses with narrow footprints you brought up are another example of poorly utilized space. Can't imagine living in one with a family.

1overcosc's draft example and Chicago style 3 flats are much nicer alternatives.

[thurmas]

Zing Scott Aitchison taking on Bonnie Crombie mayor of Mississauga:

https://twitter.com/ScottAAitchison/status/1664664979415486464

https://twitter.com/ScottAAitchison/status/1664378772835954694

[swimmer_spe]

If the affordability of housing is mainly in the larger cities, and that is mainly due to the draw of those cities, would a sound housing plan include ways to make other areas more attractive?

Pick an area you think could be a draw but isn't. What would be needed to draw people to it?

[thewave46]

Originally Posted by swimmer_spe

Pick an area you think could be a draw but isn't. What would be needed to draw people to it?

Fort McMurray, Alberta was not much of a draw prior to the oil sands development. The oil companies threw gads of money at it. People came.

So either the place has to have some intrinsic draw (city amenities, good weather) or have a seriously strong monetary incentive to draw people there.

The latter is hard to sustain outside of resource towns, because it requires a company to have its biggest cost (labour) unusually high relative to locating elsewhere, putting them at competitive disadvantage. Since resources can't be moved, they're stuck paying people big wages to live in undesirable places. If the oil sands collapsed, would Fort McMurray still thrive? It seems doubtful.

[swimmer_spe]

Originally Posted by thewave46

Fort McMurray, Alberta was not much of a draw prior to the oil sands development. The oil companies threw gads of money at it. People came.

So either the place has to have some intrinsic draw (city amenities, good weather) or have a seriously strong monetary incentive to draw people there.

The latter is hard to sustain outside of resource towns, because it requires a company to have its biggest cost (labour) unusually high relative to locating elsewhere, putting them at competitive disadvantage. Since resources can't be moved, they're stuck paying people big wages to live in undesirable places. If the oil sands collapsed, would Fort McMurray still thrive? It seems doubtful.

Fort Mack is a great example. 15 years ago, I had considered working there, but they had no housing available. So, people started pulling camping trailers there and renting them out when they flew home. So, maybe companies need to build enough housing to house anyone who does not live there. I am not talking trailers. I am talking full 1 bedroom apartments that after the mines close, those buildings could be handed over to the municipalities or sell it.

If the Ring of Fire ever gets built, hopefully they do that there. If there is as much mineral value there, it could turn into a Sudbury, Timmins or Fort Mack.

[yaletown_fella]

I just read an article on UT about housing prices in Toronto rising due to heated demand.

While Im generally not a fan of regulation , theres so much of it already, and some actual good regulation would be hiking the down payment requirement to 30% to help reduce demand.

Too many buyers are getting approved with minimum down payment and data science/marketing jobs that won't be around in few years. Many of these jobs are a result of the zero percent interest rate/irrationally exuberant covid bubble environment. These banks are like drunken sailors approving some of these people.

[casper]

Originally Posted by yaletown_fella

I just read an article on UT about housing prices in Toronto rising due to heated demand.

While Im generally not a fan of regulation , theres so much of it already, and some actual good regulation would be hiking the down payment requirement to 30% to help reduce demand.

Too many buyers are getting approved with minimum down payment and data science/marketing jobs that won't be around in few years. Many of these jobs are a result of the zero percent interest rate/irrationally exuberant covid bubble environment. These banks are like drunken sailors approving some of these people.

The bank of Canada has been accomplishing the same thing bumping up interest rates. They are doing it for other reasons, but reducing demand is still the outcome.

Any government that pumps the minimum down payment will be unpopular especially with younger people looking to get into the market. Better to leave that nasty business to the Bank of Canada that operates at arms length.

[yaletown_fella]

Originally Posted by casper

The bank of Canada has been accomplishing the same thing bumping up interest rates. They are doing it for other reasons, but reducing demand is still the outcome.

Any government that pumps the minimum down payment will be unpopular especially with younger people looking to get into the market. Better to leave that nasty business to the Bank of Canada that operates at arms length.

A lot of those young people with low down payments are also dumb and fall for the hype of a condo being a foolproof investment, paying $500,000 for a condo with a single wall modular kitchen and minifridge.

[casper]

Originally Posted by yaletown_fella

A lot of those young people with low down payments are also dumb and fall for the hype of a condo being a foolproof investment, paying $500,000 for a condo with a single wall modular kitchen and minifridge.

You should not be buying a condo as an investment. You should be buying it as a home.

Your risk of being evicted or the rental costs to go up dramatically disappear if you own a condo vrs renting an apartment.

At that point is it cheaper to rent for 10 year or is it cheaper to buy and paying that banking, strata costs and taxes.

I own a condo in a 9 story building built in 1977. Much happier (even with the higher strata fees) than a newer condo. The acquisition costs was much lower. Just now we are putting in new elevators. New carpeting and paint went in to the halls a few years ago. If you have a proper reserve fund and good maintenance these building should last a long time.

[yaletown_fella]

I like some older buildings, but the fees are too high so I think if I was going for somthing of that age range it'd have to be a tiny condo townhouse, because they don't have elevators, window cleaning and other amenities like pools that are costly to service.

I think early circa 1999-2009 condos are the sweet spot between a price tag, best layout/finishes and maintenance/strata fees assuming we expect to live 30 more years.

[someone123]

Another graphic on development fees and taxes. A further observation here is that detached housing and townhouses tend have lower fees per square foot.



Article here: https://canada.constructconnect.com/dcn/...ment-fees-crippling-housing-construction

These fees contribute to making incremental up-zoning plans infeasible.

[hipster duck]

^The more I think about it, the more I realize that Canada does basically everything wrong in the book when it comes to housing. Doesn't matter which level of government, or whether it's supply, demand, macro or micro policy. It all just adds fuel to a raging fire, and is very difficult to get out of.

Housing is to Canada what healthcare is to the United States.

[whatnext]

Originally Posted by casper

The bank of Canada has been accomplishing the same thing bumping up interest rates. They are doing it for other reasons, but reducing demand is still the outcome.

Any government that pumps the minimum down payment will be unpopular especially with younger people looking to get into the market. Better to leave that nasty business to the Bank of Canada that operates at arms length.

They haven't been successful. Canadians are still the most indebted people in the G7.

The awkward economic truth: A recession might be just what Canada needs
Inflation is too high and the economy’s been warped by years of cheap money. Now might be the time for some strong medicine
TIM KILADZE
MATT LUNDY ECONOMICS REPORTER
PUBLISHED 7 HOURS AGO

.....What no one seems to ask is: What if a recession is a good thing? What if a prolonged economic slump is exactly what Canada needs?

Historically, the economy has gone into recession roughly once a decade because, in simple terms, it overheats and needs a reset. Yet at this point Canada and the U.S. haven’t actually faced a recession in more than a decade. This doesn’t include the COVID-19 pandemic, but that was more like a natural disaster, and the crisis prompted governments to unleash trillions of dollars worth of recovery spending......

.....The economy has also been warped by years of cheap debt – a byproduct of ultralow interest rates and the vast sums of money created to facilitate stimulus spending. “Fifteen years of that amount of liquidity, or free money, distorts the financial system,” says Mark Wiedman, of the global client business at BlackRock Inc., the world’s largest asset manager. “It also starts to distort the real economy.”.....

.....in Canada, much of the paper wealth has accumulated in the housing market. Strong demand, low supply, cheap money and rampant speculation have conspired to drive up prices to eye-watering levels. Canadian households are now the most indebted among the Group of Seven countries, as a percentage of gross domestic product (GDP), largely due to the oversized mortgages they’re paying down......(bold mine)

https://www.theglobeandmail.com/business/article-recession-canada-economy-need/

[someone123]

Originally Posted by hipster duck

^The more I think about it, the more I realize that Canada does basically everything wrong in the book when it comes to housing. Doesn't matter which level of government, or whether it's supply, demand, macro or micro policy. It all just adds fuel to a raging fire, and is very difficult to get out of.

Housing is to Canada what healthcare is to the United States.

Yep. I think it probably just won't be fixed in time to make much difference to my generation (it might collapse). If it does get fixed then it will likely come from pushing in many different areas at once. This means promoting public and private investment, improving policy at all levels of government, and so on. The narrow debates about where to point the finger (e.g. is it the province or federal government's fault) are not helpful.

I think the political problems go deeper. There an unholy accidental alliance between different factions. On the one hand you've got people who love to see their asset prices rise, then on the other you have quite broken and neurotic left wing politics in the camps that normally would fight harder for goals like housing affordability.

[ssiguy]

We could build a million purchase homes tomorrow and it wouldn't make a hoot of difference because the vast majority would be bought by speculators and money launderers as a place to park/clean their money.

We MUST force all companies {except obviously those who own and run rental properties} to sell all of their housing and all lands currently zoned as residential. We must do the same for family units where they can only own 2 homes in one province and 3 nation wide.

Legally you can't force them to sell but you can basically do it via taxation. You have a 6 months to liquidate and after that you pay a 100% sales tax. This would put hundreds of thousands of homes onto the market almost immediately and bring down those prices as everyone scurries to sell their properties all at once.

As for developers who own land, they have a one year window to start construction on the land they own lest they too be hit with a 100% sales tax. It can only be sold to a developer if that developer already has approved plans on what they are going to do with it with construction beginning within the year and a FIRM commitment as to when the building will be completed. There is a huge empty lot down the street from me surrounded by low rise apts/condos and has had the zoning approved forever. While demand is very high, the damn land has been sitting vacant for a decade. I talked to the local BIA and that are also very upset but said that it was bought with dirty money and they don't even know who actually owns it except a numbered company which is money laundering 101. Such a taxation system would force these people to sell.