Happy Monday Morning! We’ve talked a lot about the recent mismatch between population growth in this country and the ability to deliver enough new housing supply to not only meet demand but actually moderate price growth. Housing is all about supply and demand after all. We’ve tried to obliterate demand but it seemingly won’t go away. Here’s a short list of demand side policies in no particular order in recent years:
An alien observer of Canadian Housing Policy tactics would have to conclude that the Govt. aims to squeeze more people into higher density, increasingly expensive housing.
Any competent person knows it is not efficient to encourage X by punishing Y.
Do you want to have more homes built?
Or do you want to have more homes NOT bought by certain classes of people?
What is simpler than your idea to incentivize BUILDING homes to have more places for people to live?
Your thesis in today's article makes sense... but it not the politicians' favorite tactics of
- blame others for the problems
- find a way to appear to be doing something by taxing and spending
Is Canada the only country that ever had an insufficient housing situation?
Has no country actually come up with ways to reduce their problem?
The questions are rhetorical because the answers are obvious.
The Republic of Panama, for example, wanted to increase the number of homes built so they ELIMINATED the RE TAXES on new homes for a period of 20 YEARS, about 20 years ago!
Because they were serious.
People needed nice homes and people needed well-paying jobs.
Expanding the housing stock satisfied both goals.
Once their program increased the housing stock they reduced the TAX EXONERATION to 10 years and then 5 years and then phased out the program.
Panama wanted lower middle income families to own their own homes, so they did not make it HARDER to qualify for mortgages.
They MADE IT EASIER by supplying long-term financing at a subsidized interest rate for those who qualified. A year ago, Canada could have borrowed 25yr money at under 4% and provided longterm mortgages to those who qualified for help to buy a home. The Banks might not have been happy, but is the country run for the benefit for the Banks?
Just saying....
While there are structural/jurisdictional differences between different Governments... the basic question to ask is how other countries successfully solved similar problems and how their successes can be adapted to Canada.
It would be refreshing to find solutions to problems that have a track record of working, especially if they used incentives, instead of taxation.
The reality is that what is considered BETTER Housing Policy depends on who you are.
Are you a Bank, selling Real Estate, a homeowner with the majority of wealth in your home, someone who wants to own a home but can't afford one?
The best Housing Policy differs depending on who the policy is supposed to "help", and that is a contentious issue, in reality, although not usually to be discussed honestly.
An honorable and competent set of Govt. institutions would have put the immediate cause for the worsening of the problem, hyperimmigration, on "hold" until there was an effective way to solve the significant problems with shortages in housing and services.
Excellent post, as always Steve! I very much apprepriate the work you do. The housing situation is not just a crisis, but a true 'emergency' as Benjamin Tal said. It's getting worse by the day and will eventually lead to social problems and hamper the Canadian economy.
Meanwhile cities are looking at the example of Vancouver's vacant homes tax as a shining example of how to 'increase supply'. My town (South Lake Tahoe, CA) has raised TOT taxes, wants to raise them more, banned VHRs, and now wants to enact a vacant homes tax.
I totally agree Steve. All levels of government are disincentivizing the building of housing! The knee-jerk reaction of some in politics is to extract some more money from "rich developers", but they aren't doing that. The developers don't pay for these taxes, the end users do. Besides that, while a few developers are rich (after decades of hard work and risk taking), probably most are not rich. I'm not a developer, but I don't see developers as the problem here.
An alien observer of Canadian Housing Policy tactics would have to conclude that the Govt. aims to squeeze more people into higher density, increasingly expensive housing.
Any competent person knows it is not efficient to encourage X by punishing Y.
Do you want to have more homes built?
Or do you want to have more homes NOT bought by certain classes of people?
What is simpler than your idea to incentivize BUILDING homes to have more places for people to live?
Your thesis in today's article makes sense... but it not the politicians' favorite tactics of
- blame others for the problems
- find a way to appear to be doing something by taxing and spending
Is Canada the only country that ever had an insufficient housing situation?
Has no country actually come up with ways to reduce their problem?
The questions are rhetorical because the answers are obvious.
The Republic of Panama, for example, wanted to increase the number of homes built so they ELIMINATED the RE TAXES on new homes for a period of 20 YEARS, about 20 years ago!
Because they were serious.
People needed nice homes and people needed well-paying jobs.
Expanding the housing stock satisfied both goals.
Once their program increased the housing stock they reduced the TAX EXONERATION to 10 years and then 5 years and then phased out the program.
Panama wanted lower middle income families to own their own homes, so they did not make it HARDER to qualify for mortgages.
They MADE IT EASIER by supplying long-term financing at a subsidized interest rate for those who qualified. A year ago, Canada could have borrowed 25yr money at under 4% and provided longterm mortgages to those who qualified for help to buy a home. The Banks might not have been happy, but is the country run for the benefit for the Banks?
Just saying....
While there are structural/jurisdictional differences between different Governments... the basic question to ask is how other countries successfully solved similar problems and how their successes can be adapted to Canada.
It would be refreshing to find solutions to problems that have a track record of working, especially if they used incentives, instead of taxation.
The reality is that what is considered BETTER Housing Policy depends on who you are.
Are you a Bank, selling Real Estate, a homeowner with the majority of wealth in your home, someone who wants to own a home but can't afford one?
The best Housing Policy differs depending on who the policy is supposed to "help", and that is a contentious issue, in reality, although not usually to be discussed honestly.
An honorable and competent set of Govt. institutions would have put the immediate cause for the worsening of the problem, hyperimmigration, on "hold" until there was an effective way to solve the significant problems with shortages in housing and services.
Excellent post, as always Steve! I very much apprepriate the work you do. The housing situation is not just a crisis, but a true 'emergency' as Benjamin Tal said. It's getting worse by the day and will eventually lead to social problems and hamper the Canadian economy.
Meanwhile cities are looking at the example of Vancouver's vacant homes tax as a shining example of how to 'increase supply'. My town (South Lake Tahoe, CA) has raised TOT taxes, wants to raise them more, banned VHRs, and now wants to enact a vacant homes tax.
https://southtahoenow.com/story/04/11/2023/concerns-prompt-joint-letter-south-lake-tahoe-city-council
In the meeting the cited the good Vancouver results as a reason to pursue the vacancy tax.
I totally agree Steve. All levels of government are disincentivizing the building of housing! The knee-jerk reaction of some in politics is to extract some more money from "rich developers", but they aren't doing that. The developers don't pay for these taxes, the end users do. Besides that, while a few developers are rich (after decades of hard work and risk taking), probably most are not rich. I'm not a developer, but I don't see developers as the problem here.