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Canada’s New Housing Minister Is Already Saying the Wrong Things (videos.abnormalbeings.space)

submitted 1 day ago by floofloof to c/canadapolitics

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[–] cecilkorik 11 points 1 day ago (2 children)

I think their plan is: Increase supply of (actual) starter and family homes that have been lacking -> these homes are sold at low prices and start dragging the rest of the housing market lower -> government chops interest rates and increases loan guarantees and incentives as much as needed to prevent prices of other homes from falling

All of these actions will help improve housing affordability and make homeownership more accessible, but not all of them will lower prices, some of them cause price inflation. I think he's intending to balance these to keep the market neutral. Whether they can successfully pull that off, remains to be seen. But Carney's not stupid, he knows he can't tank the housing market. There are literally millions of Canadians depending on the value of their house, for better or worse, it may be a bad and stupid situation but we're deep in it now and Carney's not going to rip the bandaid off yet. His goal will be to stop it from getting too much worse and try to keep it stagnant for a long time so that incomes and economics get a chance to catch up.

Yes it would be nice if you just got a reasonably priced house right out of the gate and didn't have to take out a low interest mortgage to cover the unreasonable additional cost. But we're not there yet, and I think Carney's plan is going to take that into account.

We'll see if I'm right. This is all speculation.

[–] villasv 5 points 1 day ago* (last edited 18 hours ago) (2 children)

Regardless of how smart Carney is, they couldn't tank the housing market even if they tried. I don't know why people keep mentioning this as if it was even a possibility. This is the same as people who think someone can just happen to work out too much and end up looking like a monstrous bodybuilder. This is not a thing that is achieved easily enough to consider.

All of these actions will help improve housing affordability and make homeownership more accessible, but not all of them will lower prices, some of them cause price inflation.

To be honest I don't really get what's the scenario you're envisioning here. Making homeownership more accessible is lowering prices relative to purchasing power. This is what lowering prices means, and this is what making it affordable means. You can't say the intent is to make it affordable while not decreasing prices, these are at odds.

One trick here is using inflation to alter the context of "increase" and "decrease" means. Prices have to decrease in real value (net of inflation), slowly and steadily. In order to keep homeowners in line in their illusion of preserved wealth, prices have to increasing nominally (not counting inflation). So the formula is this: make sure that housing prices climb steadily below inflation for a very, very long time.

[–] cecilkorik 4 points 19 hours ago* (last edited 19 hours ago) (1 children)

I don't know why you're missing this part of the equation:

Making homeownership more accessible is lowering prices relative to purchasing power.

You said it yourself. The other side of that equation is purchasing power. Remember that doesn't just mean income or grants, it's purchasing power. Doing things like removing tax burden, increasing mortgage terms, lowering interest rates and guaranteeing lower credit mortgages all improve purchasing power. This changes the ratio of prices to purchasing power, making homes more affordable WITHOUT lowering home prices and potentially even raising them. I get that it's not the massive drop in home prices many people want to see, but it will make housing more affordable.

[–] villasv 1 points 18 hours ago* (last edited 13 hours ago) (1 children)

I guess the difference in outlook is that I don’t really see a realistic increase in purchasing power that won’t also get immediately scooped up by a similar increase in price. All the measures you mentioned also affect prices too. The reason I say “purchasing power” explicitly is to not be misleading in that I’m referring to a hypothetical salary keeping up with inflation - something that also really isn’t the case for a lot of people. Someone whose salary is stagnant will also not see the affordability increase in the scenario I’m describing.

[–] cecilkorik 2 points 17 hours ago (1 children)

I'm not trying to sugar coat it, I don't think it's going to be roses and daffodils in the housing market under this plan. Carney's not going to be doing the Oprah show giveaway, "You! get a home! and YOU! get a home! EVERYBODY gets a home!" with everyone dancing and cheering. The new homes he's talking about building, the "war time housing" is not going to be anyone's dream home. It's going to be cheap ticky tacky crap, it's going to be ugly, it's going to be second-best, it's going to be stigmatized (hopefully not too severely). Let's get that out of the way. But the goal is that they'll be safe, sturdy, reliable and functional, and hopefully energy efficient, if they're done right. I'll be the first to admit the government doesn't have a good track record at this. Hopefully this, with the amount of attention focused on it, is what changes that. The way I see it, all it has to do is be an improvement over the current situation where some people are living 3 or 4 generations in a home, or a dozen students or immigrants, with beds in living rooms, garages, basements, anywhere people can sleep, often just renting rooms, or even just "a bed". Or where immigrants and refugees have been living "temporarily" in hotels for years (on the taxpayer dollar) making those hotels unavailable for guests. This is a reality, and this is happening. The goal is not luxury and perfection, the goal is just to be better than that, to be an improvement in the situation, and I think that's very achievable.

The affordability increase for the people with the stagnant salary you're describing, comes from the fact that those people will be lowering their expectations (or actually raising their expectations in many cases because a lot of them have simply given up now and are living with parents or other groups) and buying these lower-priced, lower-end homes (which really don't exist at the moment, which may be why it's hard to picture this choice) and accepting that they come with compromises but at least you get a decent, detached house with a roof over your head that you might be able to reasonably start a family in. Or they'll go further into debt to buy something nicer and better, like the stuff at the current lowest-end of the market, which will be possible because more credit will be available to be extended to them.

This on its own doesn't inflate the price of the rest of the housing market, it reduces it, because there are fewer buyers desperately scrabbling for all the previously existing housing stock, more supply balanced against the same demand. If that's the only thing that we did, and it was done in a vacuum where we stopped all population growth and rent-seeking and all other factors contributing to housing inflation, there would ONLY be downward pressure on prices. Realistically, we know the downward pressure will be counteracted by those and other factors, and those will have to be addressed separately, which means this home-building program will have to be pretty significant to even maintain stable price levels in the current environment but we'll have to wait and see what actually comes out of it and what else is done to manage the rest of the market and the rest of the economy too. It's all connected.

[–] villasv 1 points 16 hours ago

Makes sense. I’ll be rooting for that vision. Time for a new Vancouver Special :-)

[–] humanspiral 1 points 16 hours ago (1 children)

@[email protected] 's point is subsidizing first time buyers allows for affordability without lowering prices. It in fact, increases prices of starter homes because of the subsidy, but only while the subsidy lasts.

A balanced policy would be government construction companies that build small market housing that is affordable due to being small, that ramps activity up and down based on trailing 5 years home appreciation being 15% (3%/year).

This is a zero cost program. Subsidies cost money, without solving problem.

[–] villasv 3 points 13 hours ago* (last edited 13 hours ago) (1 children)

point is subsidizing first time buyers allows for affordability without lowering prices. It in fact, increases prices of starter homes because of the subsidy, but only while the subsidy lasts.

Exactly, we mostly agree. Demand subsidy is yet another way to enable price increases. It doesn't really make housing more affordable. So that's why agree with you that subsidies cost money without solving the problem.

trailing 5 years home appreciation being 15% (3%/year)

Now this is good, despite all the hot feelings regarding affordability right now, it is true that in the last two years several markets have observed real estate performing below inflation, which is good. We just need this to last 20 years to go back to a healthier market. In the mean time, subsidies can help the families that cannot wait 20 years to afford housing, so I'm not against demand subsidy - I'm just against the notion that subsidies are good for affordability, they're not.

Prices have to decrease, period. We can put some makeup on this and trick homeowners into satisfaction by having some nominal increase without accounting for inflation... but just being real (pun intended), prices have to decrease. Price net of inflation is the number that matters, and it has to go down. Real returns on housing has to be negative, sustained over decades.

[–] humanspiral 1 points 11 hours ago (1 children)

Prices have to decrease, period. We can put some makeup on this and trick homeowners into satisfaction by having some nominal increase without accounting for inflation

It's about policy to not completely screw over home owners. Policy to pretend to do something is motivated by protecting home owners while concern troll gaslighting. An explicit bargain to give "fair gains" to home owners while solving housing affordability is an honest one. Federal government doesn't need to be involved at all other than perhaps providing cheap credit to "city owned housing development and construction company".

From city perspective, more housing is more property taxes. There is a ROI to it for all residents if city spending is efficient and valuable. Denser housing means more commercial revenue and tax potential.

Decreasing home values can get banks in trouble, and they rule, which is why nothing ever gets done. Limiting price increases to fair amounts is only practical political possibility.

[–] villasv 1 points 11 hours ago

There is no “fair” real estate appreciation, and a nominal increase slightly below inflation is not screwing anyone over. Homeowners will be fine, this is the one thing that is for certain in all of this

[–] floofloof 2 points 1 day ago* (last edited 1 day ago) (2 children)

and try to keep it stagnant for a long time so that incomes and economics get a chance to catch up.

Is there any reason to think that is at all likely ever to happen? Incomes will surely only rise if employers are prepared to pay people more, and all the signs are that employers, particularly large ones, will do pretty much anything before they'll pay ordinary employees more.

[–] cecilkorik 2 points 18 hours ago* (last edited 18 hours ago)

I agree, it's not fair or ideal. We face a huge challenge on the price and income side of things and it is not an area that is easy to solve. That's why I think it's smart that he's focusing on the things that are (relatively) easier to solve, like creating more supply of more right-size, right-place, budget-oriented homes, and providing more access to cheap debt so that people can afford both those budget-oriented homes and the even more inflated prices in the rest of the market, even if they don't get the additional income. I think those are not only achievable goals, but are going to improve the situation in a measurable way, even if it doesn't "solve" it in the ideal sense and still leaves Canadians with a lot of (partially government-backed) debt.

To paraphrase Batman, it's not the solution we deserve, but it is the solution we need right now.

I don't know what his plan is on the longer term for dealing with Canada's low productivity and lagging incomes, but I'm looking forward to finding out.

[–] [email protected] 2 points 19 hours ago

Yeah this is not technically impossible, but extremely unlikely.