Population and Housing

[ijmorlan]

Just to note that the taxpayer would take the hit, as government would be obliged to make the banks whole.

I assumed that since owners would no longer own their properties (the right to give up ownership on whatever terms, including whatever price, one can agree with a seller is an important part of ownership), that basic property rights were already out the window.

Although I suppose that CDIC would have to step in to deal with the failures. I’m a bit unclear as to whether they bail out depositors with money from a fund (which would be depleted) or if they bail them out with newly created money from the Bank of Canada (which would be inflationary, except the economy would be so messed up that who knows what the overall outcome would be).

[Joedelay Highhoe]

To bring this thread back to housing, I wondered what would happen to the housing market if:
1. All existing mortgages were canceled immediately and houses valued at whatever had been paid for in the mortgage to date.
2. All housing would be price restricted and only sellable for the equivalent of what the owners had paid for it in the first place, perhaps indexed to inflation.

The goal: allow homeowners to not still be paying off their mortgage in their retirement years.

The banks (and all securities that are invested in mortgages) would take a hit for sure, but the housing market would be cooled pretty quickly.

I realize that this would be a pretty heavy-handed way to cut house prices, but it was an interesting thought when considering that the vast majority of the housing stock that was built over the last 100 years is selling for prices well above what they might have been allowed to increase in value due to inflation.

That is a ridiculously generous handout to an already insanely privileged group in our society. If you own a home, you passed the stress test. If rates go up, you should be fine, even if your home price decreases for 5 straight years. You still have a place to live. Homeowners made the commitment to pay their mortgage, and they should be financially able to do so. If a homeowner can't pay their mortgage because they made a stupid purchase - that's on them. Sell the house and live somewhere you can afford.

Using public funds to pay-off reckless people's terrible purchasing decisions is an insane solution.

[nms]

Thanks for all the comments and perspectives on the thought experiment. Part of this thought experiment was from wondering whether there was ever a ceiling that mortgages might hit. While mortgages are typically calculated over a 25-year time period, there is nothing that prevents a mortgagee from extending or renegotiating the mortgage to the point where they are still paying it off close to the end of their life.

Similarly, should Bank of Canada interest rates get close to the 20.78% peak of August 1981, what kind of a shakeup might happen and who will lose their shirts? We've been 'lucky' (?) to be below 1% for more than a decade.

[danbrotherston]

Just to note that the taxpayer would take the hit, as government would be obliged to make the banks whole.

"Government would be obliged to make the banks whole"...

Says who?

I mean, the banks would lobby for this, and they have a lot of power, so maybe it would happen. But the idea that government is inherently obliged to do this simply isn't true...it's a truth those with power want you to think.

[danbrotherston]

Just to note that the taxpayer would take the hit, as government would be obliged to make the banks whole.

I assumed that since owners would no longer own their properties (the right to give up ownership on whatever terms, including whatever price, one can agree with a seller is an important part of ownership), that basic property rights were already out the window.

Although I suppose that CDIC would have to step in to deal with the failures. I’m a bit unclear as to whether they bail out depositors with money from a fund (which would be depleted) or if they bail them out with newly created money from the Bank of Canada (which would be inflationary, except the economy would be so messed up that who knows what the overall outcome would be).

The right to sell something without restriction is not the same thing as owning something.

There are many things that I can own, that I cannot sell unrestricted. Guns being a most obvious example...at least outside of the US. But also cars, some refrigeration systems and equipment.

And those are only examples where government limits my ability to sell something. There are practical restrictions on almost everything.

But you'd never argue that you don't own a gun, because you cannot sell it without restriction.

And FWIW...this wouldn't even be the first time in Canada that you can own a house, but not sell it for whatever market price you like. The homes on Toronto island already apply here.

[ijmorlan]

I assumed that since owners would no longer own their properties (the right to give up ownership on whatever terms, including whatever price, one can agree with a seller is an important part of ownership), that basic property rights were already out the window.

Although I suppose that CDIC would have to step in to deal with the failures. I’m a bit unclear as to whether they bail out depositors with money from a fund (which would be depleted) or if they bail them out with newly created money from the Bank of Canada (which would be inflationary, except the economy would be so messed up that who knows what the overall outcome would be).

The right to sell something without restriction is not the same thing as owning something.

There are many things that I can own, that I cannot sell unrestricted. Guns being a most obvious example...at least outside of the US. But also cars, some refrigeration systems and equipment.

And those are only examples where government limits my ability to sell something. There are practical restrictions on almost everything.

But you'd never argue that you don't own a gun, because you cannot sell it without restriction.

And FWIW...this wouldn't even be the first time in Canada that you can own a house, but not sell it for whatever market price you like. The homes on Toronto island already apply here.

It is true that “ownership” is not a single indivisible concept, but it is well-established that property generally can be sold for whatever price one can agree with a buyer. The Toronto Islands aren’t a great example, as they are a highly unusual case and in any event what is bought/sold is a land lease together with whatever structure has been built on the land; the actual land ownership does not change (as far as I can tell the land is owned by the City of Toronto).

The notion that we would change property ownership in general to be like the Toronto Islands makes no sense at all and would not achieve the stated goal of improving access to housing. Note that housing on the Toronto Islands is highly inaccessible. Now obviously there is no way for housing on the Islands to be broadly accessible; under the normal system one would have to be wealthy whereas instead one has to be lucky.

But there is no fundamental barrier to housing being more accessible generally; we just have to make it easier to build housing. Step 1 is to allow a wide variety of construction in all residential zones, including eliminating parking minima. Past that it becomes less clear, but as a general rule strict regulation of something is not a good way to get more of it.

[danbrotherston]

The right to sell something without restriction is not the same thing as owning something.

There are many things that I can own, that I cannot sell unrestricted. Guns being a most obvious example...at least outside of the US. But also cars, some refrigeration systems and equipment.

And those are only examples where government limits my ability to sell something. There are practical restrictions on almost everything.

But you'd never argue that you don't own a gun, because you cannot sell it without restriction.

And FWIW...this wouldn't even be the first time in Canada that you can own a house, but not sell it for whatever market price you like. The homes on Toronto island already apply here.

It is true that “ownership” is not a single indivisible concept, but it is well-established that property generally can be sold for whatever price one can agree with a buyer. The Toronto Islands aren’t a great example, as they are a highly unusual case and in any event what is bought/sold is a land lease together with whatever structure has been built on the land; the actual land ownership does not change (as far as I can tell the land is owned by the City of Toronto).

The notion that we would change property ownership in general to be like the Toronto Islands makes no sense at all and would not achieve the stated goal of improving access to housing. Note that housing on the Toronto Islands is highly inaccessible. Now obviously there is no way for housing on the Islands to be broadly accessible; under the normal system one would have to be wealthy whereas instead one has to be lucky.

But there is no fundamental barrier to housing being more accessible generally; we just have to make it easier to build housing. Step 1 is to allow a wide variety of construction in all residential zones, including eliminating parking minima. Past that it becomes less clear, but as a general rule strict regulation of something is not a good way to get more of it.

I'm not suggesting it's a policy I support. I was only taking exception to the first sentence (I should have highlighted that).

FWIW...I don't necessarily think there should be no restrictions on selling of homes. A price restriction is probably not a good restriction, but the current system is fairly dysfunctional.

But I don't actually think the current system is contributing to the housing crisis as much as it is merely making the experience of the housing crisis worse.

[ac3r]

1 in 4 Canadians would likely have to sell their home if interest rates counting getting higher: https://www.cbc.ca/news/business/homeown...-1.6487137

[CP42]

Seems like a bit of a headline grab IMO.
I’m sure many will be unable to afford rising rates, but 1 in 4 is a bit much.
They also conveniently didn’t give any details of how this “survey” was conducted such as method, sample size, demographics, etc.

[panamaniac]

1 in 4 Canadians would likely have to sell their home if interest rates counting getting higher: https://www.cbc.ca/news/business/homeown...-1.6487137

1 in 4 tell pollster they'd have to sell.  Not the same thing at all.

[danbrotherston]

Seems like a bit of a headline grab IMO.
I’m sure many will be unable to afford rising rates, but 1 in 4 is a bit much.
They also conveniently didn’t give any details of how this “survey” was conducted such as method, sample size, demographics, etc.

Pretty much.  I also didn't see a qualification on how much rates will go up. You can make that number 100% of mortgage holders if you want, just by putting an absurd number on rates.

FWIW...I do think we are in a precarious position where raising rates will be painful for a lot of people. I don't fault them entirely, but I do think it was foolish. When I went to the bank for a mortgage for my first home they told me how much I could borrow and I was like...umm...no.

That being said, that amount they quoted me wouldn't buy the average home in KW today so...

[Bytor]

A Tiktok video on using upzoning to help combat the housing crisis.

https://vm.tiktok.com/ZMNxHaK9b/?k=1

[dtkmelissa]

In June, Kitchener Council (finance committee) reviewed the staff report which recommended against implementing a Vacant Home Tax. I created a short summary on the report (which was deferred to August) if you're interested. The last tweet in the thread links directly to the report as well. https://twitter.com/m2bowman/status/1551219697798057989

[Bytor]

In June, Kitchener Council (finance committee) reviewed the staff report which recommended against implementing a Vacant Home Tax. I created a short summary on the report (which was deferred to August) if you're interested. The last tweet in the thread links directly to the report as well. https://twitter.com/m2bowman/status/1551219697798057989

Do you remember which meeting that was? The minutes for June 8th Finance say the vacancy topic was deferred until August.

[ac3r]

TD Economics forecasts a potential -8% drop in national housing costs by 2023: https://economics.td.com/ca-forecast-tables#home-sales