The problem is when your government is in the business of guaranteeing house prices go up a ton - and everyone is leveraged housing - that turns housing into a speculative meme stock and not something for people to live in - which turns out to supremely suck for anyone that doesn't own a house and doesn't want to rent progressively shittier apartments for the rest of their lives.
Canada is building plenty of housing. It's the entire economy besides oil and gas.
Sure, you might be under-building slightly in B.C. and Toronto (mostly due to your gov's immigration policy specifically to prop up your housing bubble) - but that doesn't explain why prices have been going ape-shit literally everywhere in Canada for 30 years...
If Canada is building plenty of housing, why the multi-decade crisis? Governments that wish to keep housing prices rising do so almost exclusively by limiting building housing.
I've read a lot by economists on this over the years and they all agree lack of new housing is the problem in the Canadian home market so if you've got an alternative take I'd love to hear it.
Immigration policies to keep wages low and prop up the housing market. Canada's population grew by a record 1 million in 2022 alone [0]. To give people an idea how much that is, Montreal's total population is 1.7 million.
[0] - https://www.cbc.ca/news/canada/canada-record-population-grow...
Immigration went up by a lot in 2022 it's true, but Vancouver's housing situation was already at crisis levels before 2015, before increased immigration, and before this federal government even.
What we've seen in the last few years is that the existing crisis that started in Vancouver has spread to the entire of the country, and it's no surprise because housing policy in the rest of the country is not really any different than Vancouver.
An example of the future is already here, just not evenly distributed I guess.
The problems of systemically not creating enough housing hit Vancouver first, but it was inevitable that they'd hit everywhere else eventually.
Not building enough housing and red tape around building housing is also a problem, but perhaps by design to achieve the same goals.
Oh, it is definitely by design whatever the factors are.
It's a circular problem too. People buy an expensive house somewhere and it becomes a substantial part of their net worth. Home values decreasing would impoverish them. Home values increasing would enrich them. Homeowners vote a lot more than renters, especially in local elections. So you quickly end up with local governments full of people (most of whom are also local homeowners) incentivized to keep property values high.
The problem must be taken out of the hands of local governments, but even at the national level, there's never going to be political will to slash home values.
Sadly we are at a point where it doesn't matter who we vote for. They are all the same.
Provincial instead of federal (in this case), but it absolutely matters whom you vote for:
https://dailyhive.com/vancouver/david-eby-housing-supply-mun...
https://www.timescolonist.com/local-news/bc-government-docum...
https://globalnews.ca/news/9979895/bc-municipal-housing-fund...
https://news.gov.bc.ca/releases/2022PREM0092-001755
> Governments that wish to keep housing prices rising do so almost exclusively by limiting building housing.
This is the case in the US - not Canada.
China peaked at ~25% of GDP coming from Real Estate Development. Canada has been in the high teens for the last decade.
The US and most non-housing bubble countries are around ~5%.
I don't think these rates are new housing. You're looking at the real estate market as a whole. There's no way 25% of China's GDP is new housing, or Canada high teens. As real estate as a whole climbs as a percent of GDP you expect to see more NIMBYism because it means people have even more of their wealth tied into their homes, and more reason to not want competition. Which, economists seem to agree, is exactly what has happened in Canada.
Canada is only a country of 38 million and they are expected to take in 1 million migrants this year, all of whom don't bring a home with them. They took in half that last year. Their population is growing much faster than ours, but new housing starts are only around a quarter million per year.
I don't assume they are correct just because they are in wide agreement which is why I'm asking what you know that I (or they) don't. The total percent of GDP from the real estate market doesn't indicate much other than that houses are unsustainably expensive.
> Canada has been in the high teens for the last decade.
No. Canada in 'in the high teens' is mostly reselling the same stock over and over.
In Ontario where I live its municipal housing that's the problem. In Kitchner/Waterloo where I live local government is hung up on affordable housing in projects like apartment building construction. Ironically because of all the stalling and inaction no housing is afordable for anyone much less the so called poor and disadvantaged they think they are fighting for.
The affordable housing that politicians in K-W have focused on is neither sustainable nor sufficient. They are looking at inclusionary zoning which leads to 6-8 “affordable” units in a 300-400 unit development (I.e. drop in the bucket when thousands of units are needed), or they fund non-profits to do very small scale affordable retrofits and somehow manage to spend around $800k-1m per affordable unit brought to market (I.e. not sustainable and also not at a scale to make a dent). The Ontario government needs to create a housing group that does purely affordable developments at large scale, similar to BC.
Side note: K-W represent! :-)
Why are they artificially restricting housing while at the same time welcome population grow e.g. immigration?
Put simply: Housing restriction is largely at the municipal level, whereas immigration is at the federal level.
There are few if any common values or objectives that unite into coherent leadership across levels of government. Everyone for themselves, and the results are quite often ludicrous and to the severe negative for citizens.
Soviet block style housing away from urban centers is the only option for affordable housing, and stop taking over 50% of everyone’s property tax payments to pay for the socialist housing projects
> Soviet block style housing away from urban centers is the only option for affordable housing,
Khrushchevka were a creation of socialist housing programs.
>stop taking over 50% of everyone’s property tax payments to pay for the socialist housing projects
Good news. Prop taxes are local and mostly go to pay for schools and other county owned infrastructure.
Socialism is happy to provide the housing you want and funding can come from the same non-municipal sources it always has.
> Canada is building plenty of housing.
Canada is adding less housing stock than new residents (births plus immigrants minus deaths) every year, and the housing stock was already inadequate for the population 5 years ago.
I love that Canada is known as a welcoming country to people from diverse backgrounds, but the fact that the government treats housing and immigration policies separately is absolutely unhinged.
absolutely unhinged
It seems less than ideal, or maybe even illogical, but calling it "absolutlely unhinged" feels a bit dramatic. I'm not from Canada - how does Canada currently relate housing and immigration policy, and how would you propose they change it?
As I understand it, the government sets targets / limits for immigration, and sets goals for housing. While the latter may be somewhat informed by the former, these two goals are not mathematically linked, and if housing construction falls short of the goal, that's just treated as an "oh well, we'll try again next year" scenario. I agree that "unhinged" is dramatic, but I would say this is not very coordinated or effective.
A more direct method would be to apply hard caps to the following year's immigration numbers based on the previous year's actual measured housing completions. I think this would much more powerfully align pro-immigration interest groups with pro-housing-construction interest groups, resulting in much more home construction, whereas presently there is substantial conflict between the two (especially landowners who benefit from rising demand for scarce housing).
> sets goals for housing
I don't think the federal government does that at all but please someone correct me. Immigration is a federal issue that gets decided mostly on the federal level. Housing is not a (direct) federal responsibility, again correct me if I'm wrong. The government can give incentives but it can't dictate how much housing needs to be build by the provinces/territories, municipalities, etc.
Here's an example, how the BC government is explicitly trying to get more housing built: https://www2.gov.bc.ca/gov/content/housing-tenancy/local-gov...
Edit: It's actually not that simple as I thought. This is a good read about the topic: https://theconversation.com/housing-is-a-direct-federal-resp...
There's a lot of jurisdictional overlap when it comes to housing, but Canada certainly does have a federal Minister of Housing, Infrastructure and Communities, the office of which is currently occupied by Sean Fraser (who was formerly the immigration minister). But even if housing were entirely out of the federal government's hands, that wouldn't be an obstacle to them mathematically linking immigration targets to measured housing builds; they can link it to any variable they want to, even the weather on Mars.
You're right, I've changed my mind a bit about this now.
That's a reasonable idea. I wonder how units that are operating as AirBNB rentals would or could be accounted for under that policy, though.
I'm not sure they would need to be accounted for. I think opposition to AirBNBs is a product of severe housing scarcity* and in a scenario where housing is abundant and rents are low, people would be much more welcoming of AirBNBs.
* (Or in some places like Kyoto and Venice, it's due to over-tourism complaints, but I don't think anywhere in Canada is struggling with that problem.)
Tourism is a major industry in Montreal, probably as much as venice and Kyoto with year long festivals and the fact that it is an Island is also an issue.
If opposition to AirBNB in Montreal is mainly coming from locals being upset about the excess of tourists rather than the deficiency of rental vacancies, then I stand corrected.
Currently, housing availability is not a factor in immigration policy. Canada allowed over 1.2 million new residents last year. There were approximately 200k new houses built in that same time frame. Interpret this as you will.
Yes, it is hard to overstate: the current admin has given zero thought to anything other than "bring more people in".
Housing supply, healthcare, broad service capacity, everything that is meaningfully impacted by adding more residents, has mostly been ignored for years.
Housing supply in particular was already in bad shape 10 years ago, so we are seeing the compounding effects of that in 2024 as immigration skyrockets.
Imagine adding 1.2 millon people to a country with only 39 million already, in just one year! I think it's pretty clear there are many wrong/bad ways to pull that off, and we chose most of them.
How many vacancies are there? How many of the new residents are joining an existing household, and how many are family groups that will share a house?
The numbers you've cited don't sound completely out of line. The counterpoint is that housing prices have increased so dramatically.
I don't see it mentioned, but I assume wealthy people without price sensitivity around the world are purchasing extra properties in Canada as climate refuges in a relatively stable democracy, and using AirBNB to generate income from them while they are not needed.
> I don't see it mentioned, but I assume wealthy people without price sensitivity around the world are purchasing extra properties in Canada as climate refuges in a relatively stable democracy, and using AirBNB to generate income from them while they are not needed.
Yes, this has been happening exactly. Although some foreign investors are also just speculating without running an Airbnb. Recent taxation introduced on unoccupied housing has combatted this somewhat, but it's still a problem. But it's also worth noting that this only accounts for a small portion of the housing stock, probably dwarfed by Canadian nationals or corporations buying multiple properties and using them to run Airbnbs, or real estate companies buying property and keeping it unoccupied while it's on market.
I do think the "foreign investor" complaint is exaggerated as a root cause of our systemic housing issues (likely because people find it easier to point the finger abroad), though it is still a contributing factor.
Don't forget other factors being ignored like healthcare and transit
Canada is bringing in 1.3% worth of its population in immigrants every year. IIRC the births and deaths are nearly even, so without immigration the population increase would be something like 0.02% per year. The federal government is likely incentivized to create high immigration targets by big industries (because more workers creates a race to the bottom for wages, and most people are not making a living wage in Canada), as well as the federal pension program which will be paying out record amounts to new retirees as the last of the boomers are retiring now.
If you can't increase the housing stock by 1.3% every year (I suspect it's more like 0.2%-0.5% growth per year, but can't find numbers), but you choose to increase the population by 1.3% every year, you can see how this would contribute to a soaring cost of housing and consequently the record numbers of homelessness in Canada (which includes tens of thousands if not hundreds of thousands of people now living in their vehicles).
BC is moving in the right direction with recent policies which make it much more difficult to run an Airbnb, which will return some of the housing stock to the long-term housing supply when the changes come into effect, but the municipal governments of most of its largest cities (including Vancouver, whose metro area has 50% of BC's population) have made it difficult to build housing in general, as well as restrictive of high-density housing.
If you're not from Canada, you honestly can't fathom how bad things have gotten for people living here.
I agree with you its' gotten bad here but I think immigration is a bit of a red herring. It's not the immigration numbers that are the problem per se, it's that the people immigrating are net consumers rather than providers of skills that are in shortage and I think that in itself is a relatively small problem compared to the nuts and bolts of how housing is actually built in Canada and the primary cause of this problem is the government's regulation of that process. We aren't setting new highs from the building boom of the 1970's when our population was 60% of what it is now when we should probably be producing housing at double the rate of the 1970's boom, given our much larger population and immigration and a large part of why is the large cost of dealing with the government on each new build. The time it takes to go from buying land to getting it rezoned for higher density and the building process is often very long, permitting is expensive and time consuming beyond the rezoning aspect, every spot where a trade touches anything outside the lot has a government cartel on it charging double or triple what the trades working on the residence charge, inspections are arbitrary and archaic, making it very hard to bring in modern building practices at scale, etc. We need to go in and bulldoze all those barriers and get housing in production if we expect this problem to solve itself. BC is moving in the right direction on one thing though, they jsut proposed automatic upzoning of all land within 800 meters of a major transit stop. That would relieve a decent chunk of the first part of the problem.
> If you're not from Canada, you honestly can't fathom how bad things have gotten for people living here.
100%. People outside of Canada really don't realize how bad it has gotten here.
Yes, housing costs are up all over the world - but Canada's housing crisis is off the charts. Hell, even many Canadians that are comfortably housed don't even realize how bad it has gotten.
Immigration is a federal responsibility. Housing is a free-market responsibility with limits imposed at the municipal level (where it is strictly restricted to anywhere but my backyard).
That's why the two are unrelated.
Canada is not building enough housing, but you're 100% right about the government propping up the housing prices any way it can.
My city is popping up condos at a rate I haven't seen since I was in China in the 2000s.
Which city, and how long has that been the case? There's likely quite a bit of backed up demand. Typically when supply doesn't meet demand, the price goes up, the supply responds, and only after that does the price level off (or come down).
I bet 80%+ of that is bought by investors before construction completes.
They openly advertise on the side of the buildings that x% of units are already sold while there's barely a frame up.
If enough housing was being built, then the expected return on houses would be negative and investors wouldn't be buying them.
You're ignoring the fact that most of the new supply being purchased by investors means they have more power to increase rents, re-leverage their existing real-estate and buy up more. Continuously increasing real-estate prices and rents until the bubble bursts.
If everything worked based on the most basic econ101 principles, we wouldn't have any bubbles in the first place.
Nearly 7% of the entire Canadian work force is building new houses.
That's double the next closest industrial country.
Canada doesn't have a supply issue, it has a demand issue.
> Nearly 7% of the entire Canadian work force is building new houses.
Source? No really. This is shocking to me. 3% of Canadians work in construction and I suspect the majority of them are not working on housing. Do you mean 7% of the workforce participates in housing development and maintenance tangentially? Like, including lawyers, lobbyists, politicians, the portion of construction workers who aren't building roads and film sets, other craftsmen, people doing renovations, plumbers, hvac, insurance, inspection, etc.
Canada also has a lot of red tape around new builds that draws out the development process significantly, a lot of which necessitates all the other labor going into building too little housing for the population growth.
I cant find the source of that, but here's some information on the new construction lagging immigration.
https://www.fraserinstitute.org/studies/canadas-growing-hous....
50% of the workforce could be involved in construction, but if the product being built is slowly-approved with intensive white collar labor permitting single family spec development, not many new units will come out at the other end. A measure like workforce input needs to consider productivity.
I hope not to come across as condescending, but in normal usage a demand issue is one in which there's not enough demand (think: the global financial crisis in 2008/9). When there is too much demand and not enough supply as clearly seems the case here, irrespective of why that's true, that's a supply issue.
What does that mean? Sorry for being dense, but are the two not related?
Furthermore, what solutions are there? People advocate building to allow for natural supply<->demand relationships to curb the absurd home price increases.
Isn't more supply simply one of the biggest factors to lowering the prices? Of course, purchasing homes via speculation is also a huge issue - but that affects supply too, no? So does AirBnB, Renters, etcetc. All things which reduce supply of owner avail homes, driving up the price of homes and furthering the cycle.
My understanding of all this is absurdly minimal, though. I just own a home (in the US), and that's about it. So please correct me if i'm wrong. Thoughts?
Demand in Canada in entirely from immigration, there's an obvious solution.
Ah, so is this tied to your previous comment? Ie you're saying ~"not a supply issue, it's a demand issue" and you mean that there is an artificial demand causing the supply to be insufficient. That the supply would be otherwise sufficient, if not for the external sources of demand.
I'm not familiar with the immigration issue in Canada, i'll have to peek at that. Appreciate your clarity
Seems that would mean its a supply issue? I mean sure, Airbnb does suck as in a lot of areas they skirt under the normal hotel rules/taxation but wouldn't building more help this problem?
There’s no such thing as a demand issue. Canada should consider importing immigrants who can work in construction in addition to the billions of dirty Chinese money. Problem solved.
If your government creates artificial demand - that's a demand problem.
The demand isn't real. It's synthesized from unsustainable government policies.
Set interest rates to -100% - see what happens to housing demand.
Is that a supply problem? Should Canada build 800 trillion houses to fill the appetite for free government money that will eventually implode? Or is it a demand problem because your government is dumb?
I don’t understand. This theory implies that a significant percentage of Canadian houses are empty due to speculation. Is there any evidence for that theory?
Looking a bit online it feels like this might be a disproven theory https://financialpost.com/real-estate/busting-the-myth-of-ca...
Also just on a very fundamental level - outside of luxury housing, why wouldn’t investors rent out the houses they’re sitting on? Sure it’s nice to own an appreciating asset but isn’t it also nice to rent it for 10% of its value yearly?
They didn't say they are empty?
Most investors aren't keeping their properties empty. The empty places are generally owned wealthy people as a second/third home, or as means for foreigners to offshore their wealth. And this accounts for a tiny fraction of the housing supply compared to domestic/corporate real estate investors.
The demand is absolutely real. People are actually buying these properties. The prices are subsidized by government policy. Instead of fixing the supply side of the equation, Canada has decided to give away money so cheaply that normal people can afford the obscene prices for real estate. Interestingly, increasing the number of people that can afford a house without changing the supply makes prices go up. Who knew?!
Immigration is the natural effect of people moving to where the market price of labor “demands” they move. Doesn’t seem that artificial.
What? The market price of labor always 'demands' that it be lower... literally import millions of 3rd world immigrants into any first-world country and you will see housing shortages, infrastructure shortages, wage decreases/stagnation, and increased corporate profits.
The point is supply does not match demand. Immigration is unlikely to ever be low enough to counter the housing demand at this point - every single corporate/lobbying group in Canada is pushing for more immigration, and every single relevant political party is very clearly signaling that they will always bow to these demands.
And I agree that a lot of our economy and workforce is already dedicated to building housing - increasing this is not a realistic solution.
The only realistic way to improve the supply/demand is to disincentivize the investors from gobbling up the majority of our new housing supply.
We are not building plenty of housing. We started the most houses we have since 1973 in 2021, but we aren't setting any records (Canada's population in 1973 was ~23 million vs ~40 million today). (for reference: https://www.statista.com/statistics/198040/total-number-of-c...) We probably need to double or triple our output for a decade to bring housing per capita back into line with a balanced market.
What we are doing is massively overpaying for land and massively overpaying for government ineptitude on each of those units, which is why housing is such a large part of the GDP when it is embarrassing on an actual production basis.
> when your government is in the business of guaranteeing house prices go up
This is why people blame airbnb and PE. It makes them uncomfortable to blame the government, and by extension their parents, for creating this situation. It's much easier to blame a faceless other.
Canada is building plenty of homes; but homes are not housing, per se. "Housing" is usually used in these policy conversations as an abbreviation for "affordable housing" — and Canada is very much not building that. At least not in the large numbers needed.
The majority of Canadian property developers — at least, the majority of the ones who can afford to buy up lots for redevelopment in this market — seem to have an overt, almost monomaniacal focus on developing only top-of-market properties. Municipalities have to essentially force them at gunpoint to take any consideration for creating any housing stock to sell to the rest of the market.
• When you look at any new condo development in a Canadian city (without government affordable-housing involvement), there end up being no bachelor, 1bd, or even 2bd units in the development; it's all 3bd+. Picture a condo tower where every floor is the penthouse. Many Canadian property developers only build this type of condo building.
• Likewise, when you look at any new SFH development in a Canadian city (without government affordable-housing involvement), there end up being no small-lot developments; instead, contiguous previously reasonably-sized lots are almost always bought up and merged, to create space to plop down a McMansion. Again, many Canadian property developers only build McMansions.
Letting these kinds of developers loose on a city, results in a sort of "second-wave gentrification", where neighbourhoods previously affordable to the middle class, get rebuilt to be only affordable by the upper class (for whom this is mostly not their primary residence, but rather a rental property/airbnb, investment property, vacation home, property to lend to friends/family visiting them, etc.)
Classical "first wave" gentrification pushes the working class out of the city — creating a situation where the service economy of the city becomes driven by those commuting from outside the city, and low-margin service-economy businesses struggle to retain talent. (Which in turn forces the city to look into the creation/expansion of high-speed regional transit — because suddenly all the service-worker commuters are clogging the highways to get to work from the cheap exurbs.)
"Second wave" gentrification, in the places it happens, pushes the professional class outside the city as well. Now, even people like doctors, corporate managers, etc. struggle to afford to live near their place of work.
Unlike the service workers being pushed out — which is mostly a "silent" problem observable only to the service workers themselves, those trying to hire them, and city infrastructure planners — the professional class being pushed out is a problem observable by the public. The professional class often includes small-business owners, who previously operated some retail/office/clinic/etc in the city, out of street-fronted commercial rental space close to where they live. Having had their living space pushed out of the city, rather than commuting, these business owners will often choose to simply move their business, so that they can continue to live close to work. This "empties out" the city of amenities, as anything run by this class relocates to the cheaper exurbs.
Big corporate offices do remain in the city, as big corporate executives — the ones who decide where to put their office — are exactly the kind of upper-class who can still afford to live in the city. So you now get "suits" commuting into the city. And big chain businesses still manage to exist in the city to cater to these workers' needs (though even some of these do start to shutter their unaffordable urban-core locations.) But all the independent restaurants and other nice after-work things that made these bigcorp workers want to take a job in that city, are gone. So these workers start heading straight home after work. And that causes the revenue of even chain businesses within the city begins to crumble. The city becomes "sleepy." Things start closing at 10PM or earlier, because the revenue past that hour isn't worth staffing a graveyard shift. The city stops being known for its "vibrant nightlife."
(See also: Manhattan, one of the earliest victims of property-development-driven second-wave gentrification ~40 years ago. All the amenities shifted to the other boroughs of NYC, and now there's nothing for locals "in" Manhattan any more — save for a few family businesses that have fully owned their properties for decades, and who could be overnight millionaires by selling, but keep holding off.)
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Mind you, I do understand why the housing developers have this focus. As profit-driven companies, property developers aim to increase margins; and if you're in a market where there is high demand from the every "level" of the market, then you're going to gravitate toward building for the top-of-market bidders, as the accepted cost-plus-percentage pricing model of for real estate translates into higher absolute profits when building more expensive properties. As well, there's less bureaucratic overhead (both in terms of labor dealing with bureaucracy, and in terms of government fees) involved in building + selling fewer, larger lots, vs. more, smaller lots. And there's the fact that the most in-demand lots, if you luck into developing one, can be fought over by buyers, resulting in bids skyrocketing, and you the developer pocketing most of that first-sale surplus.
But these factors are exactly why governments in Canada, at all levels, must step in (and lately, increasingly are stepping in) to regulate property development. Developers aren't gonna just stop obeying market forces on their own. Governments either have to tweak the market forces themselves (e.g. by blocking foreign purchase of investment properties for speculation, as has been done in BC), or require the building of at least some lots/units designed to be affordable as part of larger developments.
Of course, a property developer that wasn't driven by a profit motive, would be able to just build entirely affordable housing. No level of Canadian government has gone so far as to propose setting one of these up as a Crown corporation... just yet. But that might be where things end up. Because, as you say, the only other lever the government has — decreasing the value of existing housing — isn't one any government is ever going to pull.
Some decades ago, anticipating India's enormous demographic growth, WTO funded urban development prototypes, like mixed-use low-rise neighborhoods, to serve as empowering models for the coming century of massive societal infrastructure creation. IIRC, they mostly still exist, and mostly worked out well... and were never copied. Developers much preferred to use land for high-end suburbs.
New development always targets the relatively high end. This is the same as middle to low income people buying used cars instead of new. As construction ages its value drops down until it becomes affordable.
> When you look at any new condo development in a Canadian city (without government affordable-housing involvement), there end up being no bachelor, 1bd, or even 2bd units in the development; it's all 3bd+. Picture a condo tower where every floor is the penthouse. Many Canadian property developers only build this type of condo building.
This is just blatantly wrong.
https://www.cmhc-schl.gc.ca/professionals/housing-markets-da...
https://archive.is/c3Dtd#selection-47483.30-47483.95