Agree with the article, but I'll provide a 'careful what you wish for' caveat.
Let's assume the market corrects itself; either because it crashes as the pool of buyers for $1M+ homes isn't there or smart policies across the country start bringing sanity back to the market. Now, the pace of those kinds of adjustments are incredibly hard to predict. If it happens fast, who feels the most pain?
Not the boomers and GenXers who bought cheap and now have substantial paper wealth. My house it probably worth a bit more than double what I paid for it a dozen years ago on paper, but that doesn't really impact my day-to-day life. And, if the market suddenly corrects by 30 - 50%? I'll still have pretty substantial gains by any historic standard.
Now, think about the young family that just leveraged everything to get one of those million dollar homes. They had to put a quarter of a million down and are still carrying a pretty hefty mortgage. A correction wipes out the equity (and any LOC) and they still have to carry a really huge mortgage in the face of increasing interest rates.
I worry about those families and think we need to tread carefully as we fix this problem. I'm actually *not* sure what the appropriate approach is. We need more housing and everything people are proposing (streamlined zoning, YIMBY, etc) are the right thing to do. But potentially some young families may get squeezed twice -- once paying at the top of the market and again as the market corrects.
I think that's a fair comment, but even if you spur the building of new houses up to what anyone would currently consider hyper-speed, it's going to take quite a while to do and it's unlikely to cause a crash in prices. Hopefully what it would do is level prices out somewhere close to a level where the incomes and borrowing power of the current group of non-homeowners catches up.
What is likely to cause a crash in prices, if anything, is higher interest rates brought on by higher inflation and ever soaring prices. That's a problem the government can't control directly, but the medium- to long-term effect of pumping the brakes gently by expanding supply would help there too.
Interest rates may be an immediate cooling factor for buyers but I remember when a "good" rate was 14% & houses were still bought. I do wish renting wasn't seen as lesser accommodation, for some people it's a better option & for some the only option.
Especially when you are young and your career isn't settled, ownership can tie you down and make moving to where the work is less attractive. It's worse for the economy, but we subsidize it.
Building decent rental, seniors & co-op housing in appropriate areas - near schools, near medical facilities, near public transit - is part of what our leaders should provide for Canadians. If locations are chosen spread throughout a municipality they become more appealing. My city has a legacy of these from the '80's and they are appreciated. Sadly very few of these developments have been built in the last two or three decades.
I absolutely agree and am pleased to see l am not alone in this thinking. The situation with housing affordability is actually the result of the ‘private is always better’ ideology that hands over the power to provide services and, in this case, homes, thus having a direct impact on what should be a basic right. To make the Market the gatekeeper to the things we all need is immoral. Look around you at all the social issues we are failing to contend with and take the time to trace the route that got us here.
I hope that those generations, who see no place for themselves in this housing market, will reconsider placing their necks in the mortgage noose, and demand more social housing. There are tons of models throughout the world that are successful and would provide another avenue.
Two things:
Do not buy in hot market and it really is the fault of the Boomers. (I say this as a War Baby, so a bit bitter.)
I will admit some reluctance to seeing government build and run housing unless there just isn't another option. That's mostly because I think it's hard for any organization to do many things well and government's history of creating housing seems to be a really mixed bag. I'd rather see policy that gets to an open and competitive market but I'll also acknowledge that in my lifetime governments haven't been particularly effective at that, either!
Good point, here in SK (at one time) many of these initiatives were not run by gov’t. Rather non- profits such as churches, businesses with non-profit entities (Muttart, eg) & cooperatives themselves often ran the buildings. Doesn’t have to be gov’t control but I think maybe gov’ts starting projects is necessary.
💯 I, an early gen x-er, have been telling you millennials to support the most libertarian Conservative candidate since you were old enough to vote. I haven't got much traction. I confidently expect to be saying "I told you so" for the rest of my life. Enjoy!
I think most of my millennial peers hear "alt-right nazi" when someone utters the words libertarian conservative. Which is why this Albertan is trying his damnedest to move his family to a red state, and soon.
If The Line let you put in pictures, I could show you the one of my parents and 6 other adults (proprietor not shown) that lived in a 'boarding house', a form of housing for the desperate, that we still haven't regressed back to. 9 adults in a 1400 sf house, 1946-1947, one of them with WW2 PTSD, tended to scream at 3AM, waking them all. We've had housing crises before!
They bought a 1200 sf bungalow in 1951 for $9000, sold in 1969 for $21,000 a 5.5% yearly increase. I bought a 1954 bungalow a few miles away at the bottom of Calgary's "dollar sales" crash era, 1985, for $89,000, sold it for $704K some 29 years later, a 7.5% yearly value increase. But, we also spent over a hundred thousand on major upgrades during those years, I believe an economist would calculate that I, too, really only got about 5-6% appreciation of the total investment, per year.
My boomer point being that 5-6% appreciation, maybe a percent better than average stock market returns, if you pick an index fund, goes WAY way back in history, to the end of WW2. That I know of. You're pushing against large economic headwinds if you want it to increase more slowly in value than steel plants and malls do.
The real problem may just be that wages and salaries for the bottom 90% have not kept up with the stock market, with the appreciation of *all* assets. You know, we read about that all the time? "90% of the growth from globalism went to the top 10%", and "billionaires got richer in the pandemic, while millions went broke", a duplicate of headlines from 2008 about that crisis?
But, after about 50 such income-inequality stories, we turn our thoughts to housing, and suddenly it isn't "young people are too poor", it's "prices are too high".
I live in the West End of Vancouver, at one point calculated as more-dense than Manhattan(!), and I can take a 15-minute walk, past 9 different "high-rise coming soon" mini-billboards, which show Unit-counts; and count up some 2000 dwellings in the offing in one square kilometre. That doesn't include the 45-storey hotel, in perfectly good condition, that was recently torn down to put up two high-rise condo towers on busy Robson street; my 9 are three blocks over. We're sure doing our bit!
[I asked my Mom if anybody ever complained about the 3AM wakeups. She looked at me like I'd just crawled out from under a rock, and should return. It was Veteran's Affairs that didn't "get" PTSD until recently. Actual veterans always did.]
I love the West End. 40+ years ago I moved into a brand new 2 bed 2 bath 2 small balconies condo there that was being rented out. The developers had built it for sale, but there were no takers. So they rented the suites out. Who would believe this now?
There’s a much simpler and more significant explanation for the rise of housing prices in Calgary: increase in number of dwellings has lagged increase in population for *decades*. Increasing demand, insufficient supply, and prices rise. All of the f scores you’re discussing are second order.
How well I know that demographic graph. We waited anxiously for it every year, at Calgary Waterworks. I was in replacement of old stuff, but sat next to the people who did the long-term planning: exactly where do you build giant pipes and roads, which direction, that won't be fully needed for 30 years? (Since "30 year supply of serviced land" was our promise to developers, who held more sway over city council than any other industry, including Oil.)
Or, in other words, I know about all that; Calgary was able to grow fast enough that the housing price rise was the same as for most other large assets, including stocks; if it didn't grow "fast enough", believe me, that was a choice. Even the Tar Sands couldn't compete for labour and equipment with the Calgary housing development industry, they were making such profits.
(And by "choice", I don't mean some conspiracy, just that rational investors sitting on land for 20 years that they got cheap from farmers, time their development move to extract maximum profit. How the system works...)
One point missed here is that there will likely need to be a readjustment of expectations regarding what type of home people will be able to afford in the future. In a lot of cities, there simply isn’t the land to build more single detached family homes. However, that’s what a lot of people feel entitled to own because that’s what they grew up with. In some cities, there’s more room to grow if politicians can get over the aesthetic arguments against “sprawl.” Nobody is going to find more land for single home neighborhoods in the middle of Vancouver or the center of Toronto. The land (and houses) that exist are still in demand, and will simply get more and more expensive. The solution to building more homes in these areas is densification, but people will have to get used to the idea of smaller spaces - townhomes or condos. I don’t think that’s going to go over well. I’ve got friends whose anger at the housing market is less that they can’t afford anything, and more that they can’t buy the same sort of house they grew up in, in the same neighborhood. I don’t know how you solve that problem in a growing country, particularly when the growth is concentrated in big cities.
The reality for most cities is that sprawl is a bit of a ponzi scheme from a services point of view. When a neighbourhood is built, you get new taxpayers (good) and development fees pay for some of the new needed services. But, 25 years later, you still need to service/maintain all of that and its not sustainable at the kind of property taxes people are willing to pay.
Densification done right allows cities to add more taxpayers without wildly increasing the cost of servicing those folks. Low densisty, single family homes should be an option for those that want them, but property taxes should reflect the significatly higher costs of servicing low-density (or people should expect rural levels of public service).
Sprawl also leads to increasingly intractable transportation problems, but I’m continually amazed at the commutes people will endure so they can have that suburban detached house. A decade ago, I knew people who were willing to live in Maple Ridge and deal with an hour long commute into Vancouver each day. Now, it’s people buying in Chilliwack and driving nearly 2 hours each way. These are people working in construction and health care, so remote work isn’t an option. They’ve got the means to buy a house, though - they’re not lower paid service workers who face the same predicament.
George you make some great points. Your last point about "not being able to buy the same sort of home they grew up in, in the same neighbourhood" really struck me. Why is that so. What I mean is why have price to income ratios so totally decoupled in Canada compared to a generation ago. Its not like we are not building homes. I don't know about the rest of Canada but here in BC home building has been on a tear for 20 years. It is the biggest industry in BC. With all that building, why isn't the market adjusting house prices to what people's incomes can afford. And when looked at from a generational perspective, all the houses currently owned by boomers and Gen Xers will have to be sold to millennials and younger generations in the next 20-40 years because all the boomers and GenXers will be dead. So if the next generation of Canadians cant buy that housing stock at current prices, who will ?
Well, let's say you were born in 1970 and grew up on the west side of Vancouver. Population in 1970 was 1 million; in 2022 it's 2.5 million. The number of single detached houses on the west side hasn't increased since 1970. In fact, it's *decreased* as many have been replaced by condos. That means you're competing against 2.5x the number of people for one of those houses. Prices rise faster than incomes because the people with the most money get to buy the limited number of houses available. And in Vancouver, it's not the actual house that's worth the money - it's the land that it sits on.
That is an excellent further discussion on the housing market, Justin. However, as an old-timer I take great exception to "nearly-two-thirds of the country who own their own homes are making off like bandits in this hot market".
As a senior, I have paid my dues to the Canadian economy for 60 years. As a senior in this present climate on a fixed income (which is meager at best and there is nothing in the budget for us), I am struggling to heat my home and put food on the table.
So if you could get the government, any government, to follow up on your ideas, I would greatly appreciate it.
Thanks Lynn. I'd like to know how all boomers became rich, greedy capitalists. Most of us worked hard all our lives and are just bewildered as everyone else about what's going on. My 90-year-old-aunt can't afford her home anymore but doesn't want leave it.
I own a condo in Edmonton, AB. Originally I bought it as a a place for my children to live while they attended university. But after their graduations I decided to keep it as part of my retirement funding plan, because I worked in an industry that didn't provide a pension plan. It gives me a small monthly income to help pay for my retirement. I also own farm land that I rent out. As I read about the housing crises in our nation I can't help but notice a few things. The value of my condo rental property has dropped significantly in the past few years. It is now worth 33% less then I paid for it in 2008. So I'm a little confused by all the cries of unaffordable housing when you could easily buy a 1,000 sq. ft., 2 bedroom condo, in Edmonton, AB. for as little as $125,000. Spend another $10,000 to $20,000 in renovations and your have a modern starter home to live in. Which brings me to the second observation that I've made.
It seems that today, the younger couples feel they need the gigantic home, with all the latest in bells and whistle, to live in. Now if the trend was for young couples to have many children in their family unit, I could see an argument for a larger home, but that's not the case at all. We have smaller family units these days. When I first got married 33 years ago, and we decided to enter the house ownership market, we didn't go out and buy the 3,000 sq. ft. home, that came with the much high price and cash down requirement. We started out by buying something smaller and affordable, and as our family grew in size we upgraded to something bigger, but never more then we really ever needed. We didn't need the 3000 sq. ft. home with the 3 baths, game room, theatre room, walk-in closets, vaulted ceilings, hardwood floors, or granite counter tops, and the 1/4 acre yard for the dog to run in.
Edmonton’s an outlier vs. other cities, though, particularly places like greater Vancouver and greater Toronto. That’s also not a new trend - when I moved to Vancouver from Edmonton in 2000, I was floored to find that a 1 bedroom condo cost as much as a 3 bedroom bungalow in Edmonton.
Great observation. I started out much the same way with my first house and mortgage (14.5%). Being single at the time I took in two renters to help in the early years. Now I see even younger folk with houses three times the size of ours and they are piloting full size SUV’s. Huge gap in between what you want and what you can afford. I also didn’t realize anything near 6% return after 20 plus years as we are in a smaller city. Someone may be making a fortune but it sure isn’t us.
I am not sure why there is so much singular finger pointing at the feds. Yes, the increase of immigration is part of it. But provincial and municipal governments and suburban life styles are a BIG part of it too. The political capture by the status quo at the local level is incredible. Want to see what political participation looks like ? Suggest building a new condo in an area that is just single family homes. The pitch forks and torches will be out faster than you can say "voted out next term"
Anyways, what felt like the "best explainer" out there for the situation was this segment on The Agenda
The arguments the two analysts (who specialize in this field) made sounded pretty compelling to me. The fact that NZ, AUS, US are all seeing similar dynamics doesnt let us off the hook, but at least we can look to other places to see what better or less shitty policies might look like.
Thank you for the video link. The American panel member explains that U.S. prices have exploded in spite of relatively depressed immigration levels in that country. Poor job prospects and Trump's jingoistic policies discouraged immigration but housing prices spiralled up regardless, in unexpected places. Indeed, reduced immigration created shortages of skilled tradespeople to build houses and thereby worsened the problem.
Don't you think that pending interest rate increases are going to have a very significant downward impact on prices? It's one thing to afford a $700K mortgage at 2%, but how on earth will that be so common when the rate goes to 6%? By the end of this year we may be talking more about bank 'power of sale' activity rather than citizen 'power bidding' activity.
I am sure interest rates will have an effect, but as you pointed it out its not just one thing. I sure hope the 70s style stagflation is not coming back. Those high interest rates were killers in the 80s.
Govt needs to build or fund building of housing of all types. Worked really well after WWII. Boomers not to blame for problem. Started with Govts not taking responsibilities seriously on many fronts, including housing. Building houses in a hurry where environmental factors are breezily dismissed won’t work either. Lots of ways to fix this. Taking money back from boomers is silly. It will come back regardless — either to govts or to their kids in large amounts. Just like boomers got it from WWII generation. All you have to do is watch them (us!) drop dead. Which is occurring right now. Check the obits. Lots of good news on my generation there. We are beginning to disappear. I lost five friends in last few weeks. That should help you greatly…with your housing issues.
Government funding would only stoke demand. Government needs to diminish barriers to supply: community consultation, parking requirements, environmental reviews
I shouldn't put in so many comments, but this is no opinion, just some reading material from decades of following this story.
1) Not right to compare Edmonton and Regina and Calgary to Toronto and Vancouver, because of inherent growth problems near a coast, vs in the wide-open plains spaces. Dr. Paul Krugman calls is "Flatland" vs "The Zoned Zone" of tightly-zoned coastal cities. His 2005 column escaped the NYT paywall via this blogger:
2) Witold Rybcznski is a wonderful read on all architecture subjects, including urban design and housing, and many of his older pieces are outside the Slate.com paywall now:
..about how it is NOT some "North American" thing to want SFD houses rather than rowhouses, or condos. People all over the world choose their own box, *if they can get the space*; SFD is very popular in sub-Saharan Africa (spacious).
Big fan of Ling, and happy to read him here at The Line. Can’t help but notice that there are only three links in this piece that link back to a source and many more statements made without providing a source for context.
I trust Ling. I like Ling. I like The Line too. So when I say this it’s coming from a place where I want to make sure everyone’s asses are covered and we don’t get into mindless arguments: Please enforce a standard of linking to sources whenever statements are made. If there is one currently in place, I’m not sure how this piece got through it.
I know I feel vastly more reassured when a publication’s essays and editorials consistently link back to a source to provide additional context (and bulletproofing!) to the points contributors are making.
Love this article Justin, and great insightful comments below. None of this skyrocket in home prices really makes any sense, and is hard to blame on any one variable. I think the unprecedented massive flood of free money in the early pandemic, coupled with an equally puzzling rise on stock prices, is causing massive inflation, and much of this flows into housing. Few families can afford the houses they are overbidding for in my limited circles
I vehemently disagree that building a fourplex, or a sixplex, on a single family lot is ultimately better to resolve this situation. Also blaming municipalities for holding things up. Perhaps it’s just everyone’s perception that they need to own a home, or better yet, developers having the ear of our politicians, while laughing all the way to the bank. Owning a home has never been affordable. You want to know what it’s like to live in a Utopian existence where mayors and developers are best buds and transform quiet, affordable regular neighbourhoods into slick, high rise condo buildings-where developers own city blocks of single family homes that have been rented out for decades to the same families- only for them to be tossed out to build unaffordable condo towers? We’ve got the “award winning” neighbourhood of Langford, BC, as a shining example. Locals are fed up with non stop construction and the erosion of their once livable community. It’s delusional, to ask for even more government over reach, when they can’t even take care of the basics. Why the hell would we want them to do even more?
Where do you propose newcomers to Canada live then? The country is growing, it isn't the small pokey bucolic country that it used to be anymore. People want to live near where the jobs are, and you have to house them somewhere.
No one is entitled to their community staying the same.
Keep entitlement out of the discussion. Our newcomers live and work the same way yours and my family did when they first came to this country: they begged, borrowed and created a life for them and their families, using whatever means possible. Meanwhile: "Since the beginning of the pandemic two years ago, prices have risen by 20 to 100 percent. New Brunswick, somewhere around 100 percent. Montreal, somewhere around 25 to 30 percent. And then everything else in between. The other thing that's happening is the mix of people who are buying houses is changing rapidly: Fewer and fewer first-time buyers, more and more investor owners. The group of buyers with the largest growth over the last two years have been people who own four or more properties." https://tarahenley.substack.com/p/theres-an-enormous-amount-of-anger?r=ilfha&utm_campaign=post&utm_medium=email&fbclid=IwAR03MBt-GLfewg2LcmBdBi8NnMPnfeAUD41kEFbN6qtvfOyIL5YfF6pA9uc&s=r
Interesting article, but no acknowledgement was made regarding the cost of building which has also significantly escalated house prices. Absolutely we need more housing and Jen's and Justin's ideas are good, but housing is expensive from the ground work up.
As a 66 yr old boomer with 7 more years on my mortgage (we weren’t financially able to buy a home until 1990 and have had to re-mortgage twice since then) I would be happy to see the market fall by 40 per cent so my 35 yr old daughter and her husband could have a fighting chance of getting out of their rental. Every time the govt puts in these inflationary measures it infuriates me. When I die my kids can have my small house. In the meantime, my husband and I need somewhere to live, too. What are boomers to do? As an aside, another inflationary measure was put in this week, where the retail price threshold for rebates on EV’s was raised substantially. I expect the auto retailers inflate their base prices accordingly.
Mr. Ling makes the classic error of jumping to conspiracy to explain a phenomenon before ruling out simple incompetence. Of course with the complex inter-relationships among federal government policies and responsibilities, even incompetence is rarely a simple matter. Sorting it out and reducing incompetence can start with a strategic overview of priorities a concept that is wholly alien to the current Government.
Housing supply is certainly one of the priorities now, no doubt, especially as it is directly related to another priority namely immigration which can be expected to result in population growth.
Another one is housing affordability which is related to house prices and interest rates.
But prices are related to supply. And supply is responsive to interest rates.
Governments like to focus on these issues one at a time. Affordability can be tackled with subsidies and incentive programs. "We'll make it easier to save for a down payment" etc. But these programs have a direct impact on prices themselves. Or we can cut the demand for housing by non-voters and impose taxes and disincentives on non-residents. Or we can reduce overall demand for housing by hardening the qualification criteria for mortgages (which btw, just makes housing more unaffordable).
And of course, as excess demand for housing combines with demand for commodities and assets generally, we need to respond by raising interest rates (a classic and sensible tool to rebalance supply and demand in the economy).
In the smorgasbord of policy that we now have, the Government can point to something it is doing to address the needs of every constituency: Higher interest rates to fight inflation. For new homebuyers: tax subsidies for them and tax penalties for non residents. etc etc.
I share my street with a local politician who recently chortled over the fact that our houses have risen greatly in value over the past year. More accurately, he could have pointed to the deterioration in the value of money.
Thx Ed. But if we end up with fewer buyers, then where is the rental properties for people to live in? We also don't make units for sale or rent that optimize storage.
Fewer buyers means less pressure on prices. You are correct - that will also affect willingness of investors to build. And that is the fundamental issue: we have to choose our priorities: you can choose to reduce house prices thru higher interest rates, and other measures (like non-residents' taxes) or incent supply (lower rates, lower development charges etc.) It doesn't help that the feds have limited their room to maneuver by mismanaging the exit from the pandemic - interest rates too for too long, and unfocussed fiscal stimulus (what Milton Friedman called "helicopter money"). This meant that while many folks used the $$ they received to live on, many others were able to pay off loans and invest in real assets (such as housing), the more so as other outlets for spending, notably travel and entertainment, were shut down.
Sorry for the lengthy reply - but there are no quick and easy fixes to our current situation, despite what politicians are trying to tell you.
Agree with the article, but I'll provide a 'careful what you wish for' caveat.
Let's assume the market corrects itself; either because it crashes as the pool of buyers for $1M+ homes isn't there or smart policies across the country start bringing sanity back to the market. Now, the pace of those kinds of adjustments are incredibly hard to predict. If it happens fast, who feels the most pain?
Not the boomers and GenXers who bought cheap and now have substantial paper wealth. My house it probably worth a bit more than double what I paid for it a dozen years ago on paper, but that doesn't really impact my day-to-day life. And, if the market suddenly corrects by 30 - 50%? I'll still have pretty substantial gains by any historic standard.
Now, think about the young family that just leveraged everything to get one of those million dollar homes. They had to put a quarter of a million down and are still carrying a pretty hefty mortgage. A correction wipes out the equity (and any LOC) and they still have to carry a really huge mortgage in the face of increasing interest rates.
I worry about those families and think we need to tread carefully as we fix this problem. I'm actually *not* sure what the appropriate approach is. We need more housing and everything people are proposing (streamlined zoning, YIMBY, etc) are the right thing to do. But potentially some young families may get squeezed twice -- once paying at the top of the market and again as the market corrects.
I think that's a fair comment, but even if you spur the building of new houses up to what anyone would currently consider hyper-speed, it's going to take quite a while to do and it's unlikely to cause a crash in prices. Hopefully what it would do is level prices out somewhere close to a level where the incomes and borrowing power of the current group of non-homeowners catches up.
What is likely to cause a crash in prices, if anything, is higher interest rates brought on by higher inflation and ever soaring prices. That's a problem the government can't control directly, but the medium- to long-term effect of pumping the brakes gently by expanding supply would help there too.
There will be a lag to improving things on the supply side, which is needed regardless to take care of growth and low vacancies.
Rising interest rates will be the more immediate factor.
Interest rates may be an immediate cooling factor for buyers but I remember when a "good" rate was 14% & houses were still bought. I do wish renting wasn't seen as lesser accommodation, for some people it's a better option & for some the only option.
Especially when you are young and your career isn't settled, ownership can tie you down and make moving to where the work is less attractive. It's worse for the economy, but we subsidize it.
Building decent rental, seniors & co-op housing in appropriate areas - near schools, near medical facilities, near public transit - is part of what our leaders should provide for Canadians. If locations are chosen spread throughout a municipality they become more appealing. My city has a legacy of these from the '80's and they are appreciated. Sadly very few of these developments have been built in the last two or three decades.
I absolutely agree and am pleased to see l am not alone in this thinking. The situation with housing affordability is actually the result of the ‘private is always better’ ideology that hands over the power to provide services and, in this case, homes, thus having a direct impact on what should be a basic right. To make the Market the gatekeeper to the things we all need is immoral. Look around you at all the social issues we are failing to contend with and take the time to trace the route that got us here.
I hope that those generations, who see no place for themselves in this housing market, will reconsider placing their necks in the mortgage noose, and demand more social housing. There are tons of models throughout the world that are successful and would provide another avenue.
Two things:
Do not buy in hot market and it really is the fault of the Boomers. (I say this as a War Baby, so a bit bitter.)
I will admit some reluctance to seeing government build and run housing unless there just isn't another option. That's mostly because I think it's hard for any organization to do many things well and government's history of creating housing seems to be a really mixed bag. I'd rather see policy that gets to an open and competitive market but I'll also acknowledge that in my lifetime governments haven't been particularly effective at that, either!
Good point, here in SK (at one time) many of these initiatives were not run by gov’t. Rather non- profits such as churches, businesses with non-profit entities (Muttart, eg) & cooperatives themselves often ran the buildings. Doesn’t have to be gov’t control but I think maybe gov’ts starting projects is necessary.
You do need government as a partner. Non profits with government funding are the most successful models.
💯 I, an early gen x-er, have been telling you millennials to support the most libertarian Conservative candidate since you were old enough to vote. I haven't got much traction. I confidently expect to be saying "I told you so" for the rest of my life. Enjoy!
I think most of my millennial peers hear "alt-right nazi" when someone utters the words libertarian conservative. Which is why this Albertan is trying his damnedest to move his family to a red state, and soon.
If The Line let you put in pictures, I could show you the one of my parents and 6 other adults (proprietor not shown) that lived in a 'boarding house', a form of housing for the desperate, that we still haven't regressed back to. 9 adults in a 1400 sf house, 1946-1947, one of them with WW2 PTSD, tended to scream at 3AM, waking them all. We've had housing crises before!
They bought a 1200 sf bungalow in 1951 for $9000, sold in 1969 for $21,000 a 5.5% yearly increase. I bought a 1954 bungalow a few miles away at the bottom of Calgary's "dollar sales" crash era, 1985, for $89,000, sold it for $704K some 29 years later, a 7.5% yearly value increase. But, we also spent over a hundred thousand on major upgrades during those years, I believe an economist would calculate that I, too, really only got about 5-6% appreciation of the total investment, per year.
My boomer point being that 5-6% appreciation, maybe a percent better than average stock market returns, if you pick an index fund, goes WAY way back in history, to the end of WW2. That I know of. You're pushing against large economic headwinds if you want it to increase more slowly in value than steel plants and malls do.
The real problem may just be that wages and salaries for the bottom 90% have not kept up with the stock market, with the appreciation of *all* assets. You know, we read about that all the time? "90% of the growth from globalism went to the top 10%", and "billionaires got richer in the pandemic, while millions went broke", a duplicate of headlines from 2008 about that crisis?
But, after about 50 such income-inequality stories, we turn our thoughts to housing, and suddenly it isn't "young people are too poor", it's "prices are too high".
I live in the West End of Vancouver, at one point calculated as more-dense than Manhattan(!), and I can take a 15-minute walk, past 9 different "high-rise coming soon" mini-billboards, which show Unit-counts; and count up some 2000 dwellings in the offing in one square kilometre. That doesn't include the 45-storey hotel, in perfectly good condition, that was recently torn down to put up two high-rise condo towers on busy Robson street; my 9 are three blocks over. We're sure doing our bit!
[I asked my Mom if anybody ever complained about the 3AM wakeups. She looked at me like I'd just crawled out from under a rock, and should return. It was Veteran's Affairs that didn't "get" PTSD until recently. Actual veterans always did.]
I love the West End. 40+ years ago I moved into a brand new 2 bed 2 bath 2 small balconies condo there that was being rented out. The developers had built it for sale, but there were no takers. So they rented the suites out. Who would believe this now?
There’s a much simpler and more significant explanation for the rise of housing prices in Calgary: increase in number of dwellings has lagged increase in population for *decades*. Increasing demand, insufficient supply, and prices rise. All of the f scores you’re discussing are second order.
https://data.calgary.ca/Demographics/Calgary-s-Population-1958-2019/as3q-cmd5
How well I know that demographic graph. We waited anxiously for it every year, at Calgary Waterworks. I was in replacement of old stuff, but sat next to the people who did the long-term planning: exactly where do you build giant pipes and roads, which direction, that won't be fully needed for 30 years? (Since "30 year supply of serviced land" was our promise to developers, who held more sway over city council than any other industry, including Oil.)
Or, in other words, I know about all that; Calgary was able to grow fast enough that the housing price rise was the same as for most other large assets, including stocks; if it didn't grow "fast enough", believe me, that was a choice. Even the Tar Sands couldn't compete for labour and equipment with the Calgary housing development industry, they were making such profits.
(And by "choice", I don't mean some conspiracy, just that rational investors sitting on land for 20 years that they got cheap from farmers, time their development move to extract maximum profit. How the system works...)
One point missed here is that there will likely need to be a readjustment of expectations regarding what type of home people will be able to afford in the future. In a lot of cities, there simply isn’t the land to build more single detached family homes. However, that’s what a lot of people feel entitled to own because that’s what they grew up with. In some cities, there’s more room to grow if politicians can get over the aesthetic arguments against “sprawl.” Nobody is going to find more land for single home neighborhoods in the middle of Vancouver or the center of Toronto. The land (and houses) that exist are still in demand, and will simply get more and more expensive. The solution to building more homes in these areas is densification, but people will have to get used to the idea of smaller spaces - townhomes or condos. I don’t think that’s going to go over well. I’ve got friends whose anger at the housing market is less that they can’t afford anything, and more that they can’t buy the same sort of house they grew up in, in the same neighborhood. I don’t know how you solve that problem in a growing country, particularly when the growth is concentrated in big cities.
The reality for most cities is that sprawl is a bit of a ponzi scheme from a services point of view. When a neighbourhood is built, you get new taxpayers (good) and development fees pay for some of the new needed services. But, 25 years later, you still need to service/maintain all of that and its not sustainable at the kind of property taxes people are willing to pay.
Densification done right allows cities to add more taxpayers without wildly increasing the cost of servicing those folks. Low densisty, single family homes should be an option for those that want them, but property taxes should reflect the significatly higher costs of servicing low-density (or people should expect rural levels of public service).
Sprawl also leads to increasingly intractable transportation problems, but I’m continually amazed at the commutes people will endure so they can have that suburban detached house. A decade ago, I knew people who were willing to live in Maple Ridge and deal with an hour long commute into Vancouver each day. Now, it’s people buying in Chilliwack and driving nearly 2 hours each way. These are people working in construction and health care, so remote work isn’t an option. They’ve got the means to buy a house, though - they’re not lower paid service workers who face the same predicament.
The phrase I've heard in Ontario is "drive until you qualify".
George you make some great points. Your last point about "not being able to buy the same sort of home they grew up in, in the same neighbourhood" really struck me. Why is that so. What I mean is why have price to income ratios so totally decoupled in Canada compared to a generation ago. Its not like we are not building homes. I don't know about the rest of Canada but here in BC home building has been on a tear for 20 years. It is the biggest industry in BC. With all that building, why isn't the market adjusting house prices to what people's incomes can afford. And when looked at from a generational perspective, all the houses currently owned by boomers and Gen Xers will have to be sold to millennials and younger generations in the next 20-40 years because all the boomers and GenXers will be dead. So if the next generation of Canadians cant buy that housing stock at current prices, who will ?
Well, let's say you were born in 1970 and grew up on the west side of Vancouver. Population in 1970 was 1 million; in 2022 it's 2.5 million. The number of single detached houses on the west side hasn't increased since 1970. In fact, it's *decreased* as many have been replaced by condos. That means you're competing against 2.5x the number of people for one of those houses. Prices rise faster than incomes because the people with the most money get to buy the limited number of houses available. And in Vancouver, it's not the actual house that's worth the money - it's the land that it sits on.
That is an excellent further discussion on the housing market, Justin. However, as an old-timer I take great exception to "nearly-two-thirds of the country who own their own homes are making off like bandits in this hot market".
As a senior, I have paid my dues to the Canadian economy for 60 years. As a senior in this present climate on a fixed income (which is meager at best and there is nothing in the budget for us), I am struggling to heat my home and put food on the table.
So if you could get the government, any government, to follow up on your ideas, I would greatly appreciate it.
Thanks Lynn. I'd like to know how all boomers became rich, greedy capitalists. Most of us worked hard all our lives and are just bewildered as everyone else about what's going on. My 90-year-old-aunt can't afford her home anymore but doesn't want leave it.
I own a condo in Edmonton, AB. Originally I bought it as a a place for my children to live while they attended university. But after their graduations I decided to keep it as part of my retirement funding plan, because I worked in an industry that didn't provide a pension plan. It gives me a small monthly income to help pay for my retirement. I also own farm land that I rent out. As I read about the housing crises in our nation I can't help but notice a few things. The value of my condo rental property has dropped significantly in the past few years. It is now worth 33% less then I paid for it in 2008. So I'm a little confused by all the cries of unaffordable housing when you could easily buy a 1,000 sq. ft., 2 bedroom condo, in Edmonton, AB. for as little as $125,000. Spend another $10,000 to $20,000 in renovations and your have a modern starter home to live in. Which brings me to the second observation that I've made.
It seems that today, the younger couples feel they need the gigantic home, with all the latest in bells and whistle, to live in. Now if the trend was for young couples to have many children in their family unit, I could see an argument for a larger home, but that's not the case at all. We have smaller family units these days. When I first got married 33 years ago, and we decided to enter the house ownership market, we didn't go out and buy the 3,000 sq. ft. home, that came with the much high price and cash down requirement. We started out by buying something smaller and affordable, and as our family grew in size we upgraded to something bigger, but never more then we really ever needed. We didn't need the 3000 sq. ft. home with the 3 baths, game room, theatre room, walk-in closets, vaulted ceilings, hardwood floors, or granite counter tops, and the 1/4 acre yard for the dog to run in.
Edmonton’s an outlier vs. other cities, though, particularly places like greater Vancouver and greater Toronto. That’s also not a new trend - when I moved to Vancouver from Edmonton in 2000, I was floored to find that a 1 bedroom condo cost as much as a 3 bedroom bungalow in Edmonton.
Great observation. I started out much the same way with my first house and mortgage (14.5%). Being single at the time I took in two renters to help in the early years. Now I see even younger folk with houses three times the size of ours and they are piloting full size SUV’s. Huge gap in between what you want and what you can afford. I also didn’t realize anything near 6% return after 20 plus years as we are in a smaller city. Someone may be making a fortune but it sure isn’t us.
I am not sure why there is so much singular finger pointing at the feds. Yes, the increase of immigration is part of it. But provincial and municipal governments and suburban life styles are a BIG part of it too. The political capture by the status quo at the local level is incredible. Want to see what political participation looks like ? Suggest building a new condo in an area that is just single family homes. The pitch forks and torches will be out faster than you can say "voted out next term"
Anyways, what felt like the "best explainer" out there for the situation was this segment on The Agenda
https://www.youtube.com/watch?v=-Bg7DC7n-eU
The arguments the two analysts (who specialize in this field) made sounded pretty compelling to me. The fact that NZ, AUS, US are all seeing similar dynamics doesnt let us off the hook, but at least we can look to other places to see what better or less shitty policies might look like.
Thank you for the video link. The American panel member explains that U.S. prices have exploded in spite of relatively depressed immigration levels in that country. Poor job prospects and Trump's jingoistic policies discouraged immigration but housing prices spiralled up regardless, in unexpected places. Indeed, reduced immigration created shortages of skilled tradespeople to build houses and thereby worsened the problem.
Don't you think that pending interest rate increases are going to have a very significant downward impact on prices? It's one thing to afford a $700K mortgage at 2%, but how on earth will that be so common when the rate goes to 6%? By the end of this year we may be talking more about bank 'power of sale' activity rather than citizen 'power bidding' activity.
I am sure interest rates will have an effect, but as you pointed it out its not just one thing. I sure hope the 70s style stagflation is not coming back. Those high interest rates were killers in the 80s.
Govt needs to build or fund building of housing of all types. Worked really well after WWII. Boomers not to blame for problem. Started with Govts not taking responsibilities seriously on many fronts, including housing. Building houses in a hurry where environmental factors are breezily dismissed won’t work either. Lots of ways to fix this. Taking money back from boomers is silly. It will come back regardless — either to govts or to their kids in large amounts. Just like boomers got it from WWII generation. All you have to do is watch them (us!) drop dead. Which is occurring right now. Check the obits. Lots of good news on my generation there. We are beginning to disappear. I lost five friends in last few weeks. That should help you greatly…with your housing issues.
Government funding would only stoke demand. Government needs to diminish barriers to supply: community consultation, parking requirements, environmental reviews
Concur. More likely Govt facilitation.
I shouldn't put in so many comments, but this is no opinion, just some reading material from decades of following this story.
1) Not right to compare Edmonton and Regina and Calgary to Toronto and Vancouver, because of inherent growth problems near a coast, vs in the wide-open plains spaces. Dr. Paul Krugman calls is "Flatland" vs "The Zoned Zone" of tightly-zoned coastal cities. His 2005 column escaped the NYT paywall via this blogger:
https://www.serendipit-e.com/blog/2005/08/flatland_vs_the.html
2) Witold Rybcznski is a wonderful read on all architecture subjects, including urban design and housing, and many of his older pieces are outside the Slate.com paywall now:
https://slate.com/author/witold-rybczynski/2
(the top piece on that page, about "what kind of cities do we want, compact or sprawling" is highly relevant)
But in particular, he wrote a great piece in 2007:
https://slate.com/culture/2007/04/why-do-we-live-in-houses-anyway.html
..about how it is NOT some "North American" thing to want SFD houses rather than rowhouses, or condos. People all over the world choose their own box, *if they can get the space*; SFD is very popular in sub-Saharan Africa (spacious).
Big fan of Ling, and happy to read him here at The Line. Can’t help but notice that there are only three links in this piece that link back to a source and many more statements made without providing a source for context.
I trust Ling. I like Ling. I like The Line too. So when I say this it’s coming from a place where I want to make sure everyone’s asses are covered and we don’t get into mindless arguments: Please enforce a standard of linking to sources whenever statements are made. If there is one currently in place, I’m not sure how this piece got through it.
I know I feel vastly more reassured when a publication’s essays and editorials consistently link back to a source to provide additional context (and bulletproofing!) to the points contributors are making.
Love this article Justin, and great insightful comments below. None of this skyrocket in home prices really makes any sense, and is hard to blame on any one variable. I think the unprecedented massive flood of free money in the early pandemic, coupled with an equally puzzling rise on stock prices, is causing massive inflation, and much of this flows into housing. Few families can afford the houses they are overbidding for in my limited circles
I feel like a really nice supplement to this is the report on "cost-disease socialism" from the Niskanen centre last year: https://www.niskanencenter.org/wp-content/uploads/2021/09/Cost-Disease-Socialism.pdf
Or, from a different angle, the idea of "Supply-Side Progressivism".
Canada's left still feels far from taking either lesson.
I vehemently disagree that building a fourplex, or a sixplex, on a single family lot is ultimately better to resolve this situation. Also blaming municipalities for holding things up. Perhaps it’s just everyone’s perception that they need to own a home, or better yet, developers having the ear of our politicians, while laughing all the way to the bank. Owning a home has never been affordable. You want to know what it’s like to live in a Utopian existence where mayors and developers are best buds and transform quiet, affordable regular neighbourhoods into slick, high rise condo buildings-where developers own city blocks of single family homes that have been rented out for decades to the same families- only for them to be tossed out to build unaffordable condo towers? We’ve got the “award winning” neighbourhood of Langford, BC, as a shining example. Locals are fed up with non stop construction and the erosion of their once livable community. It’s delusional, to ask for even more government over reach, when they can’t even take care of the basics. Why the hell would we want them to do even more?
Where do you propose newcomers to Canada live then? The country is growing, it isn't the small pokey bucolic country that it used to be anymore. People want to live near where the jobs are, and you have to house them somewhere.
No one is entitled to their community staying the same.
Keep entitlement out of the discussion. Our newcomers live and work the same way yours and my family did when they first came to this country: they begged, borrowed and created a life for them and their families, using whatever means possible. Meanwhile: "Since the beginning of the pandemic two years ago, prices have risen by 20 to 100 percent. New Brunswick, somewhere around 100 percent. Montreal, somewhere around 25 to 30 percent. And then everything else in between. The other thing that's happening is the mix of people who are buying houses is changing rapidly: Fewer and fewer first-time buyers, more and more investor owners. The group of buyers with the largest growth over the last two years have been people who own four or more properties." https://tarahenley.substack.com/p/theres-an-enormous-amount-of-anger?r=ilfha&utm_campaign=post&utm_medium=email&fbclid=IwAR03MBt-GLfewg2LcmBdBi8NnMPnfeAUD41kEFbN6qtvfOyIL5YfF6pA9uc&s=r
As for where the jobs are, many have already found out the dirty little secret that politicians don't want you to know about: they're EVERYWHERE https://vancouversun.com/sponsored/news-sponsored/starting-a-family-heres-where-you-should-set-up-your-home-base?fbclid=IwAR1SrWkBDYGhNZaOelXgtUMSbGt6Syoanox9p2GUW8Ln4-V-dpYKg_aDtFI
and good luck riding the bus in February...in Brandon...sheesh...
What is your point? That Canada should reduce immigration so that Canada's cities and towns don't change as quickly?
Try reading before responding. Not at all what I said, or implied. Good day.
Interesting article, but no acknowledgement was made regarding the cost of building which has also significantly escalated house prices. Absolutely we need more housing and Jen's and Justin's ideas are good, but housing is expensive from the ground work up.
As a 66 yr old boomer with 7 more years on my mortgage (we weren’t financially able to buy a home until 1990 and have had to re-mortgage twice since then) I would be happy to see the market fall by 40 per cent so my 35 yr old daughter and her husband could have a fighting chance of getting out of their rental. Every time the govt puts in these inflationary measures it infuriates me. When I die my kids can have my small house. In the meantime, my husband and I need somewhere to live, too. What are boomers to do? As an aside, another inflationary measure was put in this week, where the retail price threshold for rebates on EV’s was raised substantially. I expect the auto retailers inflate their base prices accordingly.
Mr. Ling makes the classic error of jumping to conspiracy to explain a phenomenon before ruling out simple incompetence. Of course with the complex inter-relationships among federal government policies and responsibilities, even incompetence is rarely a simple matter. Sorting it out and reducing incompetence can start with a strategic overview of priorities a concept that is wholly alien to the current Government.
Housing supply is certainly one of the priorities now, no doubt, especially as it is directly related to another priority namely immigration which can be expected to result in population growth.
Another one is housing affordability which is related to house prices and interest rates.
But prices are related to supply. And supply is responsive to interest rates.
Governments like to focus on these issues one at a time. Affordability can be tackled with subsidies and incentive programs. "We'll make it easier to save for a down payment" etc. But these programs have a direct impact on prices themselves. Or we can cut the demand for housing by non-voters and impose taxes and disincentives on non-residents. Or we can reduce overall demand for housing by hardening the qualification criteria for mortgages (which btw, just makes housing more unaffordable).
And of course, as excess demand for housing combines with demand for commodities and assets generally, we need to respond by raising interest rates (a classic and sensible tool to rebalance supply and demand in the economy).
In the smorgasbord of policy that we now have, the Government can point to something it is doing to address the needs of every constituency: Higher interest rates to fight inflation. For new homebuyers: tax subsidies for them and tax penalties for non residents. etc etc.
I share my street with a local politician who recently chortled over the fact that our houses have risen greatly in value over the past year. More accurately, he could have pointed to the deterioration in the value of money.
Thx Ed. But if we end up with fewer buyers, then where is the rental properties for people to live in? We also don't make units for sale or rent that optimize storage.
Fewer buyers means less pressure on prices. You are correct - that will also affect willingness of investors to build. And that is the fundamental issue: we have to choose our priorities: you can choose to reduce house prices thru higher interest rates, and other measures (like non-residents' taxes) or incent supply (lower rates, lower development charges etc.) It doesn't help that the feds have limited their room to maneuver by mismanaging the exit from the pandemic - interest rates too for too long, and unfocussed fiscal stimulus (what Milton Friedman called "helicopter money"). This meant that while many folks used the $$ they received to live on, many others were able to pay off loans and invest in real assets (such as housing), the more so as other outlets for spending, notably travel and entertainment, were shut down.
Sorry for the lengthy reply - but there are no quick and easy fixes to our current situation, despite what politicians are trying to tell you.