Housing Bubble II: The Quest To Build Enough Homes Where People Actually Need Them

[Nite]

Originally Posted by someone123

Around here house prices became unaffordable long before rents. Now rent affordability has deteriorated as well. Over time it just looks like more and more little islands of affordability going underwater. Soon apartments in Saskatoon will be unaffordable or whatever.

In the GTA there have been relatively few sales recently so the sale price data is a bit questionable. I would guess that if prices soften as rents spike people will be less inclined to sell. A lot of the articles "undersell" this as they point out that sales were the slowest since 2000 but without correcting for the massive population growth in the GTA over that period. It is an unusual market.

Rents have been falling in Toronto for the last 3 months, (up 2% YoY) however.
MoM both rents and house prices are falling in the GTA right now.

Rent in Toronto declines for third month in a row: report

The average apartment rent in Toronto has declined for the third month in a row, according to a monthly report by Rentals.ca.

According to the January report, the total average asking price for an apartment in Toronto increased just 2.1 per cent from a year ago to an average rent of $2,832.

In November, rent decreased 2.4 per cent year-over-year to $2,913. The organization’s October report was the first to indicate a slowdown in rental costs since August 2021...

https://www.cp24.com/news/rent-in-to...port-1.6726689

[hipster duck]

Originally Posted by niwell

I've posted this before, but the relationship between rental affordability and tent cities takes place at the margin. The person who rented a 1bdrm for $2k and was renovicted is probably going to look into roommates or maybe move back with family due to increases. Or simply make do with less. The person with addictions/mental health issues who was eking by in a SRO apartment that cost a couple hundred may not have those options as that housing typology quickly dwindles.

I'm simplifying a bit, but I like to think of a "housing ladder", which is the housing situation people of different means and stages of their life can realistically slot into. It kind of goes something like this, from top to bottom:

A - Own your desired house, with no trade offs.

B1 - Own your desired house, but pay a mortgage slightly out of your means or make a trade-off (take in secondary suite renters)
B2 - Own a starter home that you don't really desire, as a trade-off for not going the B1 route

C1 - Own a starter home, but pay a mortgage slightly out of your means
C2 - Renting comfortably, but waiting to buy. A trade-off for not going the C1 route.

D1 - Rent a place that you like, but pay rent that is out of your means
D2 - Rent a place you don't like, as a trade-off for D1

E1 - Rent a place you don't like, but pay rent that is out of your means
E2 - Find a precarious arrangement that reduces your rent to something that is within your means: shacking up with a partner you didn't intend to shack up with; take in extra family against the rules in your lease, etc.

F1 - The precarious arrangement in E2 is what you aspire to on a good day. Otherwise, you're couch surfing.
F2 - Homeless

Since Covid, everybody I know who isn't in Group A has been knocked down a peg. I'm B2 because I refinanced in 2020 but if my mortgage comes up for renewal at the end of next year and rates are still like this, I'll be C1. My brother-in-law's household makes over $400,000 in Vancouver (VP and Sr. Manager), but they're B1. Twenty years ago they'd be A easily. I have single friends with entry-level professional jobs that are falling into E1 - they used to be D2 or even D1.

[Truenorth00]

^ Good model. I'm B2 as well.

[Acajack]

I am lucky to be in A through no brilliance of my own. Just a question of timing.

All of my siblings and my wife's siblings (40s and early 50s) are As as well, except for one sibling who recently went from A to B1 due to some bad timing and unfavourable move from one market to another.

My parents (young boomers) flipped from B1 to A for most of their lives.

[giallo]

I like the visual 'housing ladder' concept. Nice one, hipster duck.

I moved back to Canada two years ago, so I'm not close to where I'd like to be.

I'd say I'm C2 at the moment. I'd like to buy an apartment in the future, but I don't really have a firm timeline as to when that would be.

[suburbanite]

At the risk of beating a dead horse further, the housing ladder is a good illustration of why nominal prices should not be the key indicator of whether a housing crisis exists. It's pretty easy to envision how in both a low interest rate -> high asset price, and high interest rate -> lower asset price scenario, people can slide down the ladder if the number of viable options at each rung continues to shrink.

[Nashe]

I've been at A most of my lucky, Gen X life, but contemplating slipping to B1 when I retire, unless I can restructure my lifestyle.
If I can manage the 7 year gap until my house is paid off, I'll be sitting pretty.

[niwell]

I like that idea of the housing ladder - makes a lot of sense to me.

I'd say most of my friends in Toronto are B2 or C2 - either renting in places they've been a while and waiting for an opportunity, or living in a place that's smaller than they'd like to get into the property market. However I know a few people in the D1/D2 category and some younger coworkers who fall into the E1 category.

I'm a weird hybrid - we own a place we like and can easily afford but also isn't in an ideal location so can't use as a primary residence. And also rent a place in Toronto we like and can afford, but isn't idea due to the instability inherent in renting. So a mix of B2 and C2.

[lio45]

Originally Posted by Acajack

I am lucky to be in A through no brilliance of my own. Just a question of timing.

All of my siblings and my wife's siblings (40s and early 50s) are As as well, except for one sibling who recently went from A to B1 due to some bad timing and unfavourable move from one market to another.

My parents (young boomers) flipped from B1 to A for most of their lives.

Amusingly, I’m currently D2, though I could be in A if I wanted.

[urbandreamer]

Having watched my parents age and their struggles with stairs, I think we should be building more bungalows without basements. Sitting in ER a lot over the past few years, it's astonishing the number of people I saw with nasty injuries and broken arms etc from "I fell down the stairs."

A friend lives in an 1890s Victorian row house with extremely steep, narrow staircases. She fell down the stairs recently severely bruising her rib cage.

Oh, and horrific knife injuries from mostly TFW students working in restaurant kitchens.

I've been E2 all my life. My goals at the moment are to change careers - so far sales looks like the best solution to double or triple my income - and either buy/build a small house in a lower cost region or continue to rent and boost my dividend income above poverty level.

[lio45]

Basements exist because we need deep foundations in our climate. Houses in warmer climes have no basements. (I built decent-sized houses in FL a few years ago, no basements at all, just a concrete slab in the sand. Very easy!)

Up here, if you’re going to have to dig that deep, it would be stupid to refuse to use the near-free space. If you don’t like stairs then you probably almost never need to go down anyway.

[Atrial78]

Originally Posted by Nite

Rents have been falling in Toronto for the last 3 months, (up 2% YoY) however.
MoM both rents and house prices are falling in the GTA right now.

https://www.cp24.com/news/rent-in-to...port-1.6726689

How much of this is regular seasonal variation? I imagine rents fall a little in winter (lower demand) and rise in summer (high demand, people moving).

[urbandreamer]

Realistically, I'm looking at owning a small home somewhere in the USA, like 900sqft or less and possibly continuing to rent in Canada. Unfortunately I can see myself being single for ever as women tend to prefer stable, career-oriented men. My life so far: jack of all trades master of none.

[Atrial78]

Originally Posted by suburbanite

Now obviously a lot of new homes end up in the rental supply, but the fact that we're increasing population by this much without seeing tent city's and shantytowns popping up means that either:

My experience may be different than yours. My parents live in Vancouver and over the last 5-10 years there has been a significant increase in tent cities popping up. It used to be confined to parts of Vancouver, but now we are seeing tent cities in suburbs like Langley and Surrey.

I moved away to Winnipeg. Many of my peers I grew up with have either moved away from Vancouver or some have moved back home with their parents, despite having well-paying jobs. Unfortunately, even in Winnipeg, homelessness is worsening and rent inflation is significant. A new 2 bedroom costs about 2k in Winnipeg these days.

[GeneralLeeTPHLS]

Ever since moving back to Toronto, I was in the D2 category for a few months, before finding myself something that fits D1. My situation recently improved, with rent now being more affordable.
Unfortunately, at the same time, my income has been shrinking consistently due to the industry I'm in, so while its still true, that is no longer the case. (Still D1)
I'm just hoping this year is better than last year in that regard.

That being said, I don't know what to expect. A lot of people I know are further down the social ladder than me, so I should be grateful for that.

[urbandreamer]

Exactly. The TFW students have really messed up my job situation. It's been impossible to find full time work in the GTA. Hence my current idea to either try sales or become a realtor - a former coworker became a realtor in 2018 and wow, he's done very well. Sure, it's tougher now with high interest rates, but still beats working long hours for crap wages.

[MonkeyRonin]

Originally Posted by hipster duck

I'm simplifying a bit, but I like to think of a "housing ladder", which is the housing situation people of different means and stages of their life can realistically slot into. It kind of goes something like this, from top to bottom:

A - Own your desired house, with no trade offs.

B1 - Own your desired house, but pay a mortgage slightly out of your means or make a trade-off (take in secondary suite renters)
B2 - Own a starter home that you don't really desire, as a trade-off for not going the B1 route

C1 - Own a starter home, but pay a mortgage slightly out of your means
C2 - Renting comfortably, but waiting to buy. A trade-off for not going the C1 route.

D1 - Rent a place that you like, but pay rent that is out of your means
D2 - Rent a place you don't like, as a trade-off for D1

E1 - Rent a place you don't like, but pay rent that is out of your means
E2 - Find a precarious arrangement that reduces your rent to something that is within your means: shacking up with a partner you didn't intend to shack up with; take in extra family against the rules in your lease, etc.

F1 - The precarious arrangement in E2 is what you aspire to on a good day. Otherwise, you're couch surfing.
F2 - Homeless

I think this is pretty accurate, though worth noting that it reflects time as much as it does income. For example, I'm in the C2 group but "stuck" there because we moved in a couple years ago - and also just got pretty lucky (could in theory buy a place, but it would be a downgrade in terms of actual housing quality and/or cost a lot more). If I were looking for an apartment today though, I'd probably be in the D1/D2 group instead. Conversely, if I were a few years older, I could have been in the B1/B2 group by this point in my life.

Originally Posted by lio45

Basements exist because we need deep foundations in our climate. Houses in warmer climes have no basements. (I built decent-sized houses in FL a few years ago, no basements at all, just a concrete slab in the sand. Very easy!)

Up here, if you’re going to have to dig that deep, it would be stupid to refuse to use the near-free space. If you don’t like stairs then you probably almost never need to go down anyway.

I dunno, I've seen/designed plenty of slab-on-grade or pad footing projects in Canada. Or places built on concrete pier footings (no slab required at all) - either way, all cheaper/faster/easier than excavating & building out a full basement.

[WarrenC12]

I'm in A. If you ask my wife, we are in B2.

[someone123]

That is a good list. I'm in the B2 camp, and for me personally the housing market debate is about B1 vs. B2 and how much risk I'd want to take on. I tend to avoid debt and risk and find that more comfortable.

One common situation around here is that people are in semi-decent rental arrangements but can't afford to move. It's even hard to justify most moves if you own as the transaction costs are so high and there's so little variety unless you're in the $1.5M+ range.

The biggest thing that bothers me about the housing situation isn't that it's impractical for me to afford a big house, it's that I worry about friends and family who will be forced out the city because they can't afford anything reasonable.

[Innsertnamehere]

Probably somewhere between B2 and A, to be honest. The place is all we really need, but the location isn't perfect and it's in need of some aesthetic renovations. Always something better out there, you know?

We got lucky with the housing market when we bought in early 2020 when COVID started though, allowed us to jump up from a solid B2 position.

If I have to renew next year at high rates, we may drop to C1. If rates are lower, we'll probably end up renovating and bringing the property up to A (more or less).