What should the Canadian federal government do? Housing is a provincial and municipal responsibility. They're the ones that set zoning and housing regulations.
Yep. I didn't read the Wikipedia article, but, AFAIK, there used to be more non-market or co-op housing in Canada where the cost of rent, etc. was tied to the actual costs instead of what the market will bear. That acted as a check on runaway greed since it gave people a good comparable (at least for rent) that was based on fair value rather than maximizing profit.
This is only arguably true because Jean Chretien decided to completely disengage and walk away in 1993 to solve his budget problems.
Prior to this the Federal government was deeply, deeply involved in housing in this country, both literally building social housing and also incentivizing both social, coop and market housing through huge amounts of tax expenditure.
Accordingly there was an enormous amount of apartment development through the 60s/70s when the government was most involved in incentivizing housing, and then as investment was cut down, it eroded all the way to nothing.
There is no single silver bullet to our housing problems, but honestly if we had to look for one, some single thing that had the biggest contribution, it probably would be that 1993 budget.
They could at the very least not import 1M a people a year (many of whom come here to study at diploma mills that result in no real career skills and considerable debt) at a 38M population, and limit corporations and non-citizens from buying property.
It's on the provinces to get rid of zoning and speed up development of new housing starts, but the Feds are pouring gasoline onto a house on fire with no regard for the rest of us. We wouldn't have such a significantly declining birthrate if people could afford to have children of their own in Canada.
AFAICT, that's double counting. IOW, a significant portion of non-permanent residents eventually become permanent residents, and get counted when they become permanent residents.
For example one of the biggest costs on apartment builders that dissuades them from building apartments is the HST. Developers are constantly saying this makes their projects unviable and kills them.
The Federal government could waive the HST tomorrow and massively incentivize apartment development.
The Liberals even promised to do this in past campaigns, then reneged on this.
In the past when apartments were being built rapidly it was aided by enormous tax expenditure from the federal government.
If it was a condo development being sold, then yes the end buyer of the condo would pay, but if it's a purpose built rental, then the builder has to pay the tax.
> Residential builders sometimes face unexpected GST/HST liability due to the self-supply rules in Canada's Excise Tax Act. In effect, the self-supply rules deem a builder to have sold to itself a residential property at fair market value if the builder constructed or substantially renovated that property and then either rented it out or personally occupied it.
In effect this makes purpose built rental (PBR) dramatically less viable than condo development and a core reason why builders basically stopped building PBR entirely.
Setting aside the discussion around whether PBR or condo is better to build etc, the core point here is while yes, housing is a provincial responsibility, the Federal government's taxation policies have a dramatic impact on the sort of housing that is built in this country.
I don't quite get this argument. I can kind of see it, but isn't the total cost of the property the same whether or not it's sold to an end buyer or purpose built as a rental?
For example, if you have 2 condos that worth $100k, an end buyer pays $105k after GST and a corporation building a rental pays $105k. I don't see how that's unfair unless the corporation is looking for a sneaky way to have the government subsidizing their business.
How would that be fair to me if I was the end buyer purchasing a condo as a rental property? Should I get a rebate for the GST to keep it fair?
That said, I think there should be a total ban on corporate owned residential property. Eventually we'll all be renting from private equity firms if we let the current trends continue.
Not going to get into the discussion of PBR vs condo and why you'd want to do either, but I'll elaborate more on how the taxation makes PBR unviable.
The difference between these two scenarios is in the financing, and financing is critical in the entire viability of the project.
In the Purpose Built Rental scenario the builder has to pay lets say 12% for each of these 100k condos in a 125 unit building, which ultimately results in the building costing an additional $1.5M to build. They need to find that money or find financing for that money.
In the condo example the building is $1.5M cheaper to build as they do not need to find that money, they simply sell all the condos and the buyer pays.
It's easier to get financing for a smaller amount of money, and so the condo becomes more viable and more likely to be built.
Now 1.5M maybe doesn't sound like a big deal, but from my understanding of the development industry all this really matters and adds up.
We've seen in Canada the entire market for PBR pretty much disappear and be entirely taken over by condos so this is not really any sort of debate. The development industry has talked about this a lot.
The core underlying point is though then that if there is political desire to build more PBR than condos, it's not just a provincial issue, since the fundamental taxation difference is an important part of the underlying incentives that drive people to make different sorts of housing tenure types, and this is a federal issue.
This is just one example. There's all sorts of ability for the federal government to change incentives via taxation.
(in the past one of the biggest reasons why so many apartments were built was all sorts of other capital gains tax benefits around apartment development which no longer exist)
> I don't see how that's unfair unless the corporation is looking for a sneaky way to have the government subsidizing their business.
It isn’t about fairness or not, it is just an explanation as to why everyone is building condos rather than apartments, which really sucks because instead of renting from a large landlord that has actual experience and staff, you end up renting from some dentist turned real estate “investor” who is magically on vacation when there’s a leak in the unit and doesn’t pick up the phone after 8pm. Clearly there is a place in the market for both types of landlords but the HST structure disincentivizes one type of landlord from existing.
> How would that be fair to me if I was the end buyer purchasing a condo as a rental property? Should I get a rebate for the GST to keep it fair?
This might be one solution, or go the other way and disallow condo developers from claiming the ITCs.
"We will give any municipality that fills out this form $23,800,042 to build affordable housing; each 2 bedroom apartment must be sold for $123,456 and cannot be sold above $234,568 for the next 15 years."
It's silly to pretend that large-scale homebuilding isn't being done with profits that only incentivise restricted volumes of building. Federal or state building could rectify supply and stabilise prices.
That said, it's decades too late. We're at the top of a tall, steep hill. As soon as enough people start walking away from their mortgaged homes because they can't afford repayments —which will happen with base rates so high— the market will crash.
I think there's a good chance investment firms buy up everything. If people are walking away from their mortgages that means the properties can likely be bought below market rates, especially if they can do bulk or quick deals with banks.
As supply consolidates the market rates will keep going up, so the smart choice for anyone with a huge investment in the market is to just keep buying until they own everything, right? Don't let the market crash. Instead, prop it up until you own so much of it that you effectively make the rules and set the market rates.
Investment firms are already facing massive holes in their books as office space around the world goes unlet and devalues.
In my area we're already seeing people trying (and failing) to sell at reasonable prices. The average mortgage repayments are set to rise by £6kpa. It won't be afforded for long.
Yes, I'm sure someone will clean up, but it won't buoy prices and it'll only make the long term picture worse.