The guy who runs Generation Squeeze says building more homes isn’t enough to lower prices, because most people buying houses are already property owners. Property owners can either sell their current house to get a load of cash, or borrow against it to get a load of cash. Either way, they can pay a lot for their next property.

As evidence, he mentions that Alberta has less supply per capita than the rest of the country, but house prices are half those of Ontario and BC.

Here are the good bits:

While building more supply is absolutely important, setting ambitious targets does little good if property values continue to rise. Unless they are deeply subsidized by tax dollars, new market units will price in today’s high land values – which have soared well beyond what most can afford with local earnings whether the new homes are intended for renters or owners.

Plus all the focus on “Build! Build! Build” ignores that lack of supply isn’t the only, or even primary, factor influencing the price of rent and ownership. You could be forgiven for thinking otherwise, since undersupply has become the dominant narrative shared by Canada Mortgage and Housing Corp. and a variety of financial institutions.

The Bank of Nova Scotia, for instance, published reports lamenting that Canada has a smaller number of private dwellings per capita than the G7 average, blaming this ranking for much of our unaffordability problem. This leap in logic begs questions, since the same Scotiabank data also show that Alberta has lower levels of housing supply per capita than most other provinces, yet home prices in Alberta are about half as expensive as those in Ontario and B.C.

Mr. Pomeroy [who published a study about this stuff] encourages us all to widen our focus to include the vicious cycle by which rising home prices drive rising home prices.

First-time homebuyers are a minority of purchasers. They compete with many Canadian buyers who have already owned in the market. Bolstered by the equity they’ve gained from surging home values, existing homeowners bid up the price of housing to levels that are disconnected from earnings paid by local jobs. This was especially true prior to recent interest-rate hikes, because historically low interest rates made it cheap for homeowners to liquefy wealth windfalls created by skyrocketing home values.

Some homeowners bid up the price of housing simply to relocate. Others do so to purchase an investment property in search of additional wealth windfalls.

The latter are among the one in six Canadian homeowners who own multiple properties. Most are over the age of 55. To pay the mortgages on their investment properties, they increasingly collect rent from younger residents with dashed dreams that a good home should be in reach for what hard work can earn.

This reveals that the vicious cycle by which those enriched by high home values bid housing costs ever higher isn’t just ruining the market for aspiring owners. It is also breaking the rental market, as confirmed by the record-high rents reported this summer.

To disrupt this vicious cycle, political leaders must help break Canada’s cultural addiction to rising home prices by endorsing the plan that governments will use all available policy tools to stall home prices for the foreseeable future.

  • N-E-N@lemmy.ca
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    1 year ago

    Wouldn’t this negatively impact people who bought their homes at a much lower price when it was affordable and whose home has since increased in value to 1mil+

    • Guns4Gnus@lemmy.ca
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      1 year ago

      They bought a house, not an investment.

      If they did buy it as an investment, well, they certainly should learn that investments aren’t guaranteed, and that anyone promising that should have a watchdog alerted on them.

      • N-E-N@lemmy.ca
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        1 year ago

        While I don’t disagree, I dont see how it helps anyone else? Only sounds useful if it’s exclusively on owners of multiple properties

        Am I missing something?

        • Guns4Gnus@lemmy.ca
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          1 year ago

          If they bought their house to live in they won’t have a problem.

          If they bought it because they wanted an investment that would appreciate in value, they knew the risks.

          We haven’t been in a stable market for the average person in over fifteen years.

          I just can’t muster up pity for the people who want to hold other people back just because they bought early.

          It’s that same pity which allowed flippers and investors to put us in this position to begin with

          • N-E-N@lemmy.ca
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            1 year ago

            This didn’t really explain how it makes the market better for others tho

            How does taxing home owners bring down the price of the house?

            • Guns4Gnus@lemmy.ca
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              1 year ago

              You haven’t explained how hampering others from getting a home helps society.

              You seem to think that we should be bending over backwards to protect the NIMBY crowd that cares only about themselves and couldn’t give a fuck about others.

              • N-E-N@lemmy.ca
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                1 year ago

                Lmao I didn’t say that at all, now you’re just making stuff up instead of producing any valid points for your perspective 🤷

      • N-E-N@lemmy.ca
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        1 year ago

        Doesn’t make sense to me tho. Someone could non-problematically own one 1mil house, or problematically own ten $500k homes they rent out