Housing costs

[plam]

Is there any chance of the last few pages getting put some place else? I lost track of where we stopped talking about restaurants that have closed and started talking about housing prices and population density.

In related news, I don't have any restaurant casualties to report.

Thanks mods!

[panamaniac]

Not sure if this is the right thread, but has there been any local news on what’s happening with the Waterloo rental market? One imagines that there must be hundreds of unrented/under rented apartments in the universities area at the moment?

[plam]

Not sure if this is the right thread, but has there been any local news on what’s happening with the Waterloo rental market?  One imagines that there must be hundreds of unrented/under rented apartments in the universities area at the moment?

I have a grad student who has been looking for housing. He reported that people were trying to rent at full price until some time early last week, when there was capitulation. I think he's looking at the range $350-$525 for a room in a shared apartment, with people who are locked into leases throwing in discounts to subletters.

[panamaniac]

What was the old going rate for rooms in the newer five bedroom apartments? I imagine there are some nervous investors out there at the moment.

[tomh009]

What was the old going rate for rooms in the newer five bedroom apartments?  I imagine there are some nervous investors out there at the moment.

$600-700 seems like the going price for a room in a nicer shared apartment. As plam says, you can now find rooms in the $300s.

[bravado]

I thought I'd revive this old thread on housing costs to share a delightful video about the fairness of development charges and "growth paying for growth". I'm supremely jealous of people who are able to communicate something complex in a useful way.

https://www.youtube.com/watch?v=ZEUR9bj89lo

[creative]

Great video. A concern I have is the developer currently building $1,000,000 houses and paying $200,000 in development fees. Development fees get dropped to $100,000 overnight. Do you actually believe that the developer will start selling those houses for $900,000? I used these numbers to make the math easy. Would a builder of $500,000 houses suddenly drop the price to $400,000 if people are still lining up to pay $500,000? Even if the prices drop 10% overnight will people end up bidding up the price. Reducing development charges is a great thing but we need to also look at the big picture. In theory building more houses should reduce prices but will builders continue to build if their profit margins decrease?

[creative]

From city of Kitchener website.

Kitchener development charges are not explicitly designed to fund infrastructure repairs. They are primarily intended to cover the capital costs of new infrastructure needed to support new growth, such as roads, water and sewer systems, and community centers. While they can contribute to the overall municipal budget, which may then be used for repairs, their primary purpose is to fund new infrastructure, not maintenance.

Here's a more detailed breakdown:
Development charges are one-time fees:
They are collected from developers when a new building permit is issued.

Purpose:
These fees are intended to offset the costs of increased municipal services and infrastructure required by new development.

What they fund:
The fees cover the initial capital costs of expanding infrastructure, such as roads, water, and sewer systems, to accommodate new residents and businesses.

Not for repairs:
While the collected funds can be part of a larger municipal budget, development charges are not specifically earmarked for infrastructure repairs.
Growth-related costs:
The charges are designed to cover the net growth-related costs of capital infrastructure, meaning the costs directly attributable to the new development.
For a more comprehensive explanation, you can consult the City of Kitchener's website on development charges.

[bravado]

But the video shows that the determination of who pays how much for “new” vs “maintenance” is very subjective and fully decided by people whose interest aligns with keeping existing residents costs low. Did the new subdivision cause us to need a new sewage plant to serve them, or was the existing plant well past its maintenance date and the new subdivision provided the money to replace it?

Also, I don’t see how that statement above can possibly be true when things like this entire new sportsplex are fully paid for by extorting new residents: https://www.cbc.ca/news/canada/kitchener...-1.7150644

As for the topic of developers pocketing the cash… if we can’t actually agree that reducing the cost of creating something won’t lower the price of it, then economics is dead.

[dtkvictim]

As for the topic of developers pocketing the cash… if we can’t actually agree that reducing the cost of creating something won’t lower the price of it, then economics is dead.

That's quite a leap to make. Housing is a relatively inelastic good so reducing the price to match a reduction is cost might not result in a new equilibrium. I mean, are you suggesting highly elastic and competitive goods producers aren't perpetually looking for ways to cut costs to increase profits? How often do your favourite products decrease in price when worse, cheaper materials are used and labor is off-shored?

[tomh009]

Also, I don’t see how that statement above can possibly be true when things like this entire new sportsplex are fully paid for by extorting new residents: https://www.cbc.ca/news/canada/kitchener...-1.7150644

Well ... if we are building new housing and bringing in more people, we do at some point need to add parks or other recreational facilities, too. So, is that extortion?

The article did say it's partly funded by federal government grants, but not which portion. But, in any case, I don't believe development charges were increased in order to pay for this project.

[bravado]

As for the topic of developers pocketing the cash… if we can’t actually agree that reducing the cost of creating something won’t lower the price of it, then economics is dead.

That's quite a leap to make. Housing is a relatively inelastic good so reducing the price to match a reduction is cost might not result in a new equilibrium. I mean, are you suggesting highly elastic and competitive goods producers aren't perpetually looking for ways to cut costs to increase profits? How often do your favourite products decrease in price when worse, cheaper materials are used and labor is off-shored?

Again, if we need to be absolutely perfect in our approach before we ever think about doing any public policy, we won't get anything done. 

Development charges have increased well over inflation every year since they were created. If we can't try to reduce the actual cost of housing until we eliminate the artificially limited supply first, then we should just give up caring about housing now. And yes, fees and taxes are a cost just as much as material and labour. If we increase the supply of homes, we will lower the price. If we remove costs, we will lower the price. If housing was as inelastic as you guys say, then developers should be able to charge whatever they want and have much better margins than they do today in 2025. Developing seems like a very shitty industry with bad margins - despite sitting on a good they can charge anything for...

How did we pay for things before DCs? Can anyone remember back to the ancient history of "the 90s"? I find it offensive that someone trying to buy a house today and start their life has to pay fees that didn't even exist for previous generations, let alone grow by 100% yoy. What is the purpose of taxes and public debt if they are only used to support some people and not others?

[bravado]

Also, I don’t see how that statement above can possibly be true when things like this entire new sportsplex are fully paid for by extorting new residents: https://www.cbc.ca/news/canada/kitchener...-1.7150644

Well ... if we are building new housing and bringing in more people, we do at some point need to add parks or other recreational facilities, too. So, is that extortion?

The article did say it's partly funded by federal government grants, but not which portion. But, in any case, I don't believe development charges were increased in order to pay for this project.

Will only new residents be allowed to use this facility?

[danbrotherston]

That's quite a leap to make. Housing is a relatively inelastic good so reducing the price to match a reduction is cost might not result in a new equilibrium. I mean, are you suggesting highly elastic and competitive goods producers aren't perpetually looking for ways to cut costs to increase profits? How often do your favourite products decrease in price when worse, cheaper materials are used and labor is off-shored?

Again, if we need to be absolutely perfect in our approach before we ever think about doing any public policy, we won't get anything done. 

Development charges have increased well over inflation every year since they were created. If we can't try to reduce the actual cost of housing until we eliminate the artificially limited supply first, then we should just give up caring about housing now. And yes, fees and taxes are a cost just as much as material and labour. If we increase the supply of homes, we will lower the price. If we remove costs, we will lower the price. If housing was as inelastic as you guys say, then developers should be able to charge whatever they want and have much better margins than they do today in 2025. Developing seems like a very shitty industry with bad margins - despite sitting on a good they can charge anything for...

How did we pay for things before DCs? Can anyone remember back to the ancient history of "the 90s"? I find it offensive that someone trying to buy a house today and start their life has to pay fees that didn't even exist for previous generations, let alone grow by 100% yoy. What is the purpose of taxes and public debt if they are only used to support some people and not others?

The thing is, I agree with you about lowering development charges, but your statement on economics is simply wrong.

The price of something is dictated not by what it costs to make something but instead by how much people can and will pay for it.

Lowering (or raising) the cost of making that thing affects more about whether it is built and in what form. That can and does indirectly affect price through supply but it isn’t that simple. If tomorrow, apple got a discount on screens for their iPhone the price would never change to reflect that unless Apple chose to use that increase in profit margin to achieve some other goal like increased sales volume. But there’s no rule of economics that says that must happen. 

And housing supply is constrained in many other ways and the prices are also dictated as much by the secondary market as the primary. 

Lowering development charges needs to be part of a larger policy effort to reduce (or even stabilize) prices to be meaningful. IMO.

[dtkvictim]

That's quite a leap to make. Housing is a relatively inelastic good so reducing the price to match a reduction is cost might not result in a new equilibrium. I mean, are you suggesting highly elastic and competitive goods producers aren't perpetually looking for ways to cut costs to increase profits? How often do your favourite products decrease in price when worse, cheaper materials are used and labor is off-shored?

Again, if we need to be absolutely perfect in our approach before we ever think about doing any public policy, we won't get anything done. 

Development charges have increased well over inflation every year since they were created. If we can't try to reduce the actual cost of housing until we eliminate the artificially limited supply first, then we should just give up caring about housing now. And yes, fees and taxes are a cost just as much as material and labour. If we increase the supply of homes, we will lower the price. If we remove costs, we will lower the price. If housing was as inelastic as you guys say, then developers should be able to charge whatever they want and have much better margins than they do today in 2025. Developing seems like a very shitty industry with bad margins - despite sitting on a good they can charge anything for...

How did we pay for things before DCs? Can anyone remember back to the ancient history of "the 90s"? I find it offensive that someone trying to buy a house today and start their life has to pay fees that didn't even exist for previous generations, let alone grow by 100% yoy. What is the purpose of taxes and public debt if they are only used to support some people and not others?

I probably could have been clearer but I wasn't saying I disagree with your general premise (nor saying that I agree, although I mostly do). I was only rejecting your (incorrect in my opinion) attempt to shut down any disagreement or discussion on the nuances but suggesting that anyone who disagrees doesn't believe in the fundamentals of economics.