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

[lio45]

Poilievre has recently suggested capping the amount, as a percentage of our current population, of Fresh New Suckers we let in in a given year at the percentage of housing stock enlargement of the previous year, so yeah, right there it's already likely that the CPC will be at the very least a bit better for Single-Issue-Voters-Who-Prefer-A-Roof-Over-Their-Head (probably a bigger demographic than Warren thinks).

[someone123]

Originally Posted by hipster duck

Definitely. I'd argue that time is more important than income. I mentioned my brother-in-law, who has basically reached the top 1% of earners who work for somebody else (not self-made entrepreneurs) and how living in Vancouver and being just a bit over 40, he still has to make 'sacrifices' and land in B1 whereas not even half a generation ago he'd be firmly in A. And that cascades down the chain. A 25 year-old born in 1998 is much more likely to be E1 than a 25 year-old born in 1988 in 2013, and so on, all the way down to the example niwell posted about people on the verge of homelessness, which is people in the Es sinking into the Fs.

I wonder what impact this will have on the incentive to work. Being able to afford a nicer living space, or even just have space to start a family, used to be one of the major payoffs of building a good career. Even upgrading an apartment is less appealing if you're in an older rent-controlled place or can't find a stable newer unit. There's remodeling too and having space for hobbies or toys. Another outlet is recreational property and vacation spots and those have become farther out of reach in BC just in the last decade.

At the extreme end there's a demographic who accept that they're stuck in a crappy apartment. They can afford video games, booze, and junk food. If they push hard on their career (and become some low-level manager or something) it can give them a bit more security but won't materially change their living standards. CERB seemed to contribute to this as well, as does the constant injection of labour to suppress wages. It's all trending toward more and more constraints and limited options for the lower middle class.

I'm curious about what perceptions in younger cohorts are like. I think it was a bit soul crushing to Millennials because they lived through a shift, and can generally remember a time with options not available to them (not the 1960's but maybe 2005). Mental health of younger people does not seem great but maybe they never had the same expectations.

[Acajack]

Originally Posted by someone123

I wonder what impact this will have on the incentive to work. Being able to afford a nicer living space, or even just have space to start a family, used to be one of the major payoffs of building a good career. Even upgrading an apartment is less appealing if you're in an older rent-controlled place or can't find a stable newer unit. There's remodeling too and having space for hobbies or toys. Another outlet is recreational property and vacation spots and those have become farther out of reach in BC just in the last decade.

At the extreme end there's a demographic who accept that they're stuck in a crappy apartment. They can afford video games, booze, and junk food. If they push hard on their career (and become some low-level manager or something) it can give them a bit more security but won't materially change their living standards. CERB seemed to contribute to this as well, as does the constant injection of labour to suppress wages. It's all trending toward more and more constraints and limited options for the lower middle class.

I'm curious about what perceptions in younger cohorts are like. I think it was a bit soul crushing to Millennials because they lived through a shift, and can generally remember a time with options not available to them (not the 1960's but maybe 2005). Mental health of younger people does not seem great but maybe they never had the same expectations.

So the housing crisis is having or could have an impact on our overall economic productivity?

[MonkeyRonin]

Originally Posted by someone123

I wonder what impact this will have on the incentive to work. Being able to afford a nicer living space, or even just have space to start a family, used to be one of the major payoffs of building a good career. Even upgrading an apartment is less appealing if you're in an older rent-controlled place or can't find a stable newer unit.

And at the other end, if you're house-rich, why work at all when you can just flip your house every couple years and make a few hundred thousand tax-free dollars for near-zero effort?

Either way, what's happening at both ends to disincentivize traditional employment productivity perhaps explains a lot of our current economic malaise (in addition to the way that real estate investment has cannibalized other forms of investment, or costs of space being an impediment to starting & growing new businesses, rent increases putting retailers out of business, made it harder to attract & retain talent, etc).

[niwell]

It will be interesting to see how this affects younger people. A lot of people in my age group (elder Millenial / Xennial) I know have essentially given up on home ownership - or at least the type of ownership enjoyed by their parents. That being said most are still fairly career oriented and would rather use the extra money for things like travelling, eating out, etc.

Of course this is something that also dries up when housing options become more and more precarious. Younger coworkers starting in my area now are only making marginally more than when I started almost 15 years ago, yet their rental options are far more expensive than what mine were at the time.

[giallo]

Originally Posted by Acajack

So the housing crisis is having or could have an impact on our overall economic productivity?

I think it's been affecting it for years already.

There's so little money slushing around in this country for investing in local businesses or ideas. Canadians have never been huge risk takers financially, but now that so much of that potential investment money is going to high rents or mortgages, there's nothing left to help a new business or idea grow.

The housing crisis affects so much more than just housing. It's crazy to me that all three levels of government didn't treat it like the five alarm fire that it was years ago.

[WarrenC12]

Originally Posted by lio45

Poilievre has recently suggested capping the amount, as a percentage of our current population, of Fresh New Suckers we let in in a given year at the percentage of housing stock enlargement of the previous year, so yeah, right there it's already likely that the CPC will be at the very least a bit better for Single-Issue-Voters-Who-Prefer-A-Roof-Over-Their-Head (probably a bigger demographic than Warren thinks).

Home ownership, while falling, is still at 66%. Of those, about 65% don't even have a mortgage.

That's about half of all Canadian households. They live in their home, and have no mortgage. Likely lots of these folks are already CPC voters.

I understand the situation is extreme for plenty of people, but they aren't a majority of voters. Lots of young people voting CPC this time around, likely from that group.

[ssiguy]

Originally Posted by WarrenC12

Home ownership, while falling, is still at 66%. Of those, about 65% don't even have a mortgage.

That's about half of all Canadian households. They live in their home, and have no mortgage. Likely lots of these folks are already CPC voters.

I understand the situation is extreme for plenty of people, but they aren't a majority of voters. Lots of young people voting CPC this time around, likely from that group.

I agree that young people are going to PP due to Trudeau's many policy failures chief among them is his doors wide open immigration policy. Trudeau has robbed so many young people of their dreams.

It is not, however, just young people. Trudeau is trailing PP in every demographic even the Boomers who have made off like thieves in the night on their real estate. They too are appalled that their grandkids {if they have any as their children probably couldn't afford to have any} have nowhere to live and can't ever aspire to actually owning a home. They too are appalled at all the people lining up at our food banks and living on the streets which is something that was unheard of when they were growing up.

[ssiguy]

A rather perverse consequence of our ridiculous immigration levels and the housing crisis it has caused, is that it is actually causing a decline in our birth rates. Kids are expensive but now ridiculously so. It's no wonder that BC has Canada's lowest birthrate and for the age cohort of 40 to 45 Ontario & BC have, by far, the highest birth rates.........people are having to put off having the kid until much later in life strictly due to an financial inability to have them in their 20s & 30s.

[someone123]

Originally Posted by MonkeyRonin

And at the other end, if you're house-rich, why work at all when you can just flip your house every couple years and make a few hundred thousand tax-free dollars for near-zero effort?

Yep. I would bet that this factor has sped up Boomer retirements.

[GenWhy?]

Going to be quite funny if immigration is greatly reduced and cities and provinces still don't get the message to open the free market for housing and we are right back to where we are today in 5-10 years.

[WarrenC12]

Originally Posted by GenWhy?

Going to be quite funny if immigration is greatly reduced and cities and provinces still don't get the message to open the free market for housing and we are right back to where we are today in 5-10 years.

BC has basically opened up the free market, but interest rates will have to drop for big money to flow back into RE.

[suburbanite]

Originally Posted by WarrenC12

BC has basically opened up the free market, but interest rates will have to drop for big money to flow back into RE.

Nowhere in Canada is close to anything resembling a true free market for real estate. Not that that's a bad thing, most of us probably don't see Houston or Dallas as ideal urban growth models. That being said the one thing the sunbelt model ensures is that people who solely try to speculate on real estate get left behind, and to make money you have to actually build and sell units at whatever the market can currently afford.

[someone123]

Originally Posted by suburbanite

Nowhere in Canada is close to anything resembling a true free market for real estate. Not that that's a bad thing, most of us probably don't see Houston or Dallas as ideal urban growth models. That being said the one thing the sunbelt model ensures is that people who solely try to speculate on real estate get left behind, and to make money you have to actually build and sell units at whatever the market can currently afford.

Google seems to suggest that development fees for houses in Texas metros like Austin are in the $5-20k range.

Not sure where this landed but here's an article about Langley debating raising the fees for detached from $48k to $88k: https://www.langleyadvancetimes.com/...wnship-2579477. They say this is for new services and a high-density townhouse costs $40k for things like its 12 feet of new sidewalk, its 0-0.05 new public street lights, etc. Maybe this is right but I'm skeptical they're not just funding operations off of new development, and I would expect that developers pay a lot of costs for these things too.

(Of course on most greenfield land around metro Vancouver, development is simply banned. We are a great country for millions of new people to move to but at the same time Canada is very ecologically sensitive and has to ban greenfield development around many metros.)

[suburbanite]

Originally Posted by someone123

Google seems to suggest that development fees for houses in Texas metros like Austin are in the $5-20k range.

Not sure where this landed but here's an article about Langley debating raising the fees for detached from $48k to $88k: https://www.langleyadvancetimes.com/...wnship-2579477. They say this is for new services and a high-density townhouse costs $40k for things like its 12 feet of new sidewalk, its 0-0.05 new public street lights, etc. Maybe this is right but I'm skeptical they're not just funding operations off of new development, and I would expect that developers pay a lot of costs for these things too.

(Of course on most greenfield land around metro Vancouver, development is simply banned. We are a great country for millions of new people to move to but at the same time Canada is very ecologically sensitive and has to ban greenfield development around many metros.)

Well there's typically going to be both municipal DCs (town services, parks, etc.) as well as often chunkier regional DCs which cover the substantial infrastructure components like water and sewage. These regional costs are definitely not immaterial, and our growth model typically likes to ensure that new greenfield development is well serviced upon completion, kids are attending local schools and not busing 45 minutes, there are adequate parks and greenspace, etc. The municipal operating model definitely put a higher burden on new home buyers while existing landowners benefit from elevated service levels with low tax burdens. Texas is obviously one of the lowest cost jurisdictions in the U.S. but they do pay some of the highest property taxes. Municipalities are going to get their pound of flesh one way or another, but personally I find the idea of having low-cost housing with higher annual costs preferable to drastically inflated housing costs with those lucky enough to get in paying very little going forward.

At the end of the day I wasn't even really referring to DCs. In many high growth locales in the U.S. you can build a subdivision pretty much anywhere if you have the will. In Canadian cities, there is zero chance you would get an Official Plan amendment to get agricultural redesignated to residential a kilometer beyond where the current borders end. This creates an environment where developers can come to the conclusion that sitting on land that they have a very low cost base on is a preferable business decision when they control the next ring of developable area. Especially when the writing is on the wall that the current interest rate environment is temporary, and the long term fundamentals are in their favour with near unconstrained population growth. If suddenly someone was allowed to leapfrog their parcel and keep the development train moving, that calculus may change. You certainly get some less desirable outcomes in terms of sustainability and built form (see Dallas example below), but a true free market will get you market participants who build homes and don't just wait for ideal conditions.

[suburbanite]

At the end of the day, there's tradeoffs to everything. If you want incremental, methodical growth that better serves residents, you have to have a growth policy that meshes with that. If you truly think that you need population growth doubled, then you have to give a little on the other side as well. If you try and have your cake and eat it too, you end up in our situation.

[SignalHillHiker]

Market seems to have declined again here. Lots of properties under 150K, and on the market for a while.

[GenWhy?]

Originally Posted by WarrenC12

BC has basically opened up the free market, but interest rates will have to drop for big money to flow back into RE.

Yes that process has started here for us in BC:

Dec. 31, 2025:
municipalities update of their Official Community Plans and zoning bylaws (based on the interim Housing Needs Report).

So hopefully applications can go in by 2026, and we'll see what each municipality's OCPs are and their dev. fees

[someone123]

Originally Posted by suburbanite

Texas is obviously one of the lowest cost jurisdictions in the U.S. but they do pay some of the highest property taxes. Municipalities are going to get their pound of flesh one way or another, but personally I find the idea of having low-cost housing with higher annual costs preferable to drastically inflated housing costs with those lucky enough to get in paying very little going forward.

In BC there is property tax deferral with rates 2% below prime plus the homeowner grant. The proposed development fee is something like 150 years' worth of property taxes paid by a 65+ multi-millionare homeowner. This can't be an equitable balance.

If suddenly someone was allowed to leapfrog their parcel and keep the development train moving, that calculus may change.

I think we basically have oligopolistic economics in building in many Canadian real estate markets to go along with many other oligopolies. Maybe the zoning changes in BC will get us away from this a bit. The model where you make infill extremely difficult and then approve 70 storey towers around a few malls is relatively easy for a few builders to dominate.

[WarrenC12]

Originally Posted by suburbanite

Nowhere in Canada is close to anything resembling a true free market for real estate. Not that that's a bad thing, most of us probably don't see Houston or Dallas as ideal urban growth models. That being said the one thing the sunbelt model ensures is that people who solely try to speculate on real estate get left behind, and to make money you have to actually build and sell units at whatever the market can currently afford.

I'm not talking Libertarian levels, just reasonably open zoning and set fees to develop.