Canada's 'housing bubble' deemed close to bursting

[vid]

Originally Posted by milomilo

Yep. Zoning certainly has benefits, and I like that it gives clear rules and (theoretically, at least), a simple process to get a building approved. But often the rules are not appropriate, or self defeating, but must be followed in Kafkaesque fashion.

Zoning amendment processes are another beast. To turn a former Hells Angels club house (abandoned at the time it came into our organization's possession) into a youth centre took two years, over a dozen meetings, and resulted in a 4 inch thick binder of documentation. It ended up being appealed by neighbours at the Ontario Municipal Board (which thankfully always ruled in favour of the developer) which was itself an ordeal. Even after it was approved, we got into trouble for having a roof that extended over the wall of the building because the wall of the building was built right onto the property line (an easement was required), and we also had the same issue with the front step (part of the concrete foundation poured in 1910) and the mailbox (which had to moved to the inside corner of the step which resulted in Canada Post discontinuing mail service which resulted in the purchase or a third, less deep mailbox so it didn't intrude on the air rights of the sidewalk which the roof also intruded onto).

The entire process was insane. This was before the zoning by-laws were updated here, it wouldn't be as difficult now, but it's still not extremely simple either.

We've also still got the problem a lot of cities have where if you have, say, a grocery store and a liquor store right beside each other, but on different legal parcels of land, there must be a physical barrier between each property, like a curb or fence or strip of grass. Cars cannot drive from one property's parking lot, onto another property's parking lot. There are a lot of examples where this has been ignored, like the grocery store might repave its parking lot and take out the barrier and merge it into the liquor store's parking lot so you can drive through them, but then what this does is when the liquor store wants to expand, the city orders them to install a barrier between the properties. So they just don't bother expanding. Maybe they move down the street or something.

There are some valid reasons for this kind of thing (you want to avoid traffic from using parking lots to by-pass intersections; there are many places in my city where gas station and corner store parking lots are used as slip lanes at intersections and its dangerous to customers) but when you have compatible uses beside each other, it doesn't make sense that you don't allow it. There is one development near our airport that has a large back lot and you get the impression that you can exit the property that way but you can't, because all the banks and restaurants between it and the street have to have fences between them and it to comply with this part of our bylaw.

[lio45]

I found your story (link below).
"Worried about parking in the area". Lol. I bet on-street parking in that neighborhood is plentiful and free.

There's no limit to how stupid people can be when they've decided to resist change. Preferring an abandoned ex-HA clubhouse from an urbanistic/property values standpoint is not rational.

https://www.cbc.ca/news/canada/thunder-b...vamped-hell-s-angels-club-house-1.989358

[lio45]

(Also, that weird cube with almost no windows would be a fine addition to the ongoing SSP Canada's Ugliest Buildings thread.)

[whatnext]

Originally Posted by lio45

(Also, that weird cube with almost no windows would be a fine addition to the ongoing SSP Canada's Ugliest Buildings thread.)

And yet, when you build it in Vancouver, it's worth millions!

[IMG]3691-Point-Grey-Road-Vancouver-2 by whatnextyvr, on Flickr[/IMG]
Credit Daily Hive


Story: https://dailyhive.com/vancouver/3691-point-grey-road-vancouver-cube-house

[lio45]

That's mostly land values though that same cube in Thunder Bay wouldn't be worth much.

[lio45]

Originally Posted by milomilo

And hence the housing market is permanently wrecked

Of course, and there's no going back, because owners, who make up a good chunk of the voters, won't elect people who campaign on drastically reducing the value of the voters' main source of wealth.

Realistically, the best compromise is a crazy high vacancy tax; don't change anything else, don't screw anyone, don't deflate values, don't make anyone poorer, just force (actually strongly incentivize) the billionaire Chinese money launderers to, while continuing to do their thing, start to let locals use those glass-and-steel bitcoin as a place to live in the city (this alternate use as housing does not prevent the asset's main use as a physical bitcoin, so win/win), in exchange for peanuts per month (i.e. a couple grand) for their trouble.

There, problem fixed: enormous quantities of new rental stock have just become available.

[misher]

Originally Posted by lio45

Of course, and there's no going back, because owners, who make up a good chunk of the voters, won't elect people who campaign on drastically reducing the value of the voters' main source of wealth.

Realistically, the best compromise is a crazy high vacancy tax; don't change anything else, don't screw anyone, don't deflate values, don't make anyone poorer, just force (actually strongly incentivize) the billionaire Chinese money launderers to, while continuing to do their thing, start to let locals use those glass-and-steel bitcoin as a place to live in the city (this alternate use as housing does not prevent the asset's main use as a physical bitcoin, so win/win), in exchange for peanuts per month (i.e. a couple grand) for their trouble.

There, problem fixed: enormous quantities of new rental stock have just become available.

Before our vacancy taxes came in I think back in 2016 we found that around 2% of homes were empty (not rental just homes) before exemptions. This is what city staff presented at a council meeting. Of course many are going through probate, have owners who are committed, are unlivable, etc. it’s much smaller than the average. The myth of the asian money launderer with empty homes everywhere being what ruins our housing market has never been proven. Like Bigfoot or leprechauns.

The fact is that empty detached housing doesn’t really help the rental market and condos are generally all being actively used. Investors don’t give up on rent because investors want to maximize their returns. Money launderers are probably more likely to want a steady legitimate source of income.

There’s no research showing that Vancouver has more vacant homes than any other city and a lot of research showing we have less. Anecdotal stories of windows with the lights out in downtown towers are not evidence.

[lio45]

I'd definitely want to make a distinction between "98% of units have managed to successfully pass off as occupied last time this was checked" and "98% of units are actually occupied/have people living in them". Not the same thing at all.

For a vacancy tax to work, there have to be enforcement tools, and penalties when caught that are high enough to deter. A basic starting point would be electric meters and water meters that are real-time, and ideally even a meter for the stove (and if that one shows abnormally low consumption, the only way out of the vacancy fine would be to produce a satisfying number of takeout/restaurant receipts) and water heater (which should show close to 1 daily shower per claimed resident). This would of course all pay for itself, so no downside.

I'm sure the typical real-time energy/water consumption profile of normal people is pretty obviously recognizable when you have such complete data - so a quick analysis would immediately yield which properties are "suspect", and then these could be checked more carefully.

[vid]

Originally Posted by lio45

I found your story (link below).
"Worried about parking in the area". Lol. I bet on-street parking in that neighborhood is plentiful and free.

There's no limit to how stupid people can be when they've decided to resist change. Preferring an abandoned ex-HA clubhouse from an urbanistic/property values standpoint is not rational.

https://www.cbc.ca/news/canada/thunder-b...vamped-hell-s-angels-club-house-1.989358

The neighbour to the right owned nearly a dozen properties in the neighbourhood, and he was the biggest opponent. He's been selling all of his properties in the neighbourhood and making a lot of money, he thanked us a couple years ago.

An even better example of the absurdity of this city's NIMBYs is they opposed a youth centre in a repurposed meeting hall in the southern part of Port Arthur, and their concerns were "it will be loud", "there will be too many people milling about", and "there will not be enough parking spaces". The project was eventually cancelled, and it is now a Wacky's Sports Bar and Arcade which is open until 2am, licensed, and has parking issues. Not one letter of opposition was sent to city council about it.

Originally Posted by lio45

(Also, that weird cube with almost no windows would be a fine addition to the ongoing SSP Canada's Ugliest Buildings thread.)

We were going to replace the siding and make it less ugly this year but the district social services board cut the programme that funds us at the province's request so our energy has been redirected into simply staying open. No point replacing the siding if you might be dissolved in a year. It's a lower priority at the moment but it does need to be done.

[misher]

Originally Posted by lio45

I'd definitely want to make a distinction between "98% of units have managed to successfully pass off as occupied last time this was checked" and "98% of units are actually occupied/have people living in them". Not the same thing at all.

For a vacancy tax to work, there have to be enforcement tools, and penalties when caught that are high enough to deter. A basic starting point would be electric meters and water meters that are real-time, and ideally even a meter for the stove (and if that one shows abnormally low consumption, the only way out of the vacancy fine would be to produce a satisfying number of takeout/restaurant receipts) and water heater (which should show close to 1 daily shower per claimed resident). This would of course all pay for itself, so no downside.

I'm sure the typical real-time energy/water consumption profile of normal people is pretty obviously recognizable when you have such complete data - so a quick analysis would immediately yield which properties are "suspect", and then these could be checked more carefully.

This was before the speculation tax came in or was more than a theory so no one has any incentive to lie lol.

[lio45]

Pretty sure there's always been a powerful incentive to claim for-resale speculative investments as "your primary residence", even if you rarely set foot in it.

In any case, over the past few years plenty of reports from people "on the ground" in various Van neighborhoods lend weight to the idea that nowhere near 98% of the housing in the city has people living in it year-round. I don't know what other Vancouverites besides you think of it...?

[lio45]

Originally Posted by vid

The neighbour to the right owned nearly a dozen properties in the neighbourhood, and he was the biggest opponent. He's been selling all of his properties in the neighbourhood and making a lot of money, he thanked us a couple years ago.

Yeah, it's surprising how much of an effect it's possible to have when concentrating energy and investment in a small neighborhood.

I'm in the middle of such an effort (took a few years), bought and fixed up a few problematic properties, and just funded two new constructions on vacant lots in the neighborhood (partnering with a local nonprofit). Property values went up by over 10x in the last few years, and the area is really a lot safer and more pleasant to live in. I'm not even done yet, I'd like to building something more this year.

Honestly, you should have convinced that guy to hold onto his properties, and fund you guys, so that together you could identify problems and have the money and volunteer manpower (former from him, latter from you) to fix them.

Too late now if he's sold them, but he's the exact kind of guy you want to partner with... the result likely benefiting everyone.

[casper]

Originally Posted by lio45

I'd definitely want to make a distinction between "98% of units have managed to successfully pass off as occupied last time this was checked" and "98% of units are actually occupied/have people living in them". Not the same thing at all.

For a vacancy tax to work, there have to be enforcement tools, and penalties when caught that are high enough to deter. A basic starting point would be electric meters and water meters that are real-time, and ideally even a meter for the stove (and if that one shows abnormally low consumption, the only way out of the vacancy fine would be to produce a satisfying number of takeout/restaurant receipts) and water heater (which should show close to 1 daily shower per claimed resident). This would of course all pay for itself, so no downside.

I'm sure the typical real-time energy/water consumption profile of normal people is pretty obviously recognizable when you have such complete data - so a quick analysis would immediately yield which properties are "suspect", and then these could be checked more carefully.

Lets not do any of this. We live in a society that respects peoples privacy.

For the government to gain access to an electrical bill lets require a court order and the bylaw enforcement people to show cause to obtain such an order. This is all getting very silly. Why should a home owner be required to spend money proving they are using sufficient electricity.

[milomilo]

I don't care much about the privacy, but more about the bureaucratic mess it would create, there's no chance it would pay for itself, at first glance. First you have to install multiple meters in every house, that'll probably be a thousand per house. Then you have to pay a bunch of people to look through data and/or develop some AI software to do the same. And then you have to fight and lose all the court battles when people come up with proof of why the city is wrong.

All for what? To take in slightly more revenue from the empty homes tax? Even if you did all this, it would be trivial to fake the data.

[lio45]

The idea of violating people's privacy in order to determine whether or not an unit is occupied is already inherent to the idea of a "vacancy tax", so if we want to introduce that and enforce it, yes, obviously it comes with a slight diminution of privacy.

If you're paranoid about privacy, you can just pay the vacancy tax and no one will have access to your consumption figures, just like if you're paranoid about where you're going, you can refuse to let your vehicle insurer track your speed and yearly mileage with a GPS, in which case they'll just assume you drive like a maniac and travel a lot more in a year than what you're declaring to them, and your insurance premium will be calculated accordingly.

[lio45]

Originally Posted by milomilo

I don't care much about the privacy, but more about the bureaucratic mess it would create, there's no chance it would pay for itself, at first glance. First you have to install multiple meters in every house, that'll probably be a thousand per house. Then you have to pay a bunch of people to look through data and/or develop some AI software to do the same. And then you have to fight and lose all the court battles when people come up with proof of why the city is wrong.

All for what? To take in slightly more revenue from the empty homes tax? Even if you did all this, it would be trivial to fake the data.

Actually, I was going to say the opposite. Electric meters are already real-time, and I'm sure it would be easy for an AI to analyse patterns where local daily consumption peaks are the unmistakable specific signatures of water heaters (showers) and of stoves (cooking).

And we don't need for it to be 100% unfakeable, we just need for it to be 100% guaranteed to be more hassle to fake than the hassle of simply putting and enduring a tenant in there.

The only reason people leave their investor real estate vacant is that the cap rates are so low they're negligible, so they'd rather avoid the trouble of having tenants. But if we change this to a reverse situation where your three choices are 1) dealing with tenants 2) paying a skyhigh vacancy tax 3) dealing with having to fake having a tenant in there in a way that reliably fools an AI that can pick up on daily shower and cooking patterns knowing that the penalty for vacancy tax fraud is insanely high, then the "accept a tenant" option goes from being the more troublesome to being the less troublesome.

Which is exactly the goal.

[milomilo]

That's not the primary goal. The goal should be affordable housing. This doesn't achieve that. I still disagree that the cost of enforcement would outweigh the additional revenue, but there's no point arguing that.

Even if you rented out a handful of more units, the underlying problem remains. It is incredibly expensive for someone to own a property in Vancouver and not use it. Some people are irrational, but most are not, so if they are doing this very expensive thing then it must be because it pays off more in some other way - speculation on rising house prices.

So the actual problem, that vacant homes are just a symptom of, remains high house prices. The vacant home tax might help to scare off speculators, as some of the other measures do, and I support them even though they will have little direct impact on affordability. But there's little point focusing on them, as they will never solve the supply side of the problem. They're a politically easy distraction.

[lio45]

Originally Posted by milomilo

That's not the primary goal. The goal should be affordable housing. This doesn't achieve that.

"Affordable housing" can be interpreted to mean two different things here... it can be "cut Vancouver property values in half", or "make sure plenty of apts are available at rents that are at reasonable levels compared to local wages and cost of living".

The former is off the table - voters will never elect anyone whose flagship promise is to make them a lot poorer - and the latter is something you'd help make happen with a vacancy tax.

So the actual problem, that vacant homes are just a symptom of, remains high house prices.

All property owning Vancouverites will oppose you if you go and deem this a "problem" that needs to be "corrected". So it's not really a problem, or if it's one, then it's not one that can be corrected.

Thankfully though, it doesn't mean housing can't be affordable, since the speculative aspect and the housing aspect are separate. Rents will automatically stabilize at whatever locals can pay. (This is precisely the reason cap rates in Van are absurdly low.)

[milomilo]

Originally Posted by lio45

"Affordable housing" can be interpreted to mean two different things here... it can be "cut Vancouver property values in half", or "make sure plenty of apts are available at rents that are at reasonable levels compared to local wages and cost of living".

The former is off the table - voters will never elect anyone whose flagship promise is to make them a lot poorer - and the latter is something you'd help make happen with a vacancy tax.

If you can't do the former, then the latter will not be achieved either. Sure, you might be able to free up a handful of currently underused properties with policy, but that's not going to be a significant amount. You might not like the official numbers, but that's all we've got, and you've argued in posts like this that people's perception is less valuable than the actual data.

Originally Posted by lio45

Thankfully though, it doesn't mean housing can't be affordable, since the speculative aspect and the housing aspect are separate. Rents will automatically stabilize at whatever locals can pay. (This is precisely the reason cap rates in Van are absurdly low.)

But just because cap rates are low, the rents paid in Vancouver are still high compared to other cities, right? And if they are not, then what's the problem?

This is the first source of data I found and I have done no fact checking, but I see little reason it would be way off:



So, regardless of the cap rates, Vancouverites still pay obscene rents, despite them also earning meager wages. You can tinker all you want, but the problem is clear, there are not enough units available to buy and/or rent.

Originally Posted by lio45

All property owning Vancouverites will oppose you if you go and deem this a "problem" that needs to be "corrected". So it's not really a problem, or if it's one, then it's not one that can be corrected.

And, as I said before, on this I totally agree. Despite all the hot air about affordability in our big cities, until (if ever) home owners have less political weight than renters, this problem will not be solved, because the population unknowingly do not want it to be solved. It's zero sum, for those without a house to be able to get cheaper accommodation, then those who currently own properties need to see the value of that property decrease.

[lio45]

Those Vancouver rents don't seem abnormal. They're at the same level as Toronto's, which can sprawl in nearly every direction and doesn't have that "West Coast" premium.

At first sight, I wouldn't be surprised to see the rents in San Francisco being at the same levels as rents in New York, and rents in Nice at the same levels as rents in Paris, despite the former being smaller cities.

Out of curiosity, what's your estimate of what Vancouver rents should be compared to Toronto's? Mine, all things considered (and ignoring the fact I know the answer now) would be ~100%, not ~80% or ~60% or ~150%.