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

[YOWetal]

Originally Posted by whatnext

Mountains or not, Vancouver real estate prices should be correlated with what Vancouverites earn, no?

Well if you are on a tiny patch of land and insist on a SFH then yes. Outside flow of money is part of the problem but not the only reason.

[Changing City]

Originally Posted by whatnext

Yep, according to Zillow the average home price in Houston is just $269,641! Can you imagine a large Canadian city with a strong economy with prices that Low! The median salary is $57,420 USD while Vancouver's is $69,512 CAD or $50,862 USD.

Gosh, how is it that Vancouver home prices are so high, completely divorced from local incomes.....

In the same way that the median salary and the average house price in New York or San Francisco also have no relationship to each other. Attractive places to live are generally far less affordable than a city like Houston, which has one of the lowest house price to income ratios in North America. (Generally affordability is the ratio of median household income to price, not median salary.)

Toronto is even less affordable than Vancouver, and Victoria isn't a lot better according to this site. If housing affordability is the basis for deciding where to live, then Moncton, or Regina are far better options, for example.

[MonkeyRonin]

Originally Posted by lio45

exactly. Meanwhile in canada, it's the opposite: People have incentives to have the lowest possible incomes, so they can get benefits, while having the highest-value possible real estate.

Multimillionaires getting the gst credit and all the other "low income" benefits are very common.

You discourage what you tax. Canada discourages productive behavior (working), while encouraging real estate investment. Texas does the opposite.

100%. This is an important point that gets brought up here on occasion (including by myself), but as of yet hasn't seemed to work its way into the mainstream consciousness. Our model of high income taxes/low property taxes inherently promotes unproductive economic behaviour, and exacerbates inequality by having workers subsidize homeowners (the former group being poorer, on average, than the latter, despite the overlap). It also drives up housing prices by making it a more attractive investment vehicle than it otherwise would be if homeowners had to pay for the true cost of servicing their property. We're all poorer as a result; yet the prospect of raising property taxes is still taboo and met with revulsion across the political spectrum.

In Canada, one of the best possible situations to be in would be own a property but not have a job; then sell said property every 366 days or so, collect however much the price gain in the last year was tax-free, while also collecting low-income/unemployment benefits on account of not working. Depending on your age & location, you may even be able to avoid paying the standard property taxes. Completely unethical, but entirely legal under the current system.

[MonkeyRonin]

Originally Posted by Changing City

In the same way that the median salary and the average house price in New York or San Francisco also have no relationship to each other. Attractive places to live are generally far less affordable than a city like Houston, which has one of the lowest house price to income ratios in North America. (Generally affordability is the ratio of median household income to price, not median salary.)

Toronto is even less affordable than Vancouver, and Victoria isn't a lot better according to this site. If housing affordability is the basis for deciding where to live, then Moncton, or Regina are far better options, for example.

Well duh. Vancouver has long been Canada's most expensive city. Toronto was never particularly cheap either. That tends to be the case for places that are desirable and/or have a substantial economic base. Still, there was no housing crisis when it was just Vancouver that was unaffordable - because there were enough affordable alternatives; while a place like Toronto had wages that supported the high prices.

The problem now is that even places like Moncton and Regina are less affordable than Houston, with much less dynamic economies; while Vancouver and Toronto (and many others) have gone from just being kind of expensive to extremely and completely-detached-from-local-incomes expensive.

[Changing City]

Originally Posted by MonkeyRonin

Well duh. Vancouver has long been Canada's most expensive city. Toronto was never particularly cheap either. That tends to be the case for places that are desirable and/or have a substantial economic base. Still, there was no housing crisis when it was just Vancouver that was unaffordable - because there were enough affordable alternatives; while a place like Toronto had wages that supported the high prices.

The problem now is that even places like Moncton and Regina are less affordable than Houston, with much less dynamic economies; while Vancouver and Toronto (and many others) have gone from just being kind of expensive to extremely and completely-detached-from-local-incomes expensive.

So what's your answer to whatnext's question "how is it that Vancouver home prices are so high, completely divorced from local incomes..."

Presumably they're trying to suggest its all the dodgy Chinese (and other foreign) money they frequently suggest is the main reason for Vancouver's unaffordable housing. It can't be all the new foreign students and temporary foreign workers, because as you note, Vancouver has been unaffordable for a lot longer than the higher rates of them coming to Canada.

[MonkeyRonin]

Originally Posted by Changing City

So what's your answer to whatnext's question "how is it that Vancouver home prices are so high, completely divorced from local incomes..."

Presumably they're trying to suggest its all the dodgy Chinese (and other foreign) money they frequently suggest is the main reason for Vancouver's unaffordable housing. It can't be all the new foreign students and temporary foreign workers, because as you note, Vancouver has been unaffordable for a lot longer than the higher rates of them coming to Canada.

In a normally functioning market (ie. one where people who live in or desire to live in that city buy homes with incomes earned in that city), prices can only go as high as the people who live there are able to pay. "Comparable" markets like New York and San Francisco are incredibly expensive as a result of huge numbers of people desiring to live in them; but they also have economies that generate enough high incomes to be able to afford those properties.

This relationship breaks down when incomes detached from the local economy are introduced (eg. a common occurrence in small resort towns) or when real estate is hoarded. So yes, it would imply that incomes earned outside of Vancouver (or outside of Canada) have had an effect. Actual data is hard to come by as this doesn't seem to be something tracked by StatCan, but most estimates seem to peg the foreign ownership rate (of all existing residential properties) at about 5%; though about 10% of transactions in more recent years have been made by foreign investors - a large enough amount to destabilize the market, as you have 100% of the population competing for 90% of the housing stock.

This is also all part of a bigger problem though, of a small group of people (regardless of nationality) owning a disproportionate share of the real estate. A third of properties in Vancouver are owned by investors, and a quarter of properties in BC.

Either way, he's not wrong: prices here are completely detached from incomes. The median after-tax household income in Vancouver is $86,988, versus an average home price of $1,211,700. Not many other major cities have that kind of disparity.

[casper]

Originally Posted by lio45

Do you agree that even AFTER the changes, the Feds are still continuing to make the housing crisis worse from the current levels?

"Okay, we saw the light, we'll take less FNSs than before" doesn't mean the housing crisis is going to stop increasing in magnitude.

For the housing crisis to stop increasing in magnitude, it would have to be "Okay, we'll take less FNSs per year than the yearly average capacity of industry to build new housing", which isn't the same thing at all.

Well that all depends on where we land after this all settles out. They made the change for new applicants and tied it to a decision to be made by each of the provinces.

I would agree there are a number of people who have permits under the old rules and have not arrived yet.

My preference would have been for the feds to go to these post secondary institutions and said, "you guys have to have sufficient dorm space for any foreign students you bring in and on-campus housing has to be bundled into the tuition". Maybe even given the public schools some low interest financing to build the dorms. They did not do that.

Lots of rumors floating around that some of the big city large scale projects are running into problems securing pre-sales and that is limiting their ability to obtain construction financing. That is far more concerning. While it is great that the government is building social housing, that is always going to be relatively small in comparison to the private sector. If something is happening in the private sector, that is concerning.

[Changing City]

Originally Posted by MonkeyRonin

In a normally functioning market (ie. one where people who live in or desire to live in that city buy homes with incomes earned in that city), prices can only go as high as the people who live there are able to pay. "Comparable" markets like New York and San Francisco are incredibly expensive as a result of huge numbers of people desiring to live in them; but they also have economies that generate enough high incomes to be able to afford those properties.

This relationship breaks down when incomes detached from the local economy are introduced (eg. a common occurrence in small resort towns) or when real estate is hoarded. So yes, it would imply that incomes earned outside of Vancouver (or outside of Canada) have had an effect. Actual data is hard to come by as this doesn't seem to be something tracked by StatCan, but most estimates seem to peg the foreign ownership rate (of all existing residential properties) at about 5%; though about 10% of transactions in more recent years have been made by foreign investors - a large enough amount to destabilize the market, as you have 100% of the population competing for 90% of the housing stock.

This is also all part of a bigger problem though, of a small group of people (regardless of nationality) owning a disproportionate share of the real estate. A third of properties in Vancouver are owned by investors, and a quarter of properties in BC.

Either way, he's not wrong: prices here are completely detached from incomes. The median after-tax household income in Vancouver is $86,988, versus an average home price of $1,211,700. Not many other major cities have that kind of disparity.

Not sure where you get "about 10% of transactions in more recent years have been made by foreign investors", but foreign investors haven't been allowed to buy property in Canada since 2023, and that's been extended until 2027. An FOI request by Global News revealed that the ban was only expected to impact 2% of propery sales, as foreign investment had already fallen due to vacant homes taxes. And "The latest available home ownership data via Statistics Canada shows 2.6 per cent of Toronto’s housing stock and 4.3 per cent of Vancouver’s were owned by non-residents as of 2021." So they really shouldn't have the impact on the market that you suggest.

A third of properties in Metro Vancouver were not owned by investors in 2020, it was 21.3%. The data shows 34% of condos in Metro Vancouver were owned as investments (by individuals and by corporations), and in Toronto that was 36.2%, but that's only true for condos, not all homes.

About a third (32.5%) of houses and condominium apartments were used as an investment in the City of Vancouver, but as you know, that's only about a quarter of the Metro households. One of the reasons that the proportion is higher in the City of Vancouver is that basement suites (about half the detached homes have one) and laneway homes (now over 5,000 across the city), can only be rented, not sold. So those 'mortgage helpers' get classified as investment properties - which obviously they are, but they're not stopping some would-be buyer acquiring them. Other municipalities have had greater limitations or not allowed them at all.

[niwell]

Originally Posted by MonkeyRonin

Either way, he's not wrong: prices here are completely detached from incomes. The median after-tax household income in Vancouver is $86,988, versus an average home price of $1,211,700. Not many other major cities have that kind of disparity.

I thought that this was an interesting quote from the article:

Davidoff said several factors have contributed to the gap, including an influx of ultra-wealthy property owners, which might be affecting Vancouver more than comparable Canadian cities facing similar affordability issues.

“If you think about Toronto, that’s a great city to get rich. Vancouver is a great place to be rich,” said Davidoff. “A lot of people come here with money.”

While housing prices are increasingly detached from the average Torontonian, there's still the earning potential at the top end allowing purchases (for now, at least). The "tale of two cities" thing I've mentioned in previous posts. Still a very bad situation to be in but Vancouver seems to be in an even more precarious situation. Anecdotally I've met or known quite a few people who decamped from Van for significantly higher salaries here. Or in the case of my wife's coworkers who work remotely in Van (on Toronto salaries) that they are making significantly more than those in their circle. Montreal even seems to offer higher wages in these industries nowadays.

Houston is an interesting case in that it seems much more affordable than even places like Dallas/Ft Worth which have similar land use policies but have seen significant price increases, particularly in the rental market. Austin of course has also become relatively unaffordable, in large part due to the influx of tech companies. The days of musicians renting a dirt cheap apartment to live in while recording/playing shows are long gone, at least according to friends in the industry (lots don't even bother going to SxSW anymore).

[lio45]

Originally Posted by MonkeyRonin

100%. This is an important point that gets brought up here on occasion (including by myself), but as of yet hasn't seemed to work its way into the mainstream consciousness. Our model of high income taxes/low property taxes inherently promotes unproductive economic behaviour, and exacerbates inequality by having workers subsidize homeowners (the former group being poorer, on average, than the latter, despite the overlap). It also drives up housing prices by making it a more attractive investment vehicle than it otherwise would be if homeowners had to pay for the true cost of servicing their property. We're all poorer as a result; yet the prospect of raising property taxes is still taboo and met with revulsion across the political spectrum.

In Canada, one of the best possible situations to be in would be own a property but not have a job; then sell said property every 366 days or so, collect however much the price gain in the last year was tax-free, while also collecting low-income/unemployment benefits on account of not working. Depending on your age & location, you may even be able to avoid paying the standard property taxes. Completely unethical, but entirely legal under the current system.

My personal income is very low but sufficient for my reasonable lifestyle when in Canada, and over the years, government audits have confirmed to me that it's indeed fully legal (and no one from the govt dared call it unethical at least not to my face)

[whatnext]

Originally Posted by Changing City

Not sure where you get "about 10% of transactions in more recent years have been made by foreign investors", but foreign investors haven't been allowed to buy property in Canada since 2023, and that's been extended until 2027. An FOI request by Global News revealed that the ban was only expected to impact 2% of propery sales, as foreign investment had already fallen due to vacant homes taxes. And "The latest available home ownership data via Statistics Canada shows 2.6 per cent of Toronto’s housing stock and 4.3 per cent of Vancouver’s were owned by non-residents as of 2021." So they really shouldn't have the impact on the market that you suggest.

A third of properties in Metro Vancouver were not owned by investors in 2020, it was 21.3%. The data shows 34% of condos in Metro Vancouver were owned as investments (by individuals and by corporations), and in Toronto that was 36.2%, but that's only true for condos, not all homes.

About a third (32.5%) of houses and condominium apartments were used as an investment in the City of Vancouver, but as you know, that's only about a quarter of the Metro households. One of the reasons that the proportion is higher in the City of Vancouver is that basement suites (about half the detached homes have one) and laneway homes (now over 5,000 across the city), can only be rented, not sold. So those 'mortgage helpers' get classified as investment properties - which obviously they are, but they're not stopping some would-be buyer acquiring them. Other municipalities have had greater limitations or not allowed them at all.

There's a difference between "foreign buyers" being banned and "foreign money" being banned. You do realize how much wealth is transferred from offshore parents to children holding Canadian citizenship? Note that Trudeau still allowed international students to buy property - a bizarre exemption. Why does an international student have to be able to own a Canadian home when so many Canadians cannot afford one?

[MolsonExport]

I left Vancouver in 1998 on account of the exorbitant housing prices. After four years of managing a business with 150 employees, I still could not scrape together enough money for a down payment on a modest condominium. Goddamned Trudeau, it was all his fault.

[ssiguy]

One of the biggest problems we are increasingly starting to see is how developers have a stranglehold on our housing market. They are withdrawing from the market now because they have a vested interest in making sure that prices don't fall. The last thing developers want is a surge in the number of homes available so they dictate what consumers have the option of buying. This is part of the fallacy of Trudeau misguided housing plan. If the man had any grasp of economics he would know that forcing rezoning around transit and opening up vacant lands all rely on the false assumption that builders will build and they most assuredly won't. You can force a horse to water.................This is why I have always been a strong supporter of modular housing.

Ottawa should offer massive tax write-offs/interest free loans to greatly expand our modular housing sector and then pay them to build them. They could buy tens or even hundreds of thousands of units of differing sizes/make-ups and then sell them to CMHC qualified buyers to be put on gov't owned lands. To ensure they embrace the idea of more affordable homes, they should be offered bigger tax write-offs for the more homes they build even to the point to where the builders of the most homes at affordable prices actually get a tax refund at the end of the year. Ottawa/provinces could help the cities build the needed infrastructure for these homes in exchange for the cities waving all application fees with instant approvals.

Modular housing is ALWAYS of superior quality and ALWAYS more affordable due to building in an assembly line fashion. They can, very importantly, be build 24/7 all year long as opposed to a max 8 hours day only 5 days a week and only in certain months of the year. Roughly 6 basic sub-1000 sq feet modular homes can be built with mass production for every one built by our current methods.

[suburbanite]

Where are you going to stick all these modular homes? Construction capacity and costs are an issue in major Canadian markets, but land availability is at the top of the "hierarchy of the housing crisis".

[GenWhy?]

Originally Posted by ssiguy

One of the biggest problems we are increasingly starting to see is how developers have a stranglehold on our housing market.

Some large-scale developers definitely do have a monopoly on some local markets due to the restrictive nature of areas we are allowed to build more housing. Red tape and zoning keep the small and mid-scale builders out of the market.

There is a lack of competition in the market. It's designed that way.

[MonkeyRonin]

Originally Posted by Changing City

Not sure where you get "about 10% of transactions in more recent years have been made by foreign investors", but foreign investors haven't been allowed to buy property in Canada since 2023, and that's been extended until 2027. An FOI request by Global News revealed that the ban was only expected to impact 2% of propery sales, as foreign investment had already fallen due to vacant homes taxes. And "The latest available home ownership data via Statistics Canada shows 2.6 per cent of Toronto’s housing stock and 4.3 per cent of Vancouver’s were owned by non-residents as of 2021." So they really shouldn't have the impact on the market that you suggest.

I've seen all sorts of figures for the rate of foreign buyers in a given year, from as low as 5% to as much as 20 to 30%. Consistent, accurate data is hard to come by, but the 10% figure was cited from here: https://www.capitaldaily.ca/news/for...0still%20local.

That would also make sense if 4-5% of all properties are foreign-owned, as obviously not all properties are on the market at any given time. And foreign investment in Vancouver RE really only started in earnest in the 90s, and then picked up in the 00s and 10s, before tapering off somewhat more recently - though, not entirely; as the supposed "ban" on foreign buyers still has enough loopholes as to make it possible to bypass.

In any case, I wouldn't argue that foreign investors are the main cause of Vancouver’s distorted housing price to income ratio, but it's hard to deny that they've played a role. The state of our housing market is ultimately a "death by a thousand cuts" type situation, after all.

Originally Posted by MolsonExport

I left Vancouver in 1998 on account of the exorbitant housing prices. After four years of managing a business with 150 employees, I still could not scrape together enough money for a down payment on a modest condominium. Goddamned Trudeau, it was all his fault.

Not sure what your point is beyond being a strawman, but the average home price in Metro Vancouver in 1998 was around $220,000 ($382,000 in today's dollars).

More expensive than the rest of the country at the time to be sure, but a far cry from today's average price of $1,211,700. Needless to say incomes haven't also tripled in that time. Today's pricing is also quite a far cry from the 2015 average of $761,000.

Trudeau Jr.'s policies didn't make Vancouver expensive, but they sure accelerated it.

[someone123]

Originally Posted by MonkeyRonin

I've seen all sorts of figures for the rate of foreign buyers in a given year, from as low as 5% to as much as 20 to 30%.

It mostly comes down to the definition of who is a foreign buyer. Meng with her $22M Vancouver real estate portfolio had PR and wouldn't have counted as foreign during that time. I wonder if a person who has been here for a few months doing a fake degree and has boatloads of cash to invest counts.

The reality is Canada would have barely any growth without foreign-born people moving here and their economic contributions along with capital generated abroad and invested here. You can debate if it's good or bad but that's how it is and conversations around foreign buyers that don't acknowledge these facts are not honest IMO. I think we should have a balanced level of immigration similar to what we had in the 2010's and foreign investment is good but it shouldn't come at the expense of standards of living for any cohort here in Canada. If we had gone the route of special economic zones for Chinese condos maybe it would have panned out better, but that wouldn't have delivered the same windfall to homeowners so it wasn't a desirable policy.

[Truenorth00]

We do many things to benefit and obscure foreign ownership. Put in place a beneficial ownership registry for land and we'll quickly have transparency. And that's exactly why a policy like that will be opposed.

[Berklon]

Originally Posted by MonkeyRonin

Trudeau Jr.'s policies didn't make Vancouver expensive, but they sure accelerated it.

Just like the government before him. It was going to accelerate with or without him or his policies.

I remember the "Crack Shack or Mansion" website before JT:

https://www.cbc.ca/news/canada/briti...nsion-1.880972

Do you honestly think home prices aren't going to continue to increase if PeePee is running the show?

[GenWhy?]

Originally Posted by Truenorth00

We do many things to benefit and obscure foreign ownership. Put in place a beneficial ownership registry for land and we'll quickly have transparency. And that's exactly why a policy like that will be opposed.

My understanding is that already exists in BC. Effectiveness... not sure.