Landlords unhappy with housing boom
You know all those grouchy bears complaining about the Canadian housing boom?
John Dickie, president of the Canadian Federation of Apartment Associations, said at least part of the housing boom over the past decade can be attributed to the government favouring housing over rental accommodation by providing a much larger subsidy.
“There are a number of rules in the current tax system that amount to massive favoritism towards homeowners as opposed to renters,” said Mr. Dickie Tuesday, adding it’s true for all three levels of government.
In Ontario, the group estimates, municipal, provincial and federal governments provide a subsidy of $2,629 per owner-occupied house, compared to $395 per renter.
“There is a perception among politicians that homeowners vote more frequently than tenants,” said Mr. Dickie. “There is perception in society that homeownership is good and should be encouraged.”
Homeownership rates in Canada have climbed steadily over the past decade and are now closing in on about 70% of households, something Mr. Dickie said “pushes it further than it should.”
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October 26th, 2010 at 3:57 pm
"All I know is that the financial situation of many friends and acquaintances is more precarious than I’d have ever imagined."
Would that be b/c of buying homes they could not afford??
If so, oh f boo hoo, how can I feel bad for those that cannot differentiate between needs and wants? For those that want to play "im better than thou", for those that are so unrealistic to believe that money grow on trees, those that ars sume that housing will always go up in their favour of course, etc etc.
Well, it turned.
Risk is called risk b/c it is a risk. Being greedy usually includes some kind of risk, and one caan lose.
Really, nothing new under the sun, not at all.
A learning curve is in order for those that live in bling bling brains.
It would be nice, since I relate better to those who are realistic in their expectations than those that are selfproclaimed princes/princesses.
Am I peeved? Only to a degree. I am soo greatful for having been down to earth and realistic about finances, I am not in debt but ahead. However, I am tired of looking at the massive narcisism of bling cars, home interiors, bling purses , bling rings, and anything that glitters (distastefully 99% of the time) with the expectation that I am supposed to admire this shit. I dont. That is what tires me, I am expected to admire this crap or be labelled jealous. Any advise in how to deal with this stupid expectation gracefully?
Oops, probably not this blogs purpose..
Just being the meerkat sticking my head up giving a different perspective of human mass hysteria.
October 25th, 2010 at 6:45 pm
@Anonymous:
No it doesn't. Developers can build anything the zoning allows. You think all those condo developments you get flyers for have "affordable" units? "Affordable" units are designated only in developments where the city is the property owner or otherwise directly involved.
Anyway all housing is affordable to someone. If the owner is not willing to sell or rent for what someone is willing to pay it will sit empty. The market does not care that the developer built a luxury condo for some rich person who hasn't showed up. The property is going to have to sell or rent for what someone else is willing to pay.
As I said at the outset there is no general rental affordability problem at all, just a problem with individuals and households who for some reason or another have subpar incomes. And as I said the answer to that is to try to get these individuals productively employed if possible, and to give them a decent level of assistance if not.
October 25th, 2010 at 5:15 pm
@Love My Debt
As they say in the investment world…
”bulls win, bears win and pigs get slaughtered”
October 25th, 2010 at 4:18 pm
2. Migrant labour (to the extent illegal) living in bunk houses is what happens when people try to circumvent the rules. At some point, if your business is not profitable with local labour you either go under or you bring in external labour. Nothing wrong with the former, as it is part of the creative destruction that occurs in capitalism. The problem with the latter is where it is breaking the law. Do not take that as a sign that wages do not correct; it is merely a sign that people try to bend the rules to get around it.
3. Granted it carries with it risks. You can always join the air force. Regardless, an individual who is asking for a public handout should first consider the option of what other good employment is available.
4. The military is not government's intervention in the markets but rather government's establishment of the conditions necessary (namely security) required for efficient markets to function. The reason regulation of the banking sector is necessary is because of government's intervention in the market in the first place by providing deposit insurance. To the extent deposit insurance is provided (and in this case I believe there is a positive externality to the provision of deposit insurance), that provides the requirement for regulation. I would disagree, however, that allowing people to provide higher-risk services from within banking entities is what primarily led to the cause of the financial credit crisis.
5. I disagree that a LACK of regulation is what caused the credit crisis. To a meaningful extent, the intervention of government in the markets through Fannie Mae and Freddie Mac caused the credit crisis. That, combined with unreasonably low short-term interest rates (as set by government), led to excess risk-taking and excess amounts of credit. If you took out those two forms of government intervention, I am not sure that the financial crisis would have even occurred; I can say that it would certainly have been less severe. In addition, the fundamental problem with excess risk-taking by banks stems from government regulation in the first place as caused by providing deposit insurance. INEFFECTIVE regulation then allowed institutions with insured deposits to take excessive risk with what is effectively government capital.
Without deposit insurance (and the tolerance for excessive risk taking for insured institutions), Fannie Mae and Freddie Mac, and excessively low interest rates, all government issues, the credit crisis would not have occurred.
Of course government regulation in the form of enforcement of contracts is essential, and to the extent someone is committing fraud government should intervene, but it was the action of government that got us into this mess in the first place, just as it is the action of government in Canada that props up an unsustainable housing market.
And if I sound like a recruiter that's fine, because I am actually a believer.
October 25th, 2010 at 3:59 pm
"1. I was not talking about necessarily homeownership, but rather whether or not people could afford shelter. Whether or not people can afford a home is less relevant than whether or not people can afford rent."
Point taken.
"2. As I noted, to the extent there is no affordable housing in a region for poorer workers the market will correct for that by increasing wages."
That is simply not true. An economics textbook will tell you this happens, but the more likely scenario of migrant labour living in bunk houses in Abbotsford and working in chicken barns is what really happens. Or if we look at Whistler, rather than increased wages, we just see people living ten to a room. Or we see 3-4 immigrant families sharing a home in East Van. Real wages (not nominal wages) have not increased in decades! Decades! When exactly is this "equilibrium" point going to be reached?
3. "I was not saying that everyone should just join up." You go on to say it can work on an individual basis. Military service carries with it the real risk of dismemberment, death and mental illness. I don't regret serving, but I would never suggest it to anyone at any time for any economic reason. My buddies are dead, it would be very difficult for them to purchase homes, even ones indexed to inflation.
4. "4. I did protest at the last bailout to prop up home prices, because I am not a homeowner. I rent. I am against government intervention in markets."
I am for government intervention in markets. What is the military if not a government intervention in markets? (a little tip of the cap to Smedley Butler and to gunboat diplomacy). But seriously, if the graham-leach-bliley act had not passed, we would not be in this mess. Government regulation is essential to a well run market. Imagine if the government hadn't killed Jesus and he had just been free to roam the land tipping over money lenders tables? What madness would that have been?
5. "I believe that the likelihood of a bubble would be very low without government intervention." It was deregulation of the U.S. financial markets that caused their bubble to spread and created this credit bubble. Which is what we are in here in Vancouver. In case anyone is wondering. The most concentrated credit bubble in history. While I agree with the spirit of your desire, to let free market capitalism allocate the best use of resources, regulation and the rule of law is essential for an orderly marketplace. It just is. We dont live in a world of theory. We live in a world where people in unregulated markets will steal every last penny of your grandmas retirement savings, laugh as she gets booted to the street, and then those same people will accept government taxpayer money in the form of bailouts. You tell me how to get rid of those people, and I will support your efforts to eliminate government oversight from the marketplace.
5. "Regardless of your long-term intentions, service in the forces provides an individual with a foundation in discipline and teamwork which I believe serves people well in all future endeavours."
You sound like a recruiter.
October 25th, 2010 at 3:43 pm
Devore,
Do you have stats demonstrating the affordable housing problem?
First, note that when I talk about this issue I am always referring to MIN(Rental Cost, Ownership Cost), because I do not think people need to own, and so out of reach ownership costs are not a social problem. Yeah, they are a problem, in that they are a symptom of a bubble or some form of useless government intervention, but unaffordable ownership does not mean people can't find somewhere to live.
The problem I have with the argument that there is a problem with affordable housing in Canada is that people often say things like, "It costs too much to live in Vancouver." As I previously stated, people do not have to live in Vancouver, and no one has the right to live in any location. Local issues with housing being unaffordable by those who have poor incomes should lead to people moving to somewhere more affordable. And if that reduces the supply of cheap labour in any location, then the pricing of that labour will increase to the extent necessary for the supply to meet market demands.
If anyone has any stats that demonstrate that there is a problem with sufficient housing in less desirable places to live, then I am happy to reconsider; however, as Renting noted, there are hundreds of places for rent for $500-600 out there. And, as I noted previously, you always have the option of moving somewhere less desirable or commuting further.
I described what I think the government policy should be towards housing: establish a minimum quality level and an income level at which that level of quality cannot be obtained in regions with relatively low-cost housing and then provide direct subsidies to consumers who are below that income level. If you do not believe that the government should enforce a minimum quality of housing, then you do not even need that. But that's about it in terms of policy intervention from my perspective.
Someone stated that there are a lot of positive spinoffs from housing in terms of jobs, etc and that is why the government should subsidize it. The only reason for government to subsidize any industry is when there are positive externalities that are present for the economy in general (where the market participants do not partake in the actual benefits). I see no evidence of that in housing, and therefore I see no reason why it should receive preferential treatment. Investment in any industry creates things like jobs and tax revenue. Some correctly observed earlier that diverting capital towards housing is diverting it away from other productive industries. That is absolutely correct. Let the market decide what is beneficial, rather than having government force an industry down our throats.
The answer, in my opinion, is the elimination of government intervention in the housing market, both in terms of the rental market and the ownership market.
October 25th, 2010 at 3:25 pm
77 Sour Grapes Says:
October 25th, 2010 at 10:46 pm
@NO – LYMPICS:
What’s her e-mail….we’ll prank call her.
While you’re at it, could you fax me a pizza?
==========
Sure
Thin or extra crispy
October 25th, 2010 at 3:18 pm
Days elapsed so far 16
Days remaining 4
Average Sales this month 119
Average Listings this month 198
Projected sell/list 60.0%
SALES
Projected month end total 2371 +/- 57
95% Conf Interval lower bound 2315
95% Conf Interval upper bound 2428
NEW LISTINGS
Projected month end total 3953 +/- 73
95% Conf Interval lower bound 3880
95% Conf Interval upper bound 4025
MONTHS OF INVENTORY
Inventory as of September 30th 15401
MoI at this sales pace 6.49
Note: This is a simple linear projection of month end totals.
This provides the answer to the question
"What will month end totals be, if things continue
on the same pace we've seen so far this month?"
October 25th, 2010 at 3:12 pm
US Fed is officially 'giving it away'. Negative yields on treasuries………..where can we all sign up? Getting paid to buy dollars…sweet deal. Ya..dream the good dream …the 'investors' mentioned who are 'buying' the paper is the government itself.. buying its own paper.. obstensively to loan out to a generous retail institution or two……gotta have some available if any one comes through the door…..it must be nice to own a money machine eh Bernake?
http://www.bloomberg.com/news/2010-10-25/treasury…
October 25th, 2010 at 3:09 pm
Dear servicepeople,
1. I was not talking about necessarily homeownership, but rather whether or not people could afford shelter. Whether or not people can afford a home is less relevant than whether or not people can afford rent.
2. As I noted, to the extent there is no affordable housing in a region for poorer workers the market will correct for that by increasing wages. My point was that the market will provide a solution, either by people moving away or by wages going up, and in reality a combination of both. People often tell me that in the US there would be no food supply without illegal immigrants. I disagree, and note that instead there would be a combination of: higher wages and higher employment of legal workers, an increase in food prices for domestically produced goods that currently relied on cheap labour, and an increase in automation (and also a corresponding increase in advances in automation as demand for automation increased). That is how markets work. And they generally work best when there is no government interference.
3. I was not saying that everyone should just join up. I was, however, saying that for those who say they cannot afford rent there is always a simple solution right around the corner. It does not work when you take the argument to the extreme and say everyone should do this; of course it can't! However, it does work when dealing with an individual, as there are jobs available in the CF right now.
4. I did protest at the last bailout to prop up home prices, because I am not a homeowner. I rent. I am against government intervention in markets.
I think you must have missed the thrust of my argument (could be my fault for poor writing, given more than one person seems to have missed the point), which was that I am against all forms of government subsidy and believe that the market would correct for itself if given the opportunity to play out without government interference. I do not want anyone's tax dollars to be utilized to support a bubble. I believe that the likelihood of a bubble would be very low without government intervention.
5. Finally, thank you very much for your military service. I would be happy to buy you a beer on Remembrance Day. In terms of your guess in regards to whether or not I am in the service, you are wrong, but I do not want that to colour anyone's opinion of my post. I strongly believe that employment in the CF is an excellent opportunity for everyone, and I would urge those who are having difficulty finding employment to consider joining either the reserves or regular force. Regardless of your long-term intentions, service in the forces provides an individual with a foundation in discipline and teamwork which I believe serves people well in all future endeavours.
Thanks
October 25th, 2010 at 2:46 pm
@NO – LYMPICS:
While you're at it, could you fax me a pizza?
October 25th, 2010 at 2:21 pm
62 junius Says:
October 25th, 2010 at 7:07 pm
maybe hate is too strong a word.
strong dislike.
she’s been bullish on RE for a decade and rubbing it in my nose.
I am tired of her calling me the ultimate loser.
+++++++++++
What's her e-mail….we'll prank call her.
October 25th, 2010 at 2:20 pm
@vancouverguy(a)
Well, congratulations on writing one of the dumbest posts I have ever read on this blog.
I am a military veteran, and I am going to take a guess and say you have never served in the military. Your suggestion to just "join up" as the only means of home ownership was certainly helpful, and should go a long way to alleviating this bubble. I am shocked you bother to post at all, clearly your genius would be better served at a think tank developing public policy. Why, you must be some kind of modern art masterpiece, just for that, I am going to let you bang my sister!
Suppose you live in a town with a car lot of a hundred cars, and a hundred people. Just for you, we will pretend it is a military base, so we can all play G.I. Joe.
Everyone on the base must get a vehicle, by order of decree of the base commander. (issued when he wasn't committing depraved unspeakable acts against defenseless women and children) The car lot is owned by one guy. He has 5 ferraris, five lamborghinis, 3 porsches, 15 lexus's, 1 bmw, 1 vw, 20 toyota corollas, and 50 amc gremlins.
I go on the lot:
Me: Nice ferraris
Dealer: the best in the world
Me: how much?
Dealer: 1.5 million.
Me: thats pretty steep.
dealer: you want the best, you gotta pay for it.
Me: i dont make very much.
dealer: well, not everyone can drive a ferrari.
Me: how much for that bmw?
dealer: 1.2 million.
Me: you know you can buy a beemer for a fraction of that in the states.
dealer: yes, but the base commander says you have to buy from this lot. rules are rules. cant break em. def. cant import from the states.
Me: well, ok. im scared to ask about the toyota. f' it. how much is that amc gremlin? the one with the missing quarter panel, donut tire, leaky roof, and mold?
dealer: $950,000.
me: you know i dont have that kind of money!
dealer: I got a guy at the bank. we can get you a low enough payment.
me: well, i gotta ask. where did YOU get the money for all this inventory?
dealer: i talked to the same guy.
Now if I move to Los Angeles, I know I am not living in Beverly Hills. But if I make $100,000 a year, I know I can find a great house in a nice neighborhood, might have to pay 3-4 times income, but its fine.
But it takes a special kind of jerk off to say that every home in los angeles should be valued as much as beverly hills, and if you cant afford it, you obviously dont deserve to live there!
Every city of size needs low income housing to survive. Ergo, there should be no major city on earth that poor people cannot afford to buy in. If you cant possibly work out the math on that, I swear to god I cant help you.
You look at Vancouver real estate, the least affordable city on the planet, and you come to the conclusion that it is a bubble, but rather, well, not everyone is good enough to live here?
I didnt hear you protesting when the federal government of Canada bailed out the banks to prop up your home price. That was paid for with the taxes of all the people not good enough to live here.
So in close, their are def. neighboorhoods or small cities (west van) that obviously not everyone can buy in. But entire cities? Entire regions? Are you cracked?
October 25th, 2010 at 2:17 pm
@jesse:
Yes, from the same post I wrote: "a strong housing sector is good for the economy. Lots of spin off jobs…"
The jobs don't just go to home owners which was my point. The government is trying to create jobs and economic activity not appeasing home owners by inflating home prices so home owners will vote for them.
In the case of the US they produced lots of extra jobs while the boom was going, but now it is bust not only did the boom jobs vanish so did normal housing related jobs that have been around for decades. They borrowed from the future. The same as we have done. We just have not started to pay our loan back yet.
October 25th, 2010 at 2:07 pm
@Anonymous: "It doesn’t matter what the stats say."
Anecdotes are a far more satisfying gauge of the market. All's I know is only so many homeowners can sell, with sales running at the second lowest rate in more than a decade. The rest — including the tens of thousands of BCers who have already pulled their props off the market in the past few months — have no choice but to wait unless they drop their asking prices.
October 25th, 2010 at 1:38 pm
@Renting: "The one that will cost the democrats is the lack of jobs not the falling housing prices"
I assume you understand the two are not independent of each other.
October 25th, 2010 at 1:34 pm
The reason government favors home owners is because a strong housing sector is good for the economy. Lots of spin off jobs and taxation opportunities when things are booming. Obviously when a credit bubble is created they borrow from the future which will have to be paid back.
The average home owner does not vote for the government in power because their house went up in value. Having a job is more important which was the part the government was trying to address when it pumped the bubble further in 2008.
Look at the states. There is high unemployment and housing is in the tank. The one that will cost the democrats is the lack of jobs not the falling housing prices.
October 25th, 2010 at 1:18 pm
I guess I have to ask what is affordable housing?
First off owning a place is not a necessity and is it merely a want not a need. Renting is affordable.
I quick search on craigs list shows 915 listings in the $500 to $600 range. You can get a brand new basement suite is Surrey with utilities, cable and internet included for a $575 per month (asking price – you may get it cheaper). A person making minimum wage can afford that. It is in a brand new house! A couple both making minimum wage can afford that and live better than the average Vancouver home owner. Many of the listed units that came up are 2 bedrooms. Get a room mate and your rent is $300 each.
The ONLY people who housing is unaffordable for are those who do not work. There may be issues for single parents or those with large families but for the most part our so called unaffordable housing problem is actually other problems like people who are not able to work or those who cannot find a job. It is drug problems and mental disabilities not being treated. When you can cover rent and utilities with a single income working at a widely available minimum wage job housing is affordable IMO. Maybe people just want more than they need.
October 25th, 2010 at 12:45 pm
"I am tired of her calling me the ultimate loser.
She sounds like a nasty ditchpig.
October 25th, 2010 at 12:43 pm
"It doesn’t matter what the stats say. They area I am looking at is falling. That is what matters to me. Period. Its dropped by 10% over the last three months."
Agreed.
I watch the Tri-Cities area very carefully, and the same is true for that area.
October 25th, 2010 at 12:37 pm
@Anonymous:
It doesn't matter what the stats say. They area I am looking at is falling. That is what matters to me. Period. Its dropped by 10% over the last three months.
October 25th, 2010 at 12:14 pm
The comment in the article about home ownership rates being pushed "further than it should" is a key statement. This is one of the big problems in the US market. Too many people who either are not capable of ownership, or have jobs that will eventually require them to relocate, will not do well by owning. Many will be forced to sell in the coming years.
The long term home pwnership rate is in the mid 60 % range. Reverting to that average means a lot of properties being sold for rental. With around 1 million households in Vancouver area, that's about 50,000 owned dwellings that would need to change hands over the next few years to investors. And guess what class of buyer doesn't buy in flat to falling markets.
October 25th, 2010 at 11:56 am
@Devore:
"Why are developers choosing to build luxury and high end housing, instead of sufficient quantities of affordable housing for all market segments?"
I thought "Vancouverism" required mixed developments of affordable and luxury housing? Isn't there some requirement for the %age of each development which must be affordable?
October 25th, 2010 at 11:51 am
@McLovin:
"Prices are dropping in all areas regardless of what the “official” stats say. "
"Thoughts?"
Yes – you're cherry-picking evidence. You think your anecdotal data is more accurate than the "official" stats? Trust me – it's not.
October 25th, 2010 at 11:29 am
@junius: Wow! Mom sounds like a real peach. Like BPoM, I'm staying away from short-term prognosticating. I thought that the peak in 2008 was going to be a generational maximum. I sure felt good about myself the next year or so, but this double top has really shaken my faith in myself.
All I know is that the financial situation of many friends and acquaintances is more precarious than I'd have ever imagined.
October 25th, 2010 at 11:07 am
maybe hate is too strong a word.
strong dislike.
she's been bullish on RE for a decade and rubbing it in my nose.
I am tired of her calling me the ultimate loser.
October 25th, 2010 at 11:06 am
market is getting fried
my Mom is a realtor in Edmonton (I hate her guts) and she says that she is ultraworried. finally.
I win.
October 25th, 2010 at 11:03 am
@McLovin:
I've given up trying to predict the blow-by-blow, month-by-month direction of this market. The twists, turns and surprises have been many.
Just when you think it'll be an extremely slow bleed down something could happen to trigger a massive selloff.
Another financial crisis, the bond market blowing up, the stock market crashing again, a European nation defaulting, war…
The only thing I'm still sure of is that the peak prices we witnessed in April won't be seen again for at least 20 years.
The time frame and exact trajectory downwards is anybody's guess.
October 25th, 2010 at 10:33 am
It has become obvious to me that we are going through a slow grind downward vs a quick drop like we saw in 2008. Prices are dropping in all areas regardless of what the "official" stats say. Just looking at the number of reduced properties in my inbox shows this. With that in mind perhaps its too much to ask for a quick 20-30% drop? Are we in for a 1% a month drop?
Thoughts?
October 25th, 2010 at 10:27 am
@Best place on meth:
"Whew, back to normal."
According to Chipman's stats for last week, the sell/list in GV was 73%.
October 25th, 2010 at 10:24 am
@Best place on meth:
No kidding! Let's get this show on the road
October 25th, 2010 at 10:24 am
@VancouverGuy(a): That's exactly what I am saying.
The problem is not why not everyone can find affordable housing, the problem is why is there not enough affordable housing for everyone?
Seems like the same question, but as any pollster will tell you, you will arrive at a different answer depending on how you ask the question.
I don't believe that increasing incomes will rectify the affordable housing problem. Would rising incomes simply result in higher prices and rents? And if incomes are rising only in one demographic, would that not just cause a dislocation and a new shortage in a different market segment instead?
Let us step into fantasy land for a moment, where there are no income inequalities, and everyone has the same income. Would the affordable housing problem disappear then? I doubt it.
So, in this case, why is there not enough affordable housing for everyone? Clearly there is demand for affordable housing. I am making the assumption here that vast majority of people want a roof over their heads. Safe assumption. They are willing to pay some amount of money for this product. Why is no one stepping up? Why are developers choosing to build luxury and high end housing, instead of sufficient quantities of affordable housing for all market segments? (And how would more equal income distribution change this preference?)
There are many reasons, so I'll leave that as food for thought, because I can already feel patriotz breath on my neck.
October 25th, 2010 at 10:23 am
Good stuff
New Listings 176
Price Changes 142
Sold Listings 73
October 25th, 2010 at 10:22 am
Nice numbers paulb, especially those PRICE REDUCTIONS!
October 25th, 2010 at 10:12 am
@paulb.:
Whew, back to normal.
October 25th, 2010 at 10:01 am
@VancouverGuy(a):
"So could middle income people really bid up the price of rental housing so that poor people could not afford it? No, if there was a reasonable return to be made on providing rental housing to poorer people someone would fill that gap."
Why would they if they could get a better rate of return by renting to people who might be considered more reliable tenants?