Housing: We Have ENOUGH SUPPLY
It seems like housing is being pushed as one of the biggest issues in the upcoming Ontario election. The CBC is hosting a conversation related to the housing ‘crisis’ and so far, there have been limited discussions about what follows.
Doug Ford is promising to plow over some of the best farm land in the world, primarily so his buddies can bump up the volume of houses.
If we double the volume of houses, will the prices drop by 50%?
NOT A CHANCE.
Anyone who proposes as much is being obtuse and oblivious to the fundamentals of supply chain economics.
Are developers facing a 50% in the cost of labour or input materials? NO.
So why are we tolerating such BS when it comes to our provincial and national housing policies?
WE HAVE ENOUGH SUPPLY.
However, we are not making efficient use of properties that currently exist across the province.
VACANCY is the biggest issue, followed closely by INEFFICIENT USE OF EXISTING SPACES.
Here’s a basic run-down related to housing in Ontario (and Canada):
Crack down on the real estate monopoly
The Green Party is closest to these issues.
The real estate transaction process as it stands should be declared illegal.
Agencies should NOT be allowed to keep data about sales and bidders private.
If someone wants to bid on a home, they have to register.
If someone wants to bid on a home, they should see full transparency with the prices that are registered.
Real estate commissions need to be reduced to more reasonable levels, including minimum/maximum amounts. We still live in a world where someone might be making $60,000 to place a ‘For sale’ sign on a lawn.
Investors and owners are sitting on vacant properties. Many of them are heritage properties and the intentional process of treating them poorly results in fantastic old properties being torn down once they’re deemed unfit for living and/or updating.
Vacant properties – especially commercial warehouses, land and empty ‘big box’ stores – are probably the most inefficient use of space on our planet. Temporary vacancy taxes should be brought in to encourage owners and developers to do something with these properties. If owners are not available/accessible (see below for my discussion about ‘dark money’), the properties will be auctioned off to the public, with an emphasis on proposals based on effective use of land/properties for housing and/or local markets and food growing facilities.
Another way to control vacant properties and units used for short-term vacation rentals would be to introduce an MPAC-related levy that generates new revenue for municipalities, with the explicit requirement that the funds be used for public transit and/or repair of existing roads.
Better planning from the get-go would result in avoiding these issues over the long-term.
Rentals: short/long-term properties
Why risk making your rental property subject to rent controls when you can manage it with a platform like VRBO or AirBnB?
When you can rent your home or apartment for several times the controlled maximums, why take the risk?
In fact, with the new Ontario ‘Staycation’ tax credit, the Ontario government is actually helping to exacerbate the situation. Vacation rentals by owners are now eligible.
We need to have a few better mechanisms in place to protect Canadians from the rising tide of foreign investment as a means of ‘parking’ money in real estate in Canada:
- Full disclosure – if a property is owned by a non-Canadian citizen or entity, the Canadian public can investigate the owners.
- A foreign investment tax. We need a SIGNIFICANT foreign investment tax on property in Canada. I wouldn’t suggest making it a function of doing business in retail and other sectors, but I also wouldn’t say no to this kind of idea. If reasonable conditions are met (employed Canadians, no vacancies, etc), I suppose some deductions could be made, but there’d still have to be a minimum so that tax deductions couldn’t be used to mitigate the revenue.
International conglomerates like Blackrock and Vanguard are driving the investing side of this, pushing real estate markets into the stratosphere. Other pension funds and management companies are doing the same.
The net effect? We feed hungry dogs more meat. Building more houses only improves their bottom line.
Did we not learn anything from ‘It’s a Wonderful Life’ where the horrific version of the story is ‘Pottersville’, a land owned by a megalomaniac and rented out to workers who couldn’t afford to buy the places?
Canadians should take great pride in the simple idea that our country is stable and is attractive, especially to foreign investors. I appreciate that I should keep my zeal in check (see above) so we don’t scare too many people off.
That said, part of this attrativeness draws the attention of money launderers and ‘dark money’. They need a place to park massive sums of cash.
What better way than to pump cash into real estate to park money?
The university model is fundamentally flawed and administrators have been going after international students for decades, but only recently have we really begun to feel the pinch and impact of this approach to higher education. Smaller markets like Kingston and London have become rental havens and student ‘ghettos’, cutting out supply from people that actually live in Canada ‘full time’.
To make it worse, we’re inviting a population of people that OF COURSE would be welcome if they were full-time inhabitants of our towns and did everything that other full-time residents did like visit local markets and spend dollars on our downtown businesses, but that doesn’t happen at least a third of the year, sometimes longer because students vaporize in April.
No amount of new property will reduce real estate prices or make homes more affordable to Canadians until we address the over-supply of properties that we currently have.