Canada's 'housing bubble' deemed close to bursting

[Innsertnamehere]

Originally Posted by Gresto

I have no quarrel with taxing the hell out of SFH teardowns and McMansion rebuilds. In fact, they should be taxed much more, if not banned outright. New builds should perhaps bear less of a burden, while, yes, existing homes should shoulder more realistic rates.

Teardowns don't pay those fees at all, provided they aren't creating a new unit.

Those charges are only for net new units - so tearing down a century old bungalow and putting up a modern mansion pays nothing but building permit fees to the city, while splitting the lot into two with two detached units pays one new detached fee. tearing it down and building a new six-plex with six new 2+ bed units would pay $351,000 in fees (6 2 bedroom apartment fess minus one detached fee to account for "previous paid fees" For the existing unit on site being removed).

There is a reason developers build new mcmansions instead of multi-plexes. That isn't even getting into the longer approval times to get permits for a multi-plex, the need for site plan approval if the building has more than 4 units, etc.

Right now in many parts of the city demolishing an existing dwelling and building a new one three the size requires filing for building permits, a quick zoning and code examination, and you are on your way.

Want to demolish a house and build 5-plex three times the size of an existing dwelling? File a minor variance application ($5,000), launch a potential fight against an appeal from an upset neighbour ($15-$30,000), prepare required documents for site plan approval ($30-50,000 additional over permit requirements) file for site plan approval ($23,000), pay development charges ($269,000), pay parkland dedication fees (10% of land value, likely $100k or so), then file for permits and build.

total additional cost? up to $500,000 if everything "goes wrong", which it usually does. Oh, and you could be looking at up to 2 years to get your permits having to pay for holding and lost opportunity costs over that period.

No wonder everyone just demolishes and builds another detached dwelling.

Fixing zoning eliminates a year and $5-35k of that process, but the development charges, parkland dedication, and SPA approvals still lie in the way.

SPA should be dropped immediately for any residential development under 500sm regardless of unit count IMO, and development charges need to be reviewed seriously and halved if not eliminated for multi-plexes, if not all development in general.

[rbt]

.

[Gresto]

Originally Posted by Innsertnamehere

Teardowns don't pay those fees at all, provided they aren't creating a new unit.

Those charges are only for net new units - so tearing down a century old bungalow and putting up a modern mansion pays nothing but building permit fees to the city, while splitting the lot into two with two detached units pays one new detached fee. tearing it down and building a new six-plex with six new 2+ bed units would pay $351,000 in fees (6 2 bedroom apartment fess minus one detached fee to account for "previous paid fees" For the existing unit on site being removed).

There is a reason developers build new mcmansions instead of multi-plexes. That isn't even getting into the longer approval times to get permits for a multi-plex, the need for site plan approval if the building has more than 4 units, etc.

Right now in many parts of the city demolishing an existing dwelling and building a new one three the size requires filing for building permits, a quick zoning and code examination, and you are on your way.

Want to demolish a house and build 5-plex three times the size of an existing dwelling? File a minor variance application ($5,000), launch a potential fight against an appeal from an upset neighbour ($15-$30,000), prepare required documents for site plan approval ($30-50,000 additional over permit requirements) file for site plan approval ($23,000), pay development charges ($269,000), pay parkland dedication fees (10% of land value, likely $100k or so), then file for permits and build.

total additional cost? up to $500,000 if everything "goes wrong", which it usually does. Oh, and you could be looking at up to 2 years to get your permits having to pay for holding and lost opportunity costs over that period.

No wonder everyone just demolishes and builds another detached dwelling.

Fixing zoning eliminates a year and $5-35k of that process, but the development charges, parkland dedication, and SPA approvals still lie in the way.

SPA should be dropped immediately for any residential development under 500sm regardless of unit count IMO, and development charges need to be reviewed seriously and halved if not eliminated for multi-plexes, if not all development in general.

Thanks for the correction and edification. I wonder why no leftist city councillor has ever taken on the mantle of anti-McMansion crusader. I have watched demonstrably sound dwellings be demolished and replaced in my neighbourhood, one after another, for 20+ years, and am astonished that no one in the halls of power seems to give a damn, which is unfathomable in light of the perennial news that so many people can't afford housing or barely get by. It's the height of decadence, and it continues unabated.
It has gotten so bad that currently three homeowners within a stone's throw of my house are in various stages of razing and rebuilding their houses. One of them is a self-indulgent son of Mel Lastman, who is actually tearing down a large McMansion he has occupied for many years. These are the homeowners themselves, not rapacious developers, which somehow makes it even more morally repugnant.

[yaletown_fella]

Originally Posted by Gresto

I have no quarrel with taxing the hell out of SFH teardowns and McMansion rebuilds. In fact, they should be taxed much more, if not banned outright. New builds should perhaps bear less of a burden, while, yes, existing homes should shoulder more realistic rates.

I agree with a progressive system where bigger homes are taxed at a higher rate.

Then the more self-contained basement apartment units and secondary units on the property, the more this tax would be offset/reduced.

[thewave46]

Originally Posted by Gresto

Thanks for the correction and edification. I wonder why no leftist city councillor has ever taken on the mantle of anti-McMansion crusader. I have watched demonstrably sound dwellings be demolished and replaced in my neighbourhood, one after another, for 20+ years, and am astonished that no one in the halls of power seems to give a damn, which is unfathomable in light of the perennial news that so many people can't afford housing or barely get by. It's the height of decadence, and it continues unabated.
It has gotten so bad that currently three homeowners within a stone's throw of my house are in various stages of razing and rebuilding their houses. One of them is a self-indulgent son of Mel Lastman, who is actually tearing down a large McMansion he has occupied for many years. These are the homeowners themselves, not rapacious developers, which somehow makes it even more morally repugnant.

Like the Green Party signs spackled over upper income regions of the city, the incentive to actually change policy is inversely proportional to the wealth of the area. Hence, the appearance of caring.

Left-leaning areas that are lower-income in nature generally just want to retain the level of services they have. Density in upscale areas doesn’t rate as a concern.

[MonkeyRonin]

Originally Posted by Innsertnamehere

Teardowns don't pay those fees at all, provided they aren't creating a new unit.

Those charges are only for net new units - so tearing down a century old bungalow and putting up a modern mansion pays nothing but building permit fees to the city, while splitting the lot into two with two detached units pays one new detached fee. tearing it down and building a new six-plex with six new 2+ bed units would pay $351,000 in fees (6 2 bedroom apartment fess minus one detached fee to account for "previous paid fees" For the existing unit on site being removed).

There is a reason developers build new mcmansions instead of multi-plexes. That isn't even getting into the longer approval times to get permits for a multi-plex, the need for site plan approval if the building has more than 4 units, etc.

Right now in many parts of the city demolishing an existing dwelling and building a new one three the size requires filing for building permits, a quick zoning and code examination, and you are on your way.

Want to demolish a house and build 5-plex three times the size of an existing dwelling? File a minor variance application ($5,000), launch a potential fight against an appeal from an upset neighbour ($15-$30,000), prepare required documents for site plan approval ($30-50,000 additional over permit requirements) file for site plan approval ($23,000), pay development charges ($269,000), pay parkland dedication fees (10% of land value, likely $100k or so), then file for permits and build.

total additional cost? up to $500,000 if everything "goes wrong", which it usually does. Oh, and you could be looking at up to 2 years to get your permits having to pay for holding and lost opportunity costs over that period.

No wonder everyone just demolishes and builds another detached dwelling.

Fixing zoning eliminates a year and $5-35k of that process, but the development charges, parkland dedication, and SPA approvals still lie in the way.

SPA should be dropped immediately for any residential development under 500sm regardless of unit count IMO, and development charges need to be reviewed seriously and halved if not eliminated for multi-plexes, if not all development in general.

Great post.

Of course, there is also a common work-around to this: get a permit to build a single-family house, and then just illegally convert it into apartments after the fact! That way the City collects no fees, and then renters get to enjoy unregulated, fire-trap apartments like these. Either way it's a lose-lose for the city and basically just bad policy.

Originally Posted by Gresto

Thanks for the correction and edification. I wonder why no leftist city councillor has ever taken on the mantle of anti-McMansion crusader. I have watched demonstrably sound dwellings be demolished and replaced in my neighbourhood, one after another, for 20+ years, and am astonished that no one in the halls of power seems to give a damn, which is unfathomable in light of the perennial news that so many people can't afford housing or barely get by. It's the height of decadence, and it continues unabated.

Nothing like that will ever happen because Toronto City Council is the most myopic group of self-serving dimwits in politics anywhere. I'm going to go off on a tangent here, but the inability for political parties to operate at a municipal level in Ontario is hugely detrimental to our municipal politics and to the quality of our politicians.

Whereas parties can provide a platform, funding, and discipline to talented candidates; Council candidates in Toronto instead run as independents, and are therefore responsible for funding their own campaigns and relying entirely on name recognition for success. This then gives a huge advantage to incumbents - if you can get elected to Council, you're pretty much guaranteed that position for life, provided you don't rock the boat too much. That inherently incentivizes conservatism that discourages any vision or upset to the status quo, and creates fertile grounds for corruption & graft (it also explains why Toronto Councillors are overwhelmingly white, male, and have been on council for decades).

If Toronto's government were comprised of parties, the Council Chambers would probably look a little more like the MPs and MPPs that represent the city: younger, more diverse, and a bit more passionate & engaged and willing to take risks. But until our actual municipal political system is changed, we shouldn't expect anything except more of the same - unless it's forced upon us by the Province.

[hipster duck]

Originally Posted by MonkeyRonin

Nothing like that will ever happen because Toronto City Council is the most myopic group of self-serving dimwits in politics anywhere.

100%.

While I was staunchly against it at the time, things got marginally better when Doug Ford invoked the notwithstanding clause to chop city council nearly by half, because 25 squabbling losers can actually get more done than 44 squabbling losers.

The other reason nothing gets done on the teardown front is because city councilors don't interfere in each other's turf, and most of the McMansion construction takes place in wards where the city councilors are of the suburban "keep my taxes low, pick up the garbage and don't change anything else" variety. Mostly in North York, which - despite being very central and well-connected to transit - has always had the most staunchly suburban mindset of all the former 416 municipalities.

I'm going to go off on a tangent here, but the inability for political parties to operate at a municipal level in Ontario is hugely detrimental to our municipal politics and to the quality of our politicians.

Whereas parties can provide a platform, funding, and discipline to talented candidates; Council candidates in Toronto instead run as independents, and are therefore responsible for funding their own campaigns and relying entirely on name recognition for success. This then gives a huge advantage to incumbents - if you can get elected to Council, you're pretty much guaranteed that position for life, provided you don't rock the boat too much. That inherently incentivizes conservatism that discourages any vision or upset to the status quo, and creates fertile grounds for corruption & graft (it also explains why Toronto Councillors are overwhelmingly white, male, and have been on council for decades).

If Toronto's government were comprised of parties, the Council Chambers would probably look a little more like the MPs and MPPs that represent the city: younger, more diverse, and a bit more passionate & engaged and willing to take risks. But until our actual municipal political system is changed, we shouldn't expect anything except more of the same - unless it's forced upon us by the Province.

I agree that we shouldn't have independents who bankroll their own campaigns, and Rob Ford was a product of that.

On the other hand, I'd rather not have the established political parties deal with the more mundane municipal decisions that city council often deals with. I'd rather not that these things become politicized, especially since a lot of the stuff that city council has actually been somewhat successful in - like bike lane implementation or CafeTO - could easily become fodder for the culture wars. The other thing is that in a city like Toronto, the Conservative candidate would never win, so the most important election would be among party members to select the Liberal city council candidate - or the NDP city council candidate in a handful of inner city wards. So, this doesn't really mete out corruption or sitting councilors who stay way past their prime.

I kind of like Vancouver's approach where councilors are at large, rather than representing wards, and they belong to unique political parties that don't align completely with the provincial or Federal parties. That said, that hasn't really helped Vancouver solve its similar housing problems.

[rousseau]

My cousin's 23-year-old kid has a job doing home renos in the west end of Toronto. Today he showed me photos of a beautiful house bought for $5 million that had been restored to period-appropriate grandeur that the new owners are nevertheless gutting and redoing at a cost of several million dollars.

Communism was a malignant ideology that killed 100 million people in the 20th century and must never be allowed to happen again...but, well, I can totally understand the frustration expressed by another cousin's kid, who muttered that he hoped that somebody burns the place down.

The wealth gap and the home affordabiltity problem seem like intractable issues. Me, I'm caught between a rock and a hard place on this: as a self-employed guy whose business in 2022 is a pale imiitation of what it was in the early 2000s when the future looked bright, my approaching sunset years are predicated upon squeezing as much equity as I can out of my house (though I'll never actually be able to fully retire--cue violins). At the same time, I view the stratospheric cost of housing with trepidation, as massive wealth disparities never bode well.

[casper]

Originally Posted by rousseau

My cousin's 23-year-old kid has a job doing home renos in the west end of Toronto. Today he showed me photos of a beautiful house bought for $5 million that had been restored to period-appropriate grandeur that the new owners are nevertheless gutting and redoing at a cost of several million dollars.

Communism was a malignant ideology that killed 100 million people in the 20th century and must never be allowed to happen again...but, well, I can totally understand the frustration expressed by another cousin's kid, who muttered that he hoped that somebody burns the place down.

The wealth gap and the home affordabiltity problem seem like intractable issues. Me, I'm caught between a rock and a hard place on this: as a self-employed guy whose business in 2022 is a pale imiitation of what it was in the early 2000s when the future looked bright, my approaching sunset years are predicated upon squeezing as much equity as I can out of my house (though I'll never actually be able to fully retire--cue violins). At the same time, I view the stratospheric cost of housing with trepidation, as massive wealth disparities never bode well.

Your cousin is discovering is the customer is not always right but are simply the new owner of whatever it is your selling.

We don't have a wealth gap and home affordability problem in Calgary or Saskatoon. Those cities are expanding and adding new suburban homes to meet demand. That leads to the conclusion that the problem is something else. The growth in population in Vancouver and Toronto and the constrained availability of land. These cities will go in the same direction of London, Paris, New York, etc. Expectations are out of sync with reality if a new young family expects to own a single family home.

I have some good friends who live in Paris, she is an engineer and her husband a fire fighter. They live in and raised two kids in an apartment.

Same dynamics in the US. There is a reason lots of single family homes are being built in Texas, Arizona and Nevada. Cheap land.

You should try to get the most out of your property at retirement and not have an remorse.

[yaletown_fella]

There is no real scarcity of land in the GTA; it's artificial scarcity created by greenwashed legislation that was lobbied for by wealthy homeowners to inflate land prices (similar to how organizations like the Toronto Real Estate Board have lobbied government/BOC and rallied for low/negative interest rates for decades)

I have no desire to live in a large suburban house in a car dependent area, but I recognize that an increase in suburban SFH is key to bringing down the prices of attached townhomes, condos, apartment etc.

Demand for housing in Toronto is simply far too high due to this artificial scarcity. PSF cost of a condo shouldnt even be half the cost of one in Paris. We have nowhere near the economic production and amenities of such a world city.

[casper]

Very concerning....

https://bc.ctvnews.ca/ranking-these-metr...s-due-to-rising-interest-rates-1.5931960

The Bank of Canada needs to exercise caution in what it is doing. Slowing the rate of growth is one thing but causing the price to go down is very concerning and reckless.

In some communities with a drop of 14% + 6% inflation that results in an effective drop of 20%. That is far to much far to quickly.

[Nouvellecosse]

Originally Posted by yaletown_fella

There is no real scarcity of land in the GTA; it's artificial scarcity created by greenwashed legislation that was lobbied for by wealthy homeowners to inflate land prices (similar to how organizations like the Toronto Real Estate Board have lobbied government/BOC and rallied for low/negative interest rates for decades)

I have no desire to live in a large suburban house in a car dependent area, but I recognize that an increase in suburban SFH is key to bringing down the prices of attached townhomes, condos, apartment etc.

Demand for housing in Toronto is simply far too high due to this artificial scarcity. PSF cost of a condo shouldnt even be half the cost of one in Paris. We have nowhere near the economic production and amenities of such a world city.

It's true there's no real scarcity of land in the GTA as it isn't especially dense given world standards. It's artificial scarcity created by decades of policies that force land to be used inefficiently, many of which are still in place and supported by wealthy homeowners. So yes if you artificially restrict supply in one way and don't loosen artificial restrictions in another way, then prices will rise.

Fact is, increasing supply of housing in general is part of lowering prices, not supply of any one specific type of housing. The idea that you can never address sprawl without destroying affordability is just a talking point from people like Wendell Cox and Randall O'Toole to support their preferred type of (sub)urban form and unfortunately such talking points have infected general discourse.

[lio45]

Originally Posted by MonkeyRonin

Great post.

Of course, there is also a common work-around to this: get a permit to build a single-family house, and then just illegally convert it into apartments after the fact! That way the City collects no fees, and then renters get to enjoy unregulated, fire-trap apartments like these. Either way it's a lose-lose for the city and basically just bad policy.

Wow. The ROI on that thing is so bad it doesn’t even beat inflation! I’d sooner put $4M in Bitcoin at current prices. (In both cases, the only hope for it turning out a decent investment is the scenario “a sucker takes it off your hands at some point in the future for an even more unjustifiable price than the one you paid yourself”.)

[WhipperSnapper]

I really hope Ford approves the recommendation for as of right zoning for 4 units per property. With that said, is there that much of a difference between 4 separate units with 8 occupants or a McMansion with 8 occupants? This discussion doesn't consider that immigration is coming from places where multi-generations living under one roof is commonplace or as a means to own a piece of property for others when a self contained unit is out of range.

Once again, this discussion is all about improving the efficiency of supply amidst rising construction costs and stagnating wages over reducing demand. It's like lowering interest rates in an overheated economy like the stagflation the morons in Ottawa have created continuing to throw money into the overheated economy and not raising interest rates.

[esquire]

With the boom in WFH over the past couple years, I wonder to what extent the good old invisible hand has pushed permanent WFH workers into smaller, more affordable communities?

If you work in IT, let's say, and can basically work from your laptop just about anywhere (I know people who fit this exact description, so it's not purely hypothetical), then you are basically free... you no longer have to compete against multiple bidders for some highly in demand Toronto starter home. Maybe it's not that appealing a thought for someone who is 23, just out of university, and wants to go out every night, but if you're my age (early 40s) and your life basically revolves around work and family regardless of where it's situated then it's not a big deal... it may even be a plus.

I'm sure this must be quantified somewhere, I'd be curious to see the stats.

On a related note, it might be good in the long run for Canada to elevate a couple more cities into the upper tiers the way that Calgary was transformed from a Regina clone to a major metropolis over the 40 year span of 1960-2000. That could take the pressure off the largest cities to keep accommodating more newcomers from within Canada and abroad. Victoria, Halifax, London and K-W seem like the most obvious candidates in that regard. You could even potentially throw Saskatoon and St. Catharines/Niagara into that mix too.

[swimmer_spe]

Originally Posted by casper

Very concerning....

https://bc.ctvnews.ca/ranking-these-metr...s-due-to-rising-interest-rates-1.5931960

The Bank of Canada needs to exercise caution in what it is doing. Slowing the rate of growth is one thing but causing the price to go down is very concerning and reckless.

In some communities with a drop of 14% + 6% inflation that results in an effective drop of 20%. That is far to much far to quickly.

No, this is what is needed. In the last 2 years, housing prices have skyrocketed. For a personal example, I sold a house 4 years after buying it for double of what I paid for it. While I profited off of the market, this is not how it should be.

I feel the median price of a home in a market should match what the median income can afford. So, for Vancouver, what can a medium income afford?

[swimmer_spe]

Originally Posted by esquire

With the boom in WFH over the past couple years, I wonder to what extent the good old invisible hand has pushed permanent WFH workers into smaller, more affordable communities?

If you work in IT, let's say, and can basically work from your laptop just about anywhere (I know people who fit this exact description, so it's not purely hypothetical), then you are basically free... you no longer have to compete against multiple bidders for some highly in demand Toronto starter home. Maybe it's not that appealing a thought for someone who is 23, just out of university, and wants to go out every night, but if you're my age (early 40s) and your life basically revolves around work and family regardless of where it's situated then it's not a big deal... it may even be a plus.

I'm sure this must be quantified somewhere, I'd be curious to see the stats.

On a related note, it might be good in the long run for Canada to elevate a couple more cities into the upper tiers the way that Calgary was transformed from a Regina clone to a major metropolis over the 40 year span of 1960-2000. That could take the pressure off the largest cities to keep accommodating more newcomers from within Canada and abroad. Victoria, Halifax, London and K-W seem like the most obvious candidates in that regard. You could even potentially throw Saskatoon and St. Catharines/Niagara into that mix too.

https://en.wikipedia.org/wiki/List_of_census_metropolitan_areas_and_agglomerations_in_Canada

I always go back to that list. I feel the goal of the governments should not be to focus on just the large cities, but to focus on the up and coming ones.
For an example,all except 1 of the top 10 have rail or will have rail transit. That should be the first focus. Get some sort of rail RT built for the top 10. The next 10 should see BRT built. Many of them do have plans, but not much is being materialized. The next 10, should start having a good growth plan to see them build the need for good RT.

[whatnext]

Originally Posted by casper

Very concerning....

https://bc.ctvnews.ca/ranking-these-metr...s-due-to-rising-interest-rates-1.5931960

The Bank of Canada needs to exercise caution in what it is doing. Slowing the rate of growth is one thing but causing the price to go down is very concerning and reckless.

In some communities with a drop of 14% + 6% inflation that results in an effective drop of 20%. That is far to much far to quickly.

The price has to go down. The problem is the BoC and the Feds have been frantically fighting it since 2008 ensuring more people would end up underwater when the correction comes. The boil should have been lanced immediately rather than allowed to fester.

Now they’ve created a dangerous social situation where young people have to deal with poor wage growth and sky high housing prices. It’s a recipe for social unrest.

[theman23]

Originally Posted by casper

Very concerning....

https://bc.ctvnews.ca/ranking-these-metr...s-due-to-rising-interest-rates-1.5931960

The Bank of Canada needs to exercise caution in what it is doing. Slowing the rate of growth is one thing but causing the price to go down is very concerning and reckless.

In some communities with a drop of 14% + 6% inflation that results in an effective drop of 20%. That is far to much far to quickly.

These are 14% drops from February, not YOY.

[someone123]

I agree that the artificial restriction on zoning is bad and limits density in parts of the GTA, but I think urban uses still would have consumed a lot of the land around Toronto even without those restrictions. The land use would rebalance and there would be a bit more medium density (inherently a positive since that's people who get to choose better housing options than what current restrictions allow) and higher land consumption at the low end out on the fringes (again people getting what they want). To reduce the footprint, more restrictions would be needed.

I'm not necessarily anti-greenbelt but I think we need to accept that if we are going to have population growth in the cities there will be some consumption of greenfield land and some expanded roads. It's not realistic to expect 100% of the demand to be satisfied by infill and transit. I think Canada's answer to this conundrum has mostly been the "head in sand" approach where there are a bunch of constituencies that heavily promote mutually incompatible goals and the thing that gives is affordability.