- cross-posted to:
- canada@lemmy.ca
- cross-posted to:
- canada@lemmy.ca
the housing crisis has been created by banking practices that have directed excessive amounts of credit into the property market, and especially residential mortgages. As a result, buyers can bid prices up to ever-higher levels, resulting in a market where people must pay more for the same type of housing. Hence financialization can be defined as an inflationary tendency in the housing market that is induced jointly by banks’ desire to expand mortgage lending and buyers’ confidence that the value of their properties will rise.
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However, the image of a bubble bursting and prices returning to a more rational “equilibrium” level does not seem to apply to the housing market. Because housing is a necessity, people are willing to pay high prices for it. Bidding wars can therefore persist even when relative supply grows, so long as credit markets enable them.
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Housing is seen as a huge part of Canadians’ retirement planning. Politicians are afraid to do anything to lower the price of housing (remember Carney’s housing minister saying they didn’t want to reduce house prices?) because they think they’ll be punished by voters. Because of that, house prices keep increasing.
It’d be great if there was a bi-partisan consensus to gently let the air out of the balloon by carefully lowering the amount of money available in mortgages, or the amount of money exempt from taxes on the sale of a primary residence. By all means, increase supply at the same time, but we also need to make homes less of an asset.
Letting air out can happen a lot quicker if you give a good reason to people not to care about their home price. For example by providing an equivalent or otherwise decent government pension. My inlaws fall into that bucket.
I agree with letting air out of the balloon slowly. That’s what rezoning and densification shoots to do. It is slow because development is slow. But limiting available capital (ie: competing for mortgages)? In what world does that make sense? And if primary residence cap gains aren’t exempt, then anybody that had to move for work would get screwed. That’s a corporate friendly policy, not a people friendly policy. The goal here is for people to own houses, and for there to be penalties for owning more than one. But that’s exactly where policy is right now.
I agree with letting air out of the balloon slowly. That’s what rezoning and densification shoots to do.
My experience with densification was seeing 600k houses (that I could almost afford) be replaced with 2-4 1.1m houses (that I could not afford).
We should pursue densification and rezoning are positive for many reasons, but price isn’t one of them.
But limiting available capital (ie: competing for mortgages)? In what world does that make sense?
A world where prices are increasing faster than wages. We’ve had historically low interest rates since 2008, which has made borrowing large sums easier, meaning people can afford to pay more for houses.
That was great for people who got in early: they could get cheap money that wouldn’t reduce their quality of life. But it means they could bid up the price of houses. Folks coming after had to pay higher and higher prices, until they did start to see a quality of life hit.
Because housing is a necessity, people are willing to pay high prices for it. Bidding wars can therefore persist even when relative supply grows, so long as credit markets enable them.
Right, that’s why I see rural houses literally falling over because nobody wants to live in them. /s
Supply and demand applies to food. It definitely applies to housing.
The central argument of this is that because the number of houses per adult is the same as 1989, the housing supply is fine. And then they have the audacity to claim other people are cherry-picking. No mention of average household size being different now, even just considering adults (nor mention of urbanisation). There’s little effort to support their own theory with numbers, either.
Not to mention, that very same graph has a noticeable dip right in the recent years where it’s become an issue. They’ve just scaled the graph so it’s not emphasised. 1989 was the last time it was so low.
Housing size is specifically addressed:
On top of that, the square footage of housing units in Canada has on average been growing across all housing types, which should in theory provide more flexibility for people to live with roommates.
Housing units are bigger and there are more of them per capita any way you slice it: by population, by number of adults, or by number of households.
They make a very compelling argument that the big change is not anything to do with supply, it’s entirely a result of easing burrowing standards and increased access to credit. It’s not as simple a story, but it actually offers a reasonable explanation for the observed data, while ECON101 Supply & Demand arguments don’t match the data. Doesn’t matter if it makes sense if it’s wrong.
I think a big part of the supply problem and the generational difference in ownership is the size creep of homes. Homes have been getting bigger and bigger to support the same sized families meanwhile wages have stagnated. Thats all extra flooring, walls, insulation, labor to build, energy to heat, wires to run, property taxes to pay etc. We need to change the way the supply is skewed and start offering more reasonably sized homes.
Sure if you want and can afford a 2500+ sqft 3 storey house then shop for that, we build lots of those, but we don’t build lots of 500-1200 sqft homes which reflect the size of starter homes from decades ago. Many homes this size need to be custom built or are built by smaller developers. We don’t see entire neighborhoods of these sized homes anymore. Same goes for apartments, they’ve experienced luxury condo creep despite demand for that level of luxury being met already.
The problem with building a 500-1200 sqft home is that most of the price is in labor and land. So it doesn’t cost a lot more to make that a 1500-2500 sqft home instead, which will in turn give more profit.
A local developer bought an old single detached home for 1.3 million and knocked it down to build 4 small sdh micro units on that property. Each one is currently listed for $650,000. I was watching the construction and I’m sure they didn’t pay anywhere near that for materials. They’re ok but definitely not quality.
Household, not house.
In 1900, people in the West lived with extended family members, like in essentially all other cultures. By 2000, not so much. In between it varied by socio-economic class. Your 1970’s family might include grandpa if they’re not rolling in it.
Most likely, that’s what you’re seeing on the bulk of this graph.
It’s not as simple a story, but it actually offers a reasonable explanation for the observed data,
No, no it doesn’t. I’d explain why, but that would be the exact same comment again.
ECON101
What, do you have an economics degree?
You can’t shit on other people’s education unless yours is better.
Did you read the article? Household size is accounted for.
And yes, I have a minor in Economics with a Math major. FWIW.
How could I possibly be quoting out of this article if I didn’t read it? They divide housing stock by number of (thousands of) adults for the upper line of the second graph. If the average number of adults in a household changes, that line is misleading. They make an effort by not including children, but it’s not enough.
That’s my guess why the 20th century looks that way, anyway. If you crop at 2000, suddenly it shows exactly what mainstream analysts have been saying - lots of immigrants came in all at once, and the housing supply tightened. Otherwise it’s close to flat.
Beyond housing itself, they inject (current, Canadian) numbers about debt, but that connects to a lot of things, and the ratio of home price to median income. Median household income has diverged from the mean, and yes the finance system has changed. They really haven’t made an argument for their version to dissect. It’s all innuendo and appeal to the authority of other people they agree with.
They start with “the CMHC is recommending too much construction”, which is defensible, but “housing is all a huge bubble” is a more extraordinary claim, and “actually there’s plenty of houses” is a non-sequitur.
And yes, I have a minor in Economics with a Math major. FWIW.
I’m surprised at the language you’re using, then. ECON101 is a phrase you see from people who think Das Kapital is a current textbook.
The stock of dwellings per capita has risen considerably over that time, from about 290 per thousand people in 1971 to 403 in 2023. Even housing stock relative to the adult population alone (which has remained at a flatter and higher level due to the declining share of children in Canada’s population) has grown, from 477 dwellings per thousand adults in 1971 to 510 in 2023.
Some analysts prefer to take households as the key demographic unit, but this approach also reveals no clear evidence for the supply-shortage argument. Census data show that there have consistently been more dwellings than households since 1971. In the intense period of housing inflation since 2001, that ratio has actually risen slightly, from 1,011 dwellings per thousand households to 1,017 in 2021.
They address all three metrics explicitly.
If you have a minor in economics, you know about frictional misallocation. It addresses nothing.
Maybe I’d attach some kind of significance to the slight fluctuation they mentioned, if the “trends” they identified from the statistics they actually showed us weren’t lying with statistics. As it is, I’ll put that in the innuendo category.
And they’re never going to correctly identify the problem if they’re analysing it as a national issue, rather than a bunch of local issues in a trenchcoat.
It’s clear that there must be a supply issue, as there is an observed reduced availability in homes, driving up prices. But it’s hard to spot in nationally averaged data, as these are local shortages, not national ones. The capitalisation of the economy demands a centralisation of labour, meaning people move from rural to urban areas. Similarly, there are some urban areas facing population flight due to the closure of key industries, meaning people move out to where their income is. And then there’s the matter of immigrants, who tend to stick around in progressive cities where they are both welcome and can get a job.
This is also why Covid had such a high impact on housing prices: mostly rural businesses went under, whereas urban businesses in high-density areas were more easily able to keep sufficient customers, or could rely on subsidies provided by richer cities. This too shifts the demand for labour from rural areas to denser urban areas.
The availability of credit is an accelerator of rising prices, not a direct cause. In a buyer’s market, supply is plenty so there’s no need to overbid as you can easily buy a similarly priced (or even cheaper) home nearby. But as anyone who’s looking for a home will tell you: that’s not available at the moment. So they have to overbid to get anywhere, and prices rise faster because that credit is available to do so.
In a nutshell, available houses aren’t where the demand needs them to be, ergo there are local supply issues. Building more homes in economically attractive areas would cool off prices.
Sounds like remote work would help, then. Unfortunately most Canadian employers and governments are forcing return-to-office.
Housing is not fungible. It doesn’t matter how much supply there is in the middle of nowhere; lack of supply in the places people actually want to live is a shortage.
Also, it has fuck-all to do with financialization and everything to do with restrictive zoning laws that enshrine single-family. Y’all are literally prohibiting building more density; WTF did you think was gonna happen?!
It def is both financialization and zoning. Restrictive zoning increases the value of housing hence line goes up.
Rezoning is framed as increasing supply and affordablity, instead of decreasing values of existing homes. When both will happen.
The irony is that decreasing the value of homes really is the inevitability. Because rezoning encourages redevelopment, that redevelopment generally includes more dense and theoretically more affordable housing types. But developers still want to make money, so they are built to maximize profit, not affordability. So it suggests that if they sell, other houses have less demand, and demand will fall. But that hasn’t been borne out.
It def is both financialization and zoning. Restrictive zoning increases the value of housing hence line goes up.
The difference is that financialization is a symptom of the problem, not the cause of it. It is enabled by the imbalance between supply and demand caused by the zoning laws restricting the supply.
Rezoning is framed as increasing supply and affordability, instead of decreasing values of existing homes. When both will happen.
“Increasing affordability” and “decreasing value” are mathematically equivalent statements, so yeah. Obviously.
(In fact, that’s why the problem is so hard to solve: NIMBY homeowners will claim to be all for “housing affordability” in theory, but in reality they absolutely hate it because they benefit from prices being high. Zoning that restricts density is a symptom of society being held hostage by the already-privileged, demanding ever more subsidies for themselves)
Financialization occurs irrespective of supply and demand by making more credit available. It’s literally injecting money into that specific market. Once people see prices rising, the rising prices become part of the product - people buy as much housing as they can as an investment vehicle. It’s like the effect of people buying a stock because it goes up. Everyone I know has either bought additional property as investment or wanted to but couldn’t afford it.
What is the reason, besides finacialization, that restricting supply makes sense?
Zoning laws are made by people elected by those who financially benefit from stricter zoning laws.
You literally say this in your parentheses statement.
Stricter zoning preferences come after one has a financial stake in housing.
Financialization is the root cause.
What is the reason, besides finacialization, that restricting supply makes sense?
It sounds good to voters. Zoning is basically a promise to keep the neighborhood free of things you don’t personally care about under the guise of thoughtfulness. Current owners like that, and it’s too abstract for most of the people who lose from it to care about.
Same reason they scream bloody murder when it goes away. Calgary’s zoning just got forced back in.
THANK YOU!!!
2020 had that effect, where work from home spurred people to move to some of the extremely low cost areas but that just meant that the absolute cheap houses under 80k were all bought up and 100k is the floor. But that was a one time adjustment.
The “supply-shortage argument” is encapsulated by the CMHC’s claim that “increasing housing supply is the key to restoring affordability.” If the argument is correct, then we should expect to see evidence that increases in dwellings per capita lower prices over time.
A great straw man argument 👍
It is difficult to find clear evidence that increased supply pushes price down, because in private markets, new supply only emerges when prices rise and developers feel reassured they can earn a profit on their investment. Price and supply both move up together over time, with increased supply not necessarily pushing prices down.
But when setting out to demonstrate supply’s downward impact on price, they instead use abstract models that presume what they are trying to explain.
Oh the irony. These economists with shady premises… btw you will never find evidence that supply pushes prices down, because in private markets that’s impossible.
It’s kind of funny that the same group that eats this kind of narrative like hot cake is also the group of people with a tendency to blame demand (as in immigration), like if by magic the supply vs demand relationship only works one way. Even though the last paragraph of the article tries to state this exact point (if supply is not the solution, demand is not the problem) - the only thing that this kind of article accomplishes is to undermine the efforts to build housing.
Your first quote conveniently leaves out the last sentence which says “historical data shows otherwise.”
Now, a strawman argument is where you create a fake thing to attack. I’m explaining this to you because there are so many people who genuinely believe that demand is growing higher than supply is.
You seem to be on the side which knows that supply is not the problem, rather it’s greed. The article agrees with you at every turn, but you fight it? Did you actually read it?
Your first quote conveniently leaves out the last sentence which says “historical data shows otherwise.”
What difference does it make? It’s still a straw man. Historical data will showing otherwise is what makes it a great straw man.
Now, a strawman argument is where you create a fake thing to attack.
Yes, I know but thank you. It’s exactly what the “If the argument is correct, then we should expect to see…” line is doing.
You seem to be on the side which knows that supply is not the problem, rather it’s greed.
No, I’m not. I don’t think there’s a single cause that can easily summarize the housing affordability problem. Specially not a vague one such as “greed”. Saying that greed is the problem is the kind of thing that people who confuse BlackRock with Blackstone say.
“If the incredibly common argument that is used all the time and we did not make up(it’s not a strawman) were true then we would expect to see data which reflects that. We do not see data whoch reflects that.”
Strawman arguments need to be made up by the person attacking them. Here they are are simply talking about an existing argument and showing how it’s wrong.
The strawman is taking “supply is an issue” to mean that “dwellings per capita is going down”. Or to assume that stating the former means stating the latter. Or to assume that the former implies the latter. Whatever framing you prefer.
If you disagree this is strawman, that’s fine. Maybe there’s a bette name and we can call it something else, sorry for the confusion. The main point is that “dwellings per capita is going down“ is not representative of the view that supply is a factor in housing affordability.
House prices are soaring because supply is being suppressed while demand is being stimulated while all locations have unique locational supply of land that creates small location monopolies.
This government doesn’t care about statistics, they only care about their precious votes, not the people.
Isn’t that so funny? They care about the votes… To get in power to… Get the votes again… How ridiculous.
I understand the need for votes but they shouldn’t be able to twist or downplay statistics for political gain.
Oh I definitely agree.
Votes are the people, and we keep letting this happen to us. It’s insane, really, knowing that even as fucked as our system is there’s still really no reason any significantly intelligent nation should be dealing with any of the crap we support.
Votes are the people
I find it hard to believe when Quebec and Ontario hold well over half of the electoral districts, and a Minister on the Liberal side having already admitted to certain policies being implemented solely for Quebec voters.
This voting system doesn’t seem fair for the rest of the provinces and territories, but I’m just an average joe so what do I know eh.
Any guesses as to why Ontario and Quebec hold more than half the electoral districts?
Could have something to do with the huge amounts of people living in those places. And a Liberal’s policies are not the pinnacle of democratic fairness, either.
In other news water is wet. When you live where everyone wants to live prices will be higher. If you want less expensive housing live in a small town somewhere.
It’s not ever going to go down.
I don’t get articles like this. Are they having a wish that the government will come in and just wave a magic wand and make property affordable for all?
Any government that tries messing up the real estate equity that people have will be voted out before nightfall.
A lot of that “equity” is really capital gains since housing prices have gone up like mad over the last decade.
The magic wand is public, non-market housing and we should not accept homelessness and child poverty as the collateral damage of a system that property owners have benefitted from.
Adopting a defeatist attitude is the same as saying that we want people to die on our streets.
I say this as a homeowner: I will vote for affordable housing.
As someone who is building a new sdh right now, I will vote for affordable housing that doesn’t damage our equity.
You are part of the problem
lol. Too bad. I’m protecting my own family.
lol. I appear to have triggered people. So sad.
My instinct is to yell at you but I’m gonna ask a question instead:
have you considered that your family would also benefit, along with everyone else, from not having to worry about being able to afford housing?
You really aren’t. Your children will suffer in the future all for your short-sighted greed. Other people’s families will suffer, too. You won’t care, it seems, because you appear to be broken, like you’re missing some core piece of being a human being.
Thanks, Captain Burden.
