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

[Innsertnamehere]

Originally Posted by lio45

Okay, but in a free market situation, those SFHs will be far away, connected to urban areas by long drives on expensive new toll roads, and will cost a lot, if the people who'll be buying them have to pay the fair cost of their services; they won't be as cheap as you think.

yes, and people will make economic decisions on whether the commute is worth the house.

The US model on this front shows that many people are willing to make the commute. Many aren't though, and would continue to buy condos.

The only way out of this hole is to deregulate the market and let developers respond to demand from buyers. Much of that demand would stay in apartments - much would shift to houses. Deregulate, de-tax, and let the industry to it work to deliver housing. And build the damn infrastructure to support it. Build the GO lines, subway stations, and new highways needed.

[theman23]

Originally Posted by hipster duck

. These people are essential, and there's a lot of them, but they don't buy detached houses, and they don't buy detached houses even in Houston.

This doesn’t seem likely. Look up realtor.com, there are a ton of SFH for sale in the Houston suburbs for less than $300k. If were building $700k starter condos in the suburbs for blue collar workers, who are these SFH in Houston being targeted at?

[Nite]

Originally Posted by theman23

That isn’t true. By the end of 2021 we were back to growing by 420k people a year. That would have been the second highest growth number in over 30 years, second to 2019.

And again, you keep conflating housing affordability and prices. Affordability has not yet plateued.

No i am not, the whole point in raising interest rates is to make homes more unaffordable and hence drive down the prices. this is who interest rates control home prices and not immigration.
You make home unaffordable; prices go down, you make them more affordable, prices go up. Raising or reducing immigration wouldn't get this effect as the pandemic and post pandemic years have shown, only interest rate can do this..

[whatnext]

Originally Posted by Nite

No i am not, the whole point in raising interest rates is to make homes more unaffordable and hence drive down the prices. this is who interest rates control home prices and not immigration.
You make home unaffordable; prices go down, you make them more affordable, prices go up. Raising or reducing immigration wouldn't get this effect as the pandemic year have shown, only interest rate do.

Please, take a refresher course in Economics 101 where a nice professor will explain the law of Supply & Demand to you.

[P'tit Renard]

Originally Posted by Innsertnamehere

The only way out of this hole is to deregulate the market and let developers respond to demand from buyers. Much of that demand would stay in apartments - much would shift to houses. Deregulate, de-tax, and let the industry to it work to deliver housing. And build the damn infrastructure to support it. Build the GO lines, subway stations, and new highways needed.

That's exactly the Japanese approach, and why they've been so successful at stimulating new housing starts, even in the SFH space. This country needs to smack a sledgehammer at zoning bylaws and excessive building code restrictions.

[WarrenC12]

Originally Posted by whatnext

Please, take a refresher course in Economics 101 where a nice professor will explain the law of Supply & Demand to you.

That's rich coming from you.

[Nite]

Originally Posted by whatnext

Please, take a refresher course in Economics 101 where a nice professor will explain the law of Supply & Demand to you.

nothing effects demand more than interest rates.
not even 2 million immigrants can stop house prices from falling when interest rates are at 5%

[whatnext]

This kind of thing is why Canada's real estate industry is such a carny sideshow. Full of sleazy characters who are never held accountable by the law. No wonder we are such a haven for other crimes like money laundering. Affordability is the last thing on the players' minds.

16 years after real estate fraud charges laid, Vancouver developer never stood trial. He also never stopped business
Investigation: Accused in 2008 of masterminding one of B.C.'s largest real estate frauds, Vancouver property developer Tarsem Gill has never faced the charges at trial. He has, however, remained very active in B.C. real estate in the years since, attracting recent allegations of fraud.
Author of the article: Dan Fumano
Published Jun 10, 2024

It pained Emi Herawati to cut back on the money she regularly sent to her family back in Indonesia, including her seven-year-old grandson, but she was left with no choice after she lost her retirement savings.

Herawati spent years working 12-hour days running a salon and spa in east Vancouver. After COVID-19 hammered her business, she closed up shop and sold her house to fund her retirement. The notary public who worked with her on the property sale told her he could help her invest the money from the transaction, according to an investigation by the B.C. Society of Notaries Public.

That notary, Jitendra Desai, then “brokered a deal” for Herawati to take the net proceeds from the sale of her home — totalling $200,000 — and invest it as a mortgage loan on a residential property in Vancouver, the regulator has alleged in a continuing disciplinary matter against Desai....

...The paperwork said the borrower was Surinder Gill, but the point of contact was always Surinder’s husband, Tarsem Singh Gill, Herawati said. At the time, she didn’t realize he was the man accused, 16 years earlier, of orchestrating one of the largest real estate frauds in Canadian history.....

...Eventually, in response to her concerns, Desai arranged a meeting last September in his Vancouver office with Gill and Herawati as well as her friend, Mike Brown, who was helping her through the process. By that time, Brown had researched Gill’s background, and when he raised the five outstanding criminal charges at the meeting, Gill calmly replied with something like: “They’ve been trying to get me for years. And I’m still standing,” said Brown.

“When he said that, I wanted to jump across the desk and strangle him,” Brown said recently.

The infuriating thing about Gill’s comment, Brown said, is that it was true.....

.... In fact, the VPD had already looked into Gill. A generation ago. After Vancouver police were alerted to a massive fraud in 2002, they mounted what was described as the largest commercial crime investigation in the department’s history. They eventually enlisted the RCMP’s help with the probe, which led to criminal charges being laid in 2008 against Gill and his lawyer, Martin Wirick.

Those charges against Gill are now old enough to drive. But they have never been tested.

Gill, the Vancouver property developer accused of orchestrating what was described as one of B.C.’s largest real estate scams and the biggest legal fraud in Canadian history, has yet to stand trial 22 years after the alleged scam was exposed and Wirick was disbarred, 16 years after Gill was arrested and charged, 11 years after he pleaded guilty to defrauding victims of $31 million, and 10 years after a judge allowed him to withdraw that guilty plea.

The reversal of the guilty plea in 2014 meant Gill needed to stand trial. But that trial never happened, and the B.C. Prosecution Service couldn’t provide a timeline for when a trial might happen....(bold mine)

https://vancouversun.com/news/local-...-past-14-years

[theman23]

Originally Posted by Nite

nothing effects demand more than interest rates.
not even 2 million immigrants can stop house prices from falling when interest rates are at 5%

Interest rates are important. As are land use policies, tax laws, and a host of other things. But the mass immigration in the last three years (arguable 9 years, since population growth was already 50% above historic norms prior to COVID) is what has buoyed housing prices despite the hike in interest rates. It is also the easiest thing for a government to change.

[Innsertnamehere]

taking immigration down to pre-2015 levels and axing sales taxes on new housing construction would immediately take a huge amount of pressure off of housing.

That, and put significant amounts of infrastructure funding to municipalities contingent on hitting certain performance standards like DC rates being at a certain level and approval timelines meeting certain standards.

[Truenorth00]

Originally Posted by Nite

nothing effects demand more than interest rates.
not even 2 million immigrants can stop house prices from falling when interest rates are at 5%

Now talk about affordability and not absolute price.

[jonny24]

What are you guys still engaging with Nite? He's either not arguing in good faith and never will, or is genuinely unable to grasp what's going on and never will.

[MonkeyRonin]

Originally Posted by Nite

No i am not, the whole point in raising interest rates is to make homes more unaffordable and hence drive down the prices. this is who interest rates control home prices and not immigration.
You make home unaffordable; prices go down, you make them more affordable, prices go up. Raising or reducing immigration wouldn't get this effect as the pandemic and post pandemic years have shown, only interest rate can do this..

To explain it again: in a normally-functioning market where supply & demand are in equilibrium, a ~40% increase in mortgage costs would typically result in a roughly comparable ~40% reduction in purchase costs, with the overall median monthly payment staying stable (ie. reflecting what that median buyer can afford). Instead, we've seen a 40% increase in mortgage costs, but only a 15% reduction in housing prices from the peak. As a result, rather than a buyer's monthly costs remaining in equilibrium, they've gotten higher overall.

And the reason that housing prices are not dropping as much as expected is because demand for housing is remaining strong. A big part of why demand is remaining strong is because our population has been growing by >1 million people per year (and rising) for several years now, while we only complete 200-250,000 housing units per year. In other words, because demand is outpacing supply, prices are remaining high and average housing costs have risen.

[Innsertnamehere]

Originally Posted by MonkeyRonin

To explain it again: in a normally-functioning market where supply & demand are in equilibrium, a ~40% increase in mortgage costs would typically result in a roughly comparable ~40% reduction in purchase costs, with the overall median monthly payment staying stable (ie. reflecting what that median buyer can afford).

I don't think this is completely true. Markets are elastic, but not that elastic. Housing has a sort of "minimum" price roughly equal to the cost of building new housing which is hard to drop below in a market with a growing population outside of some pretty extreme market conditions. I don't think anyone would reasonably have expected a 40% drop in real estate values due to recent interest rate changes. Indeed - that's the entire point of the changes, to crunch people's disposable incomes and but a brake on the economy to slow down inflation.

the BoC jacked rates fully expecting housing affordability to go to sh*t. In fact, that was literally the entire point. There was too much money in the economy, so they had to take it out through debt payments.

The problem in Ontario and much of Canada is that housing affordability is a much larger problem than just interest rates. Even in a healthier 3% mortgage environment (vs. 5% today), affordability in much of the country is still crap.

[lio45]

It’s approximately true, and some of the reason(s) it’s not completely true are due to the fact that even if the Scheme was drastically slowed down, Canada still greatly favors real estate investment, so there’s a lot of speculators and investors who don’t need to sell, making the situation more inelastic but that’s precisely because we aren’t a “normal” market.

If real estate is just a roof over people’s heads and demand is being met by supply, real estate can absolutely drop 40% if the central bank rate goes from 0.25% to 5%.

40% real estate price drops are only inconceivable to you because you’re used to Canada, where real estate is a safe haven for everyone and their mother.

[Build.It]

"White collar jobs downtown" is an old-fashioned way of thinking, and the data doesn't back up that position either. From 2018 to 2023 Downtown Toronto gained 6.3% more jobs, while Toronto CMA grew by more than 10% during that timeframe. This would suggest that more jobs went to the suburbs.

In 2023 there were 601K jobs downtown, compared to the roughly 3 million person total workforce in all of the GTA - so roughly 20%. Although that's a good chunk, it's hardly the lions share. This means that 80% of the workforce is in the suburbs.

I shouldn't really need to provide all this data to prove this point, since it is quite obvious to anyone who lives in the GTA, but the average everyday GTA resident lives and works in the suburbs and hardly ever goes downtown, except when they really have to or for entertainment/recreational purposes.

So basically, you have a 50km anti-development barrier around your largest metro-region which is supposed to drive more workers downtown, and yet despite that the suburban workforce is still growing faster than the downtown workforce.

You can't stop technology. The average person, when given the choice between the freedom of being able to work and live wherever they want (in other words having a car), or being limited to going wherever you can get with public transit during certain hours of the day at certain intervals, will almost universally choose the automobile lifestyle. It is simply a no-brainer. If you can afford it why the hell wouldn't you want that freedom.

The people screaming for freeways to be torn down, and cars to be replaced by bikes and trains is very small minority of the population. The average person in the GTA will never downgrade their lifestyle by getting rid of their car. Just like you wouldn't trade in your cellphone for a payphone, the average person isn't going to trade in their car for a train ride. Even the greenbelt can't stop that natural demand, as much as the high density urbanists wishes it would.

Rather than fight it, we should just let the market take care of it. I'm not saying there is no place for rail or downtown (there obviously is, for that portion of the market who likes that kind of lifestyle). But by pushing their lifestyle, values and beliefs on to everyone else, and convincing politicians to put the largest greenbelt in the world around the GTA, the high density activists managed to make the GTA the least affordable place in all of North America (relative to incomes).

It is really time for this thing to be put to rest and for the activists to acknowledge that the Greenbelt has been a collosal failure and that it is utterly ridiculous to simply block development for a 50km radius around an entire metro area. Instead the activists pay various consultants ungodly amounts of money to gaslight us and try to convince us that supply/demand doesn't apply in this particular situation for reasons that are far too complicated for us regular people to understand.

[Innsertnamehere]

Originally Posted by lio45

It’s approximately true, and some of the reason(s) it’s not completely true are due to the fact that even if the Scheme was drastically slowed down, Canada still greatly favors real estate investment, so there’s a lot of speculators and investors who don’t need to sell, making the situation more inelastic but that’s precisely because we aren’t a “normal” market.

If real estate is just a roof over people’s heads and demand is being met by supply, real estate can absolutely drop 40% if the central bank rate goes from 0.25% to 5%.

40% real estate price drops are only inconceivable to you because you’re used to Canada, where real estate is a safe haven for everyone and their mother.

40% real estate price drops are possible, yes. But not likely from interest rate hikes alone.

Look south of the border. Even Austin, the posterchild for a supply-unconstrained, high-growth metro, has seen prices drop "only" 18% from pandemic highs, despite US mortgage rates generally actually increasing more than Canadian mortgages did. That's more the range you would expect from such a rapid interest rate hike, as it it takes time for markets to adjust.

[Innsertnamehere]

Originally Posted by Build.It

"White collar jobs downtown" is an old-fashioned way of thinking, and the data doesn't back up that position either. From 2018 to 2023 Downtown Toronto gained 6.3% more jobs, while Toronto CMA grew by more than 10% during that timeframe. This would suggest that more jobs went to the suburbs.

In 2023 there were 601K jobs downtown, compared to the roughly 3 million person total workforce in all of the GTA - so roughly 20%. Although that's a good chunk, it's hardly the lions share. This means that 80% of the workforce is in the suburbs.

I shouldn't really need to provide all this data to prove this point, since it is quite obvious to anyone who lives in the GTA, but the average everyday GTA resident lives and works in the suburbs and hardly ever goes downtown, except when they really have to or for entertainment/recreational purposes.

So basically, you have a 50km anti-development barrier around your largest metro-region which is supposed to drive more workers downtown, and yet despite that the suburban workforce is still growing faster than the downtown workforce.

You can't stop technology. The average person, when given the choice between the freedom of being able to work and live wherever they want (in other words having a car), or being limited to going wherever you can get with public transit during certain hours of the day at certain intervals, will almost universally choose the automobile lifestyle. It is simply a no-brainer. If you can afford it why the hell wouldn't you want that freedom.

The people screaming for freeways to be torn down, and cars to be replaced by bikes and trains is very small minority of the population. The average person in the GTA will never downgrade their lifestyle by getting rid of their car. Just like you wouldn't trade in your cellphone for a payphone, the average person isn't going to trade in their car for a train ride. Even the greenbelt can't stop that natural demand, as much as the high density urbanists wishes it would.

Rather than fight it, we should just let the market take care of it. I'm not saying there is no place for rail or downtown (there obviously is, for that portion of the market who likes that kind of lifestyle). By pushing their lifestyle, values and beliefs and on to everyone else, and and convincing politicians to put the largest greenbelt in the world around our largest city, the high density activists managed to make the GTA the least affordable place in all of North America (relative to incomes).

This is a little hyperbolic and paints the picture with a bit too much black and white paint - but you aren't far off.

A LOT of the shift in the Toronto market to high-density housing forms is genuinely market driven. Even in a supply unconstrained, deregulated market, I don't think Toronto would be building today like it did in the early 2000's. More than 20% of people would be and are today picking urban lifestyles on purpose.

That said - it's definitely not universal and the biggest issue of affordability in southern Ontario is ground-related housing which has seen by far and away the highest cost increases over the last 20 years. It is where the biggest issue lays - though there are problems throughout the entire housing system.

[goodgrowth]

Cities have become franchisors of basic living:

[hipster duck]

Originally Posted by Build.It

"White collar jobs downtown" is an old-fashioned way of thinking, and the data doesn't back up that position either. From 2018 to 2023 Downtown Toronto gained 6.3% more jobs, while Toronto CMA grew by more than 10% during that timeframe. This would suggest that more jobs went to the suburbs.

The data does back that up (Original G&M article for those who have subscriptions).

Also, think of the jobs that were formed downtown vs. in the suburbs. Downtown jobs are msotly well-paid, professional FIRE type jobs. Suburban job growth was mostly from warehouse and fulfillment centre workers getting paid $20/hour.

Of course there are more white collar jobs in the suburbs than downtown, but there is no net growth in these types of jobs in the suburbs. Just look at commercial real estate forecasts for suburban office parks.

Anyway, my point is that you can't solve the GTA's housing issues by removing the greenbelt and building sprawl. You're always presenting that as some kind of panacea.

I'll agree with you that we are not building enough freehold ground-oriented housing to meet true demand (not some "would you prefer a SFH over a condo?" straw poll question that doesn't present the added costs and other trade-offs). But in a region like Toronto, which is growing by 200k/year; where the average household size is 2.4 and shrinking; where a 50% drop in prices (like FL in 2008) would still leave SFH costing over $600,000; where the cost of building a stick frame home is probably north of $200/ft2 and where the construction industry has pivoted over the past twenty years to a labour force that's oriented around building reinforced concrete highrises, I really don't think that building sprawl is going to solve enough of the housing crisis to make up for its costs.