Some fair points but the article misses many of the fundamentals of why housing has become so unaffordable. Combine rapid population growth due to immigration with a stagnant economy over the past 10 years (thanks for that JT) ,resulting in flat GDP per capita ,and you have a recipe for the affordability issue that many now face.
Meanwhile the cost of building new housing continues to rise due to municipal red tape, fees, FN approvals, and the bureaucratic sludge that is endemic to our municipal governments. It takes years to just get a development and building permit to build a house or condo.
Until Governments at all levels in Canada understand that they are the problem and not the solution, I don't see things improving.
Immigration in of itself does not intrinsically lead to higher housing prices, unless the immigrant population is specially lacking in tradespeople who would be involved in housing construction.
Blaming a "stagnant economy" for housing unaffordability might be tautological, because an economy where a greater share of GDP is spent on non-productive assets (housing) is how an economy *becomes* stagnant.
Whilst i generally agree with your premise I think you are possibly over generalizing the urban Toronto, Vancouver and perhaps Montreal situations to the entire country. While prices have risen elsewhere they have not done so as quickly or as much as these three locations (certainly there is a ton of variable answers based upon location).
As such any broad based solution focused on fixing the market in those three locations is likely to have significant, potentially unintended, consequences by also proportionally lowering housing values elsewhere.
As late boomers we purchased a 30+ year old home in an Alberta metro urban community for just over $400,000 in 2007 at the height of a market swing. Almost 20 years later the valuation of this is now between $470,000 and $480,000, roughly 15% for the term (very roughly 0.74% annually).
As such value has not even appreciated at a rate matching general inflation and any "national" strategy to deal with three significant but localized settings needs to consider the potential harms elsewhere along with benefits.
It's true that Boomers and government money parasites have absorbed (and squandered) most of Canada's wealth. The question is what to do about it.
The answer is to make those same people absorb as much of the cost as possible in the time we have left. Dramatic cuts to OAS and NGO grants, cuts to civil service numbers, 130% tax inclusion rate for fully indexed guaranteed pensions, remigration and deregulation of resource extraction, will reset the economy quickly in favour of the people who have been shafted.
It won't happen, but it is both just and necessary.
If you cut the civil service and the cuts are done through attrition (not filling jobs where people resign or retire), then you actually reduce employment opportunities specifically for younger people (who then have no civil service jobs to apply to), not for the boomers slowly aging out of the civil service.
People who are on "fixed incomes", as in those who are retired and beyond their physical abilities to earn income from the labour are facing the same challenges that retirement brought for people who retired in the late '60's and early '70s. Inflation got out of control and so sales of assets that were to provide for a comfortable retirement quickly failed to keep pace with the cost of living.
I realize that a couple who purchased a home in 1982 is sitting on a capital gain bonanza, but you can only sell it once. If the capital gain is ploughed into a down sizing move into a condo how much money is left over as insurance against the post pandemic inflation crisis?
Government loves inflation. The skyrocketing cost of oil and gas this spring is filling government coffers with a financial windfall and you can bet that every cent will get spent on new programming, which in turn distorts the economic government footprint in the economy and the stagnation continues.
The solution is a desperately needed correction in housing speculation that should be redirected towards business development and true economic growth. The housing market has been a handy spot for speculative investment instead of a home ownership dream for young people who are priced out of the market.
The last of the three examples, the 61 year old with 10 years left on their mortgage gave me pause; Mike misses something I think I know:
In my 15 years as a stock broker, financial planner for about 300 households, I observed a difference between the generations that experienced hardship and those that did not, a difference much discussed among my peers. Clients who were close enough in age to the depression era, or WWII, who experienced the lasting emotional impact of difficult choices, sometimes no choices, going hungry, feeling acute insecurity for food and shelter as a result of those circumstances. They witnessed, experienced or heard about their parents stress.
The difference was behavioural. The hardship group saved more, spent less on discretionary items and always had a cushion that built over time, eventually creating a sense of security. They prioritized paying down the mortgage and were very wary of, even avoiding any expensive, unsecured, or after tax debt, especially credit card debt. They were expert at delayed gratification.
The group that experienced no hardship behaved differently. Instead of being focused on avoiding any self inflicted hardship through debt, they focused on their wants. Wants became needs, debts grew, revolving credit card debt was normalized and a huge amount of discretionary income was spent on instant, as opposed to delayed, gratification. Marketing, media, and peer pressure contributed, but this was a difference of choices made.
The results at age 65 are two completely different worlds, as a result of the magic of compounding working for, or against the future. It's the difference between security and choices, and working forever wherever possible with few choices. It's the difference between inner peace and pervasive anxiety.
I'm not saying this is the only input to the current situation; housing affordability is also part of the problem. But we can't pretend there isn't a difference in behaviour because every financial professional who's met both groups has dealt with the results in a visceral way. We've sat with, helped, consulted, congratulated and consoled many in both camps.
There's a policy issue, and there's also a change in how people think about their own responsibility vs. the responsibility of the state to care for them. This can also be influenced by policy, and should be. The kind of debt that's grown (I mean, omg, people borrow on online shopping sites for $300??) exponentially does not benefit productivity, growth or progress at either the national or individual level.
Thanks for the well thought-out & presented submission on the current state of the housing market. As a boomer with a paid off home who has been conditioned to consider this my retirement fund I'm not eager to see my home values engineered to stagnate or decline.
I can only hope that any actions our government takes is paced in decades not years.
One of the most influential books I read was Boom Bust Echo by David Foote and it taught me demographics drive almost everything. We must look ahead to the next 10-25 years where it is almost assured that the huge wave of boomers will die. This will have a significant impact on a number or the concerns we are debating today namely housing & healthcare.
It is very possible the supply of single-family homes hitting the market over these periods will overpower the market with supply & prices should fall. This should also happen with health care, while we deal with the wave of seniors swamping the system now with age related issues we must look ahead over the next 10-25 year period and can imagine a significant decline in healthcare requirements possibly creating excess capacity & staffing.
In closing this situation took decades to form but I believe we can see these serious issues of today resolving themselves over the next decades to come.
Exactly. Blaming boomers because they made the cruel decision to be born with the biggest cohort is insane. Makes as much sense as blaming them for WWI and II, and making their parents have a lot of babies all at once.
The article, while correct in direction, paints a singular proposition for correction: the Canadian citizen must bite the bullet alone. I would appreciate a revisiting of this topic to include:
1. Challenging the validity that home ownership is a "right"...or national goal. The foundational right to adequate housing was formally enshrined as law in 2019. On the contrary, citizens must be allowed to under save, under plan and live of life free of home ownership.
2. Tying the cost of "the fix" to our national debt. It's time for the politicians to understand the reality that inflation control and federal expenditure reduction must contribute a large portion of the funds to affect national housing prices. They must, however, pay the political price for reallocating voter-enjoyable programs to house price remediation.
3. Aligning student loans to specitic degree earning potential. Nationally we have students with high loans who took low income degrees (Women's Studies must be an example). Post secondary degrees and loans must, in part, be assessed on their contribution to housing affordabilitiy through higher incomes and more rapid loan repayment.
4. Mandatory 10% annual savings from the first year of taxable earnings. Funds may be redeemed at any time by the purchase of a home or formal acknowledgement that home ownership is not a significant personal objective.
The suggestion of such governmental interference is repulsive. Government has no right to intrude into the living rooms of Canadians. It implies that Canadians are unable to accept their responsibilities to provide for themselves...and to ditch the bitching when "everything" doesn't come their way. But "everything" changed in 2019 and government must accept responsibility for much of the problem.
The four steps above will, very painfully, move housing prices downwards.
I agree with 1 in principle, but I think that home ownership adds so much to flourishing for most people, that government should make it a key objective to run the polity in such a way that this is achievable for those who want it.
2 is obviously true, but I think we don't blame the final beneficiaries of current policies enough. Politicians and their clients most both suffer.
3. I agree. All government student loans should be repaid as a capped percentage of income over a period of time, and should be securitized bundled by degree and school. So a U of T engineer could pay $10,000 of tuition with 1% of income, while a Brock gender studies major might not be able to pay $10,000 of tuition at all.
4. I am charging my employed, at home, kids a substantial rent with the promise that that will get it back toward a deposit on a marital home.
This is a stickier problem than outlined here, because new buyers *have* been getting into the housing market. They've paid the highest prices, and they've got the least equity. Home ownership rates among 25-29 year olds was 44.1% in 2011, and it was 36.5% in 2021. For 35-39 year olds, the comparable numbers were 67.1% and 61.5%. Over that time period, average housing prices went up by 70%. A severe housing price correction tends to be in the range of 30%, and you'd basically wipe out the wealth of all of the younger cohorts of buyers while *still* only marginally increasing affordability for those who currently can't get into the housing market.
Forget the boomers with their huge piles of equity - they were driving this problem for decades, true, and a loss of value is less likely to leave them financially underwater. However, demographic realities are going to be taking them out of the equation over the next 10-20 years. That's about how long it's going to take the younger cohort to recovery their lost equity from a big price correction.
This problem took a long time to create through insufficient construction and restrictive zoning. A rapid correction that screws over half of your future voters for a couple of decades (the wealthier, higher propensity ones) is political suicide. As we've been seeing in the comments on this site, Alberta voters still have declared omerta against the federal Liberals for such a crash triggered by the NEP 45 years ago! Actually fixing this problem in a way that doesn't create a bigger mess is going to take decades as well.
Don't forget that the Bank of Canada is about 2008 lowered interest rates to a ridiculous level and artificially kept them low. This created the housing crisis. People borrowed well beyond their means and starting bidding wars over houses. The same low interest rates made saving money in conventional places (like a savings account in a bank) absolutely future. Real estate became the only "sure" investment. At the same time, people were buying little post-war bungalows, tearing them down, and building the biggest house possible on the lot. This resulted in a loss of entry-level single family homes. If Carney couldn't see the problem he was creating as Gov of the Bank of Canada, he's surely not going to be able to see the solution as PM and should not even think of meddling in the market. The law of unintended consequences will surely come back to bite us in the ass.
Also, in the scenarios in the OP, people were making bad decisions. Government policy should not be based on bad decisions. Ever.
I’m willing to make the sacrifice. I bought,totally Reno 3 homes,sold them. All the while working full time,raising a family. Asset growth averaged 2.5% per year. Held each home for a min of 5 years. Was mortgage free on our third home. Built brand new our 4th. Hard work,live with some dust,off and on and do some of your own work. Leave the true Mechancal to Certfied Pros,ticketed for Insurance disclosure. There are deals out there,
For me, the housing crisis has come about after decades of crumbling infrastructure. We have to fix both. How do we build homes for cities that do not have the infrastructure to support new communities. I think if government somehow forced massive drop in prices we would likely be thrown into a recession. A really terrible awful one.
Bad news for homeowners? And seniors, I would imagine. This is our chickens coming home to roost or something more clever, it's early still.
I am sitting somewhere between Nadia and Mario in this scenario, and the points highlighted are resonant. I got out of the housing market to rent and move around while rebooting career a number of years ago, and by the time I was looking at getting back in, prices overall had doubled for anywhere it made sense for me to live. My carefully saved equity did not cut it. And I agree that younger boomers, X-ers, and elder millennials tend to have more in common than not on these themes, unless you have had an old school, conventional financial path (ie paid off relatively affordable house in suburbs and actual union-type full pension)—or just a very lucky life. My 84 year old dad totally gets this, btw, and understands that rebalancing needs to happen. What I would like to know is if there is a quiet majority of Canadians who do understand—whatever their generation or whatever they tell pollsters —but somehow that never makes it into policies?
Substitute 🇨🇦 for 🇬🇧 and you’re writing a pretty exact analysis of over here too. Except you missed out the real reason: we all stopped building. People keep trying to tell me that housing is a uniquely different market to every other branch of capitalism - that conventional supply and demand relationships don’t apply. I keep reminding them that I’ve spent the last decade actually building houses, and sit on the board of a big social landlord - so I’ve got a pretty good idea.
This is why I came to the conclusion a long time ago that the only way this gets fixed is a crash. I doubt enough people are altruistic enough to do what needs doing voluntarily.
Politicians and homeowners will work against that at every level, but I still think prices keep going down, as they already have been in the GTA and BC.
The gamut has been run. People stretched their incomes, added second incomes, brought in tenants, relied on parental help, and used equity pulled from inflated homes to buy even more inflated homes. Every workaround available was used to keep the game going.
But those workarounds are finite. Boomers have already used a great deal of their housing wealth to help their children buy into the same inflated market. The Marios of the world have less ability to do that. Everyone younger has even less room to work, save, or dream their way into ownership.
At some point you simply run out of people who can beg, borrow, or steal enough money to buy in. Housing got too expensive for those not already established to justify working towards it, and I think we're starting to see the consequences of that now.
I've come around to the idea that capital gains taxes on primary residences might be a good and necessary thing. One way to possibly cushion the impact of introducing capital gains on primary residences would be to declare a base year to start the calculation. For example 2024 as the base year for assessed housing value on homes already owned. As of the year 2025 capital gains would be applied as normal. Ideally it would protect near retirees counting on housing for retirement funding since much of the gains would be protected from taxation. Then hopefully it should cool the housing market going forward since housing would be treated like other investments. It would be political suicide so it will never happen.
No. Not another tax. I’ll let my house fall apart,lower my value,lower my tax. Watched my brother do it during a bitter divorce. Got ugly,his acreage was run down,on purpose. Lowered his assessment value
"The challenge facing Canada is no longer whether affordability restoration is necessary. It is whether a political system built during the wealth-preservation era can engineer a successful transition away from it, largely counter to their own personal interests."
Some fair points but the article misses many of the fundamentals of why housing has become so unaffordable. Combine rapid population growth due to immigration with a stagnant economy over the past 10 years (thanks for that JT) ,resulting in flat GDP per capita ,and you have a recipe for the affordability issue that many now face.
Meanwhile the cost of building new housing continues to rise due to municipal red tape, fees, FN approvals, and the bureaucratic sludge that is endemic to our municipal governments. It takes years to just get a development and building permit to build a house or condo.
Until Governments at all levels in Canada understand that they are the problem and not the solution, I don't see things improving.
We need skilled tradespeople big big big time.
Immigration in of itself does not intrinsically lead to higher housing prices, unless the immigrant population is specially lacking in tradespeople who would be involved in housing construction.
Blaming a "stagnant economy" for housing unaffordability might be tautological, because an economy where a greater share of GDP is spent on non-productive assets (housing) is how an economy *becomes* stagnant.
Whilst i generally agree with your premise I think you are possibly over generalizing the urban Toronto, Vancouver and perhaps Montreal situations to the entire country. While prices have risen elsewhere they have not done so as quickly or as much as these three locations (certainly there is a ton of variable answers based upon location).
As such any broad based solution focused on fixing the market in those three locations is likely to have significant, potentially unintended, consequences by also proportionally lowering housing values elsewhere.
As late boomers we purchased a 30+ year old home in an Alberta metro urban community for just over $400,000 in 2007 at the height of a market swing. Almost 20 years later the valuation of this is now between $470,000 and $480,000, roughly 15% for the term (very roughly 0.74% annually).
As such value has not even appreciated at a rate matching general inflation and any "national" strategy to deal with three significant but localized settings needs to consider the potential harms elsewhere along with benefits.
It's true that Boomers and government money parasites have absorbed (and squandered) most of Canada's wealth. The question is what to do about it.
The answer is to make those same people absorb as much of the cost as possible in the time we have left. Dramatic cuts to OAS and NGO grants, cuts to civil service numbers, 130% tax inclusion rate for fully indexed guaranteed pensions, remigration and deregulation of resource extraction, will reset the economy quickly in favour of the people who have been shafted.
It won't happen, but it is both just and necessary.
AE, see my post above.
If you cut the civil service and the cuts are done through attrition (not filling jobs where people resign or retire), then you actually reduce employment opportunities specifically for younger people (who then have no civil service jobs to apply to), not for the boomers slowly aging out of the civil service.
Don't wait for attrition.
People who are on "fixed incomes", as in those who are retired and beyond their physical abilities to earn income from the labour are facing the same challenges that retirement brought for people who retired in the late '60's and early '70s. Inflation got out of control and so sales of assets that were to provide for a comfortable retirement quickly failed to keep pace with the cost of living.
I realize that a couple who purchased a home in 1982 is sitting on a capital gain bonanza, but you can only sell it once. If the capital gain is ploughed into a down sizing move into a condo how much money is left over as insurance against the post pandemic inflation crisis?
Government loves inflation. The skyrocketing cost of oil and gas this spring is filling government coffers with a financial windfall and you can bet that every cent will get spent on new programming, which in turn distorts the economic government footprint in the economy and the stagnation continues.
The solution is a desperately needed correction in housing speculation that should be redirected towards business development and true economic growth. The housing market has been a handy spot for speculative investment instead of a home ownership dream for young people who are priced out of the market.
The last of the three examples, the 61 year old with 10 years left on their mortgage gave me pause; Mike misses something I think I know:
In my 15 years as a stock broker, financial planner for about 300 households, I observed a difference between the generations that experienced hardship and those that did not, a difference much discussed among my peers. Clients who were close enough in age to the depression era, or WWII, who experienced the lasting emotional impact of difficult choices, sometimes no choices, going hungry, feeling acute insecurity for food and shelter as a result of those circumstances. They witnessed, experienced or heard about their parents stress.
The difference was behavioural. The hardship group saved more, spent less on discretionary items and always had a cushion that built over time, eventually creating a sense of security. They prioritized paying down the mortgage and were very wary of, even avoiding any expensive, unsecured, or after tax debt, especially credit card debt. They were expert at delayed gratification.
The group that experienced no hardship behaved differently. Instead of being focused on avoiding any self inflicted hardship through debt, they focused on their wants. Wants became needs, debts grew, revolving credit card debt was normalized and a huge amount of discretionary income was spent on instant, as opposed to delayed, gratification. Marketing, media, and peer pressure contributed, but this was a difference of choices made.
The results at age 65 are two completely different worlds, as a result of the magic of compounding working for, or against the future. It's the difference between security and choices, and working forever wherever possible with few choices. It's the difference between inner peace and pervasive anxiety.
I'm not saying this is the only input to the current situation; housing affordability is also part of the problem. But we can't pretend there isn't a difference in behaviour because every financial professional who's met both groups has dealt with the results in a visceral way. We've sat with, helped, consulted, congratulated and consoled many in both camps.
There's a policy issue, and there's also a change in how people think about their own responsibility vs. the responsibility of the state to care for them. This can also be influenced by policy, and should be. The kind of debt that's grown (I mean, omg, people borrow on online shopping sites for $300??) exponentially does not benefit productivity, growth or progress at either the national or individual level.
I think there's an even bigger problem. There are no jobs or careers for too many kids. Their future is incredibly bleak.
Thanks for the well thought-out & presented submission on the current state of the housing market. As a boomer with a paid off home who has been conditioned to consider this my retirement fund I'm not eager to see my home values engineered to stagnate or decline.
I can only hope that any actions our government takes is paced in decades not years.
One of the most influential books I read was Boom Bust Echo by David Foote and it taught me demographics drive almost everything. We must look ahead to the next 10-25 years where it is almost assured that the huge wave of boomers will die. This will have a significant impact on a number or the concerns we are debating today namely housing & healthcare.
It is very possible the supply of single-family homes hitting the market over these periods will overpower the market with supply & prices should fall. This should also happen with health care, while we deal with the wave of seniors swamping the system now with age related issues we must look ahead over the next 10-25 year period and can imagine a significant decline in healthcare requirements possibly creating excess capacity & staffing.
In closing this situation took decades to form but I believe we can see these serious issues of today resolving themselves over the next decades to come.
Exactly. Blaming boomers because they made the cruel decision to be born with the biggest cohort is insane. Makes as much sense as blaming them for WWI and II, and making their parents have a lot of babies all at once.
The article, while correct in direction, paints a singular proposition for correction: the Canadian citizen must bite the bullet alone. I would appreciate a revisiting of this topic to include:
1. Challenging the validity that home ownership is a "right"...or national goal. The foundational right to adequate housing was formally enshrined as law in 2019. On the contrary, citizens must be allowed to under save, under plan and live of life free of home ownership.
2. Tying the cost of "the fix" to our national debt. It's time for the politicians to understand the reality that inflation control and federal expenditure reduction must contribute a large portion of the funds to affect national housing prices. They must, however, pay the political price for reallocating voter-enjoyable programs to house price remediation.
3. Aligning student loans to specitic degree earning potential. Nationally we have students with high loans who took low income degrees (Women's Studies must be an example). Post secondary degrees and loans must, in part, be assessed on their contribution to housing affordabilitiy through higher incomes and more rapid loan repayment.
4. Mandatory 10% annual savings from the first year of taxable earnings. Funds may be redeemed at any time by the purchase of a home or formal acknowledgement that home ownership is not a significant personal objective.
The suggestion of such governmental interference is repulsive. Government has no right to intrude into the living rooms of Canadians. It implies that Canadians are unable to accept their responsibilities to provide for themselves...and to ditch the bitching when "everything" doesn't come their way. But "everything" changed in 2019 and government must accept responsibility for much of the problem.
The four steps above will, very painfully, move housing prices downwards.
I agree with 1 in principle, but I think that home ownership adds so much to flourishing for most people, that government should make it a key objective to run the polity in such a way that this is achievable for those who want it.
2 is obviously true, but I think we don't blame the final beneficiaries of current policies enough. Politicians and their clients most both suffer.
3. I agree. All government student loans should be repaid as a capped percentage of income over a period of time, and should be securitized bundled by degree and school. So a U of T engineer could pay $10,000 of tuition with 1% of income, while a Brock gender studies major might not be able to pay $10,000 of tuition at all.
4. I am charging my employed, at home, kids a substantial rent with the promise that that will get it back toward a deposit on a marital home.
This is a stickier problem than outlined here, because new buyers *have* been getting into the housing market. They've paid the highest prices, and they've got the least equity. Home ownership rates among 25-29 year olds was 44.1% in 2011, and it was 36.5% in 2021. For 35-39 year olds, the comparable numbers were 67.1% and 61.5%. Over that time period, average housing prices went up by 70%. A severe housing price correction tends to be in the range of 30%, and you'd basically wipe out the wealth of all of the younger cohorts of buyers while *still* only marginally increasing affordability for those who currently can't get into the housing market.
Forget the boomers with their huge piles of equity - they were driving this problem for decades, true, and a loss of value is less likely to leave them financially underwater. However, demographic realities are going to be taking them out of the equation over the next 10-20 years. That's about how long it's going to take the younger cohort to recovery their lost equity from a big price correction.
This problem took a long time to create through insufficient construction and restrictive zoning. A rapid correction that screws over half of your future voters for a couple of decades (the wealthier, higher propensity ones) is political suicide. As we've been seeing in the comments on this site, Alberta voters still have declared omerta against the federal Liberals for such a crash triggered by the NEP 45 years ago! Actually fixing this problem in a way that doesn't create a bigger mess is going to take decades as well.
Don't forget that the Bank of Canada is about 2008 lowered interest rates to a ridiculous level and artificially kept them low. This created the housing crisis. People borrowed well beyond their means and starting bidding wars over houses. The same low interest rates made saving money in conventional places (like a savings account in a bank) absolutely future. Real estate became the only "sure" investment. At the same time, people were buying little post-war bungalows, tearing them down, and building the biggest house possible on the lot. This resulted in a loss of entry-level single family homes. If Carney couldn't see the problem he was creating as Gov of the Bank of Canada, he's surely not going to be able to see the solution as PM and should not even think of meddling in the market. The law of unintended consequences will surely come back to bite us in the ass.
Also, in the scenarios in the OP, people were making bad decisions. Government policy should not be based on bad decisions. Ever.
I’m willing to make the sacrifice. I bought,totally Reno 3 homes,sold them. All the while working full time,raising a family. Asset growth averaged 2.5% per year. Held each home for a min of 5 years. Was mortgage free on our third home. Built brand new our 4th. Hard work,live with some dust,off and on and do some of your own work. Leave the true Mechancal to Certfied Pros,ticketed for Insurance disclosure. There are deals out there,
For me, the housing crisis has come about after decades of crumbling infrastructure. We have to fix both. How do we build homes for cities that do not have the infrastructure to support new communities. I think if government somehow forced massive drop in prices we would likely be thrown into a recession. A really terrible awful one.
Bad news for homeowners? And seniors, I would imagine. This is our chickens coming home to roost or something more clever, it's early still.
I am sitting somewhere between Nadia and Mario in this scenario, and the points highlighted are resonant. I got out of the housing market to rent and move around while rebooting career a number of years ago, and by the time I was looking at getting back in, prices overall had doubled for anywhere it made sense for me to live. My carefully saved equity did not cut it. And I agree that younger boomers, X-ers, and elder millennials tend to have more in common than not on these themes, unless you have had an old school, conventional financial path (ie paid off relatively affordable house in suburbs and actual union-type full pension)—or just a very lucky life. My 84 year old dad totally gets this, btw, and understands that rebalancing needs to happen. What I would like to know is if there is a quiet majority of Canadians who do understand—whatever their generation or whatever they tell pollsters —but somehow that never makes it into policies?
Substitute 🇨🇦 for 🇬🇧 and you’re writing a pretty exact analysis of over here too. Except you missed out the real reason: we all stopped building. People keep trying to tell me that housing is a uniquely different market to every other branch of capitalism - that conventional supply and demand relationships don’t apply. I keep reminding them that I’ve spent the last decade actually building houses, and sit on the board of a big social landlord - so I’ve got a pretty good idea.
This is why I came to the conclusion a long time ago that the only way this gets fixed is a crash. I doubt enough people are altruistic enough to do what needs doing voluntarily.
Politicians and homeowners will work against that at every level, but I still think prices keep going down, as they already have been in the GTA and BC.
The gamut has been run. People stretched their incomes, added second incomes, brought in tenants, relied on parental help, and used equity pulled from inflated homes to buy even more inflated homes. Every workaround available was used to keep the game going.
But those workarounds are finite. Boomers have already used a great deal of their housing wealth to help their children buy into the same inflated market. The Marios of the world have less ability to do that. Everyone younger has even less room to work, save, or dream their way into ownership.
At some point you simply run out of people who can beg, borrow, or steal enough money to buy in. Housing got too expensive for those not already established to justify working towards it, and I think we're starting to see the consequences of that now.
I've come around to the idea that capital gains taxes on primary residences might be a good and necessary thing. One way to possibly cushion the impact of introducing capital gains on primary residences would be to declare a base year to start the calculation. For example 2024 as the base year for assessed housing value on homes already owned. As of the year 2025 capital gains would be applied as normal. Ideally it would protect near retirees counting on housing for retirement funding since much of the gains would be protected from taxation. Then hopefully it should cool the housing market going forward since housing would be treated like other investments. It would be political suicide so it will never happen.
No. Not another tax. I’ll let my house fall apart,lower my value,lower my tax. Watched my brother do it during a bitter divorce. Got ugly,his acreage was run down,on purpose. Lowered his assessment value
So much this. Every bad policy leads to equally bad reactions by the people affected by the bad policy.
There won't be any capital gains post 2024 for quite some time
Then mortgage interest becomes tax deductible, which has its own trade-offs. I don't think those are good trade-offs, given the experience in the U.S.
That would discourage sales and would discourage upgrades to homes. Careful what you wish for.
"The challenge facing Canada is no longer whether affordability restoration is necessary. It is whether a political system built during the wealth-preservation era can engineer a successful transition away from it, largely counter to their own personal interests."