Yesterday we had an article about a politician seeking feedback on affordable rent in Vancouver – this feedback would presumable be used to lobby for government support of affordable housing.

Government policy at all levels affects rents and house prices in a number of ways, from zoning rules to tax law, but it is the belief of many people at this particular blog that one of the biggest market forces when it comes to house prices is the Canadian Mortgage and Housing Corporation. The CMHC has been buying up mortgage debt from banks and in 2008 were ordered to approve as many ‘high risk’ mortgages as possible to help support the housing market.

On that note, we received the following email from AZ:

With a minority conservative government, and a provincial liberal party teetering on extinction,  there is the ability to cause real change if everyone who is passionate on the topic is rallied under a common banner.

Therefore, I was hoping to have a posting that requests people to write to their MLA, MPs, City Council, and the media to inform them that there will be a political consequence for ignoring the current real-estate situation. And, most importantly – post what they have written to their elected officials on your blog, and if possible – the response that they receive.

Here is my story and what I wrote to my MLA and MP:

“My wife and I are both professionals with “prestigious” (or so I am told) careers and are both university graduates with post-graduate degrees.  In most parts of the world the hard work and time we put into school and our current 60 hour work weeks would afford us a house we can call our own.  Unfortunately, salaries for most professionals in Vancouver are in the area of 20% lower than in other parts of the world for comparable work.

But with low wages, and high home prices – even responsible people like us, who have no debt (through hard work and sacrifice), and manage to save a good portion of their income (again through sacrifice) can’t afford a house without taking on ridiculous levels of debt  – in the mean time we are forced to pay high levels of rent.

My concern is that a bad situation will be made worse through bad policy – The solution is not about rent control, co-operative housing, or a hike in minimum wage: it is through prevention of market speculation on housing – anything else is a bandage solution.  The victims of this practice of speculation are far and wide – from the young professionals, to the blue-collar worker, to the new immigrant family.

Housing is a basic need and the market of this need should not be allowed to be cornered.  To allow this is akin to pushing up prices on groceries or medicine due to speculation of future price appreciation – these items are essential to living and are required to form healthy sustainable communities.

The high cost of home ownership through speculation has forced property values to ridiculous levels and has forced many to rent longer than they would have otherwise. As well, those who are financing their mortgages by passing rent cheques from their tenants to the bank are also desperately trying to stay afloat and thus raising rents.

Four facts that must be understood for this solution to be fixed.

1) The victims of high-rent are not just the unemployed, elderly, single parent families – but the employed, the young professionals, and the otherwise “financially uncompromised”.

2) The problem of high rent is high housing prices and low wages– which forces renters to stay renters for longer than they would otherwise, thus increasing the demand and price of rental units.

3) The culprit of high rent and housing costs is market speculation – which drains the economy by creating a micro-environment of inflation on a fundamentally required staple.

4) The solution is to curb housing speculation by:  increasing taxes on non-primary residences severely (property and capital gains), prevent CMHC insurance of loans on non primary residence housing and for housing with a price tag of over $500,000, increase the amount required for a down-payment to 25% (this prevents an individual from buying multiple condo units on speculation of price appreciation).   Although these items make home ownership seem more inaccessible it would serve to reduce home prices to “true” supply-demand fundamentals, prevent speculation, strengthen the personal balance sheets of Canadians,   make renting more affordable (by shifting some renters into homes by displacing speculators), and by encouraging real economic development by moving capital from real-estate into professional and resource based areas of the economy.

The Federal conservatives attempted to address these needs, although they were the ones that added to problem to begin with (See Flaherty’s first budget speech).  Without arguing details on the aforementioned, more needs to be done.

I find the situation extremely frustrating and I have chosen to vote exclusively on this issue at the Provincial, Federal, and Municipal levels.”

I am sure if MPs and MLAs in the region receive a 100 or so emails – they will start to talk.

Have any of you written your MP or MLA on this subject and received any interesting responses?  If you feel this issue is important will you be writing any letters to politicians at various levels of government?  Here’s a list of contact information for Vancouver area Members of Parliament.

I suspect that AZ is correct in the assumption that a ‘100 or so emails’ (or letters sent by post) would generate some talk.  On a related note reader traffic at this blog is approaching 4000 visitors a day now, which means that less than 3% of you writing in on this subject would do the trick.

So what do you think – should the CMHC be used to prop up the Canadian housing market?  Does current government policy make housing more affordable and accessible or does it encourage speculation and harm living standards by encouraging large risky debt loads?