Pain. I predict pain
January 9, 2019 8:09 AM   Subscribe

“Maybe it’s just a moment and the [housing] market will rebound again like it has in the past, but maybe this is finally the perfect storm,” says Steve Saretsky, a Vancouver real estate agent. “I think we’re seeing the catalyst for a correction that everyone’s been talking about for 10 years.”

Now [interest] rates are rising, and many heavily indebted households are feeling crunched. In 2018, the Bank of Canada increased its benchmark rate three times to 1.75 per cent. Another two or three hikes are expected in 2019. For the first time in a quarter century, households are having to renew their mortgages at rates that are higher than when they first signed.

At the same time, the federal government has steadily tightened mortgage standards... The new mortgage rules have reduced the amount Canadians can afford to borrow by around 20 per cent, sending home sales tumbling across much of the country.

It’s a one-two punch that has shaken the foundations of the housing market, put an immediate dent in consumer spending and left economists and market observers wondering how deep the hit to the economy will be.
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Unfortunately, would-be home-buyers must instead vie for space in the rental market, which is expected to rise across Canada for 2019.
posted by devrim (58 comments total) 18 users marked this as a favorite
 
For the first time in a quarter century, households are having to renew their mortgages at rates that are higher than when they first signed.

Do mortgages work differently in Canada (not the usual 15- or 30-year fixed rate we see in the US) or are these ARMs where the gamble came back and bit them?
posted by xedrik at 8:40 AM on January 9 [1 favorite]


They do work differently here. Fixed rates are commonly for 5 years.

(I am terrified of losing my apartment, as I am priced out of living alone in most areas of my city. I don't want roommates!!!!)
posted by wellred at 8:43 AM on January 9 [7 favorites]


Most Canadian mortgages have25-30 amortizations with 5 year terms. The 5 year terms can be fixed or variable.
posted by Mitheral at 8:44 AM on January 9


Vancouver has had prohibitively high living costs for years now. This news is old news.
posted by SonInLawOfSam at 8:52 AM on January 9


Man, I thought US-style mortgages were confusing and bad; being required to refinance/renew every five years would suuuuuuuuck. Plus that weirdness where mortgage rates are noticeably higher for longer terms, ouch.

Strange how seemingly nobody in the entire world has figured out a clean, tidy, sane approach to housing financing (I'm gonna straight-up exclude the possibility of no financing, as IMHO that just means everyone is basically a serf).
posted by aramaic at 8:54 AM on January 9 [7 favorites]


Had a short explainer but it sounds like everyone else has it covered re: 5-year term fixed-rate mortgages.

I wonder how this will shake out in the rental market. When the market for houses in Toronto started to go soft due to everyone getting priced out of the market, people's attention shifted to condos, which until two or three years ago was rising steadily but wasn't batshit insane. In the space of a year, prices shot up $100k, and suddenly people couldn't afford condos either.

The rental market is already pretty bad in Toronto, though hearing about the eye-watering rents in places like Los Angeles (never mind San Francisco or New York City) puts it all in terrible, terrible perspective. I just hope this doesn't make things worse.

FWIW, the rules implemented by the federal government were designed to make mortgages safer by strictly limiting who qualifies for them in the first place, and for how much. People who renew their mortgages with their current lender are exempt from the new stress test rules, and already there's been a rise in renewals, but all that might do is expose people to higher rates because people have a disincentive to shop around at renewal time. So this does seem different from the recklessness that caused the foreclosure crisis in the States, though admittedly I am no expert.
posted by chrominance at 8:54 AM on January 9 [1 favorite]


Poloz has just today punted on a Bank of Canada interest rate increase - no change for now, but also a heads-up that rates will increase in the future. No surprises there.
posted by Mary Ellen Carter at 8:56 AM on January 9 [1 favorite]


I feel like I've been reading these articles about the housing markets in Vancouver and Toronto for at least 15 years. Snark aside, if there truly is a significant correction *a lot* of people are going to be completely and utterly screwed because over the course of my adult life real estate has become the primary (only?) investment vehicle for a lot of middle-class Canadians, and it seems like financial planning for many people is based around a scenario where housing prices go up and up and up forever, or at least until they can cash their chips in and move to a location where houses are cheaper. This is exactly what a lot of Toronto Boomers of retirement age are doing as we speak (which is driving up prices in smaller towns like Owen Sound, Sarnia, etc.). The other half of this is sky-high debt levels and people also using equity loans as piggy banks, again on the assumption that prices will never go down. I guess we'll see! I've spent my entire life avoiding unnecessary debt and feeling like a bit of a sucker while seemingly everyone else swims in cheap credit.

My wife and I have been renting the same place in Toronto for going on 18 years, and we're extraordinarily lucky in that we have a fantastic landlord who is not charging us anywhere near market rate for what we have, but if and when we do have to move out it'll almost certainly be a big hit to our quality of life because the Toronto rental market is insane and getting worse.
posted by The Card Cheat at 8:58 AM on January 9 [19 favorites]


Man, I thought US-style mortgages were confusing and bad; being required to refinance/renew every five years would suuuuuuuuck. Plus that weirdness where mortgage rates are noticeably higher for longer terms, ouch.

I mean, at the same time, Canadians have benefitted from renewing every five years for a long time now, since every time it was time to re-up, the lending rate has been lower. As the article states, this is the first time in decades that homeowners in Canada are facing higher interest rates at renewal. In fact, lots of people switched to variable-rate mortgages, which are seen as inherently riskier since you're not locking in a rate, because flat or dropping rates were essentially guaranteed for so long.

Though anyone who's bought property in the last decade was probably aware the free ride wasn't going to last, and that rate hikes were coming eventually.
posted by chrominance at 8:58 AM on January 9 [4 favorites]


I reckon in Toronto and Vancouver the need for housing could easily suck up two solid decades of high density housing construction, especially if at least half of it was rentals.

There's astonishing demand now for people who already live here, and the only reason it isn't worse is because almost no who isn't already here can afford to move here except tech workers etc. Everyone wants to come to the cities, and no surprise.

Living expenses (aside from housing) out in the burbs are ruinous even just looking at the requirement for having a car and all the other crap it entails. If you can do without a car that's at least $500 a month in your pocket including time lost to "car stuff" if you drive a beater, and probably near double that if you've got a car payment and a significant commute. People are sick of it.

I am not even sure it would be possible to build fast enough in TO to keep rent from rising faster than inflation, which is IMO disgusting, but here we are at the dawn of the Urban Age.

Something's gotta give.
posted by seanmpuckett at 9:04 AM on January 9 [2 favorites]


My wife and I have been renting the same place in Toronto for going on 18 years, and we're extraordinarily lucky in that we have a fantastic landlord who is not charging us anywhere near market rate for what we have

I'm in the same boat. I've been in my scruffy apartment for 12 years now, watching (and benefiting) as my neighbourhood becomes increasingly gentrified. I lived here for 10 years before my landlords asked for a rent increase. If anything happens to push me out, I would have a really hard time finding anything for less than 175% of what I pay now and I would be pretty much screwed.
posted by sevenyearlurk at 9:04 AM on January 9 [1 favorite]


It's going to hurt people who are overextended on their mortgages, but I can't help but also think it will help a lot of people who are renting, or who want to. "Housing needs to be affordable" and "real estate is a good investment" can't coexist.
posted by mhoye at 9:07 AM on January 9 [7 favorites]


I want a house so bad. My condo has basically doubled in price since I bought it in 2010, so I have some decent equity. If only I had a crystal ball and could sell condo high and then buy a week later, post-crash. But of course selling condo and not buying immediately would be CRAZY since if things just keep going up, I would never be able to get into the real estate market again.
posted by If only I had a penguin... at 9:08 AM on January 9 [1 favorite]


Strange how seemingly nobody in the entire world has figured out a clean, tidy, sane approach to housing financing

Actually the Islamic system (murabahah particularly) makes a lot of sense to me. We accept flagrant usury too easily.
posted by Segundus at 9:12 AM on January 9 [13 favorites]


Living expenses (aside from housing) out in the burbs are ruinous even just looking at the requirement for having a car and all the other crap it entails. If you can do without a car that's at least $500 a month in your pocket including time lost to "car stuff" if you drive a beater, and probably near double that if you've got a car payment and a significant commute. People are sick of it.

I am not even sure it would be possible to build fast enough in TO to keep rent from rising faster than inflation, which is IMO disgusting, but here we are at the dawn of the Urban Age.


Depending on the suburb, living expenses even without a car aren't necessarily that much better either. Condos in inner suburbs like Yonge and Sheppard in Toronto also go for exorbitant rates. I feel like York Region's starting to get that way too, though that's mostly anecdotal. How far out does one have to go now just to reap the benefits of substantially lower housing costs?

In Toronto proper, I feel like the limiting factor isn't necessarily how fast developers can put up buildings, because there are condos sprouting everywhere downtown these days. The limiting factor (at least partially) is whether the urban infrastructure can cope with the extra load. Not just the obvious, visible things like public transit or schools, but even basics like sewage, electricity and water. The only reason it isn't worse is because so many people are priced out of the market, but at the same time Toronto is notoriously awful at taking advantage of its high desirability (and the resulting revenue via property taxes and other revenue streams) to pay for, well, anything, so I have very little faith in the city's long-term ability to cope with the infrastructure demands.
posted by chrominance at 9:21 AM on January 9


> at the same time Toronto is notoriously awful at taking advantage of its high desirability (and the resulting revenue via property taxes and other revenue streams) to pay for, well, anything

This is true in part because a lot of people here would rather live in a city with crumbling infrastructure and shitty public transit than have their property taxes go up by even $1.
posted by The Card Cheat at 9:23 AM on January 9 [10 favorites]


Vancouver ought to take a look across the water at Victoria, which, for the past five years or so, has been doing innovative things to increase the amount of rental housing and combat a rise in rental costs.

While developers themselves have decided to build rental housing in Victoria, the City of Victoria and the regional district (the equivalent of the county in the U.S.) also worked with the previous center-right government to unlock federal funding to build more affordable (public) housing. So rental is driving construction in Victoria right now.

City of Victoria has also worked to rein in Airbnb, in an effort to keep more housing in the rental market. The newly elected City of Victoria council, many of whom campaigned on affordability, has launched a new rental advisory board.

Victoria is often mocked by the folks in Vancouver, but I've always thought we do things a bit better. I say "City of Victoria" by the way because the city is just one small municipality. The surrounding suburbs, notably Oak Bay and Saanich, have truly benighted housing policies that drive unaffordability.

The solution to the housing crisis in the Victoria region or Vancouver is to rezone, rezone and rezone some more for density. Rezone massive swaths of single-family detached neighbourhoods (Vancouver may call itself a "world class city" but it is fundamentally a low-density suburban landscape) for density.

The era of the single-detached family home must come to an end.
posted by JamesBay at 9:24 AM on January 9 [7 favorites]


But he also knows that Ottawa’s tighter mortgage rules, combined with relentlessly rising interest rates, means it’s getting harder for people to obtain the large mortgages necessary to get into the market: “I don’t know where the buyers are going to come from,” he admits. “And that worries me.”

It's not the rules, it's the PRICES. Even at current interest rates, a mortgage payment on a house similar to the one I'm currently renting in Toronto would be $4000-5000/month. That's just about double what we're paying in rent, and doesn't include any taxes or repair costs (like the $30,000 my landlord spent to stop our basement leaking). Our household income is a fair bit above the 50th percentile for our city, and the concept of our buying anything within Metro limits is laughable. I'd be better off buying lottery tickets than saving for a down payment.

The prices are out of whack for so many reasons. This correction is badly needed. I feel a bit bad for people who've bought more recently and could end up underwater - but not that badly. The fact that they could purchase (even at a stretch) makes them so much more economically privileged than the rest of us in the rental market that it's like they live in another world.
posted by jb at 9:25 AM on January 9 [2 favorites]


Living expenses (aside from housing) out in the burbs are ruinous even just looking at the requirement for having a car and all the other crap it entails. If you can do without a car that's at least $500 a month in your pocket including time lost to "car stuff" if you drive a beater, and probably near double that if you've got a car payment and a significant commute. People are sick of it.

Good points. And, of course, there are people who don't know how to drive - and people who are disabled and cannot drive even if they knew how. In my house of four adults, one is visually impaired and another has had seizures. Driving is not an option for either. Added to their needs for specialist education/medical care, we must stay within city limits.

The market cannot and never has provided adequate housing at reasonable prices in urban areas - not in London in c1900 (where labouring people paid 50+% of their income to live in 2-3 rooms per family), not in Ur in c.1900 BCE.
posted by jb at 9:29 AM on January 9 [3 favorites]


No one ever has an answer when I ask in various real estate threads where all of the people who can afford houses come from, as jb notes. There's always hand-waving about "climbing the real estate ladder" while none of those folks seem to acknowledge that the first rung is now ten feet from the ground.
posted by maxwelton at 9:32 AM on January 9 [2 favorites]


Generally my friends in Toronto who own had help raising a down payment, from a parent or parents. Some of them are in debt up to their eyeballs, and some have figured out a way to make the mortgage payments, condo fees, etc. work through various machinations. Almost no one I know just flat out earns enough to comfortably own in Toronto proper.

Almost all of us are in precarious financial situations, due to debt, not having certain housing, freelancing, etc. It's terrifying. I'm better situated than most, and I'm not that well situated.
posted by wellred at 9:40 AM on January 9 [3 favorites]


@maxwelton - invariably that first rung is a lucky break that is used carefully. In my case, it was the policy of my former employer to vest benefits upon start date (no waiting to Vest), and which invested almost exclusively in tech stocks in the 90s. That windfall went to buy a small house in a redlined area whichnsoon gentrified, and which I took good care of; trades up a couple more times until I retired and could pay cash for my dream house. But I continued to live on a shoestring budget all this time. Other such strokes of luck could include a *small* inheritance, lawsuit settlement, prize money, etc. This is probably not a
satisfactory answer, but a big part of that first rung is luck, + cherishing that windfall.
posted by mmiddle at 9:47 AM on January 9 [1 favorite]


We're older and definite beneficiaries of "climbing the real-estate ladder" but if it hadn't been for a tech employee housing rush in our old town adding at least 100K to the sales price of our century home, we would not have been able to afford our tiny little condo. And we're precarious too, make no mistake. We've got a lot of equity from 3 decades of home ownership, but not a lot of income. It works, barely, from a financial POV, but from a lifestyle perspective there's nowhere we'd rather be.

(I do get the feeling there's a lot of people who are happy with the shitty infrastructure because they're not personally suffering from it, but there's a vast number of people who are also pissed off as hell and WANT taxes to be raised. A lot of the former live in the burbs, a lot of the latter live downtown. Thanks, amalgamation, one of the cruelest schemes perpetrated on our metropolitan areas.)
posted by seanmpuckett at 9:47 AM on January 9 [5 favorites]


Vancouver is an international hub for money laundering, especially since the former provincial government turned a blind eye to it. It has had, along with the financialization of our housing market as primarily an investment vehicle for wealth, a deleterious impact on local housing. Part of a perfect storm, as it were, that has made Vancouver horrifically unaffordable.

This would be Nathan Cullen, MP for Skeena--Bulkley Valley, on the recent collapse of a massive probe by the RCMP:
'Billions of dollars from international gangs is laundered through BC under the nose of the last government. Housing prices skyrocket and Vancouver becomes a hub for money laundering.
Years spent investigating and suddenly all charges dropped. Why? Because Crown lawyers accidentally leaked an informants name. I can’t express how infuriating this whole mess has become.'

This is almost enough to turn me into a conspiracy theorist. Almost.

And this would be a link to the story.
posted by Phlegmco(tm) at 9:51 AM on January 9 [6 favorites]


No one ever has an answer when I ask in various real estate threads where all of the people who can afford houses come from,

Knock wood on my being able to keep my condo, even, but basically I have a good job and I bought 8 years ago. My mom's total income is less than my condo carrying costs (And she owns her home outright and paid her mortgage off within 10 years even with an 18% interest rate, because she got into the real estate market in 1976), so no, she did not help me. I had virtually no student debt and paid off what little student debt I did have within a couple of months of starting work. I think the key point here really is that I got in in 2010 though. I thought it was crazy expensive back then, but now I'm glad I jumped.
posted by If only I had a penguin... at 9:52 AM on January 9


> I'm better situated than most, and I'm not that well situated.

Seriously! I mean, my wife and I are (just) in the top 10% for Canada in terms of our combined household income, we don't have kids, our housing costs are far lower than average for Toronto, and we *still* are really only able to rent the place we have and live where we do because of our benevolent landlord (I mean, we've proven ourselves to be really good tenants who are perhaps worth keeping the price a bit low for, but still). We ran the numbers roughly ten years ago, when our combined income was a bit higher than it is now and prices were "low" compared to now, and even back then our conclusion was that we could a) own a house in Toronto, or b) live lives where we spent money on things that were not home ownership-related, but not both. Living in Toronto you hear a lot of stories about outwardly-prosperous people who are functionally broke and/or underwater in debt, but if something has to give it hasn't given yet.
posted by The Card Cheat at 10:34 AM on January 9 [2 favorites]


But of course selling condo and not buying immediately would be CRAZY since if things just keep going up, I would never be able to get into the real estate market again.

I'll take Bitcoin 2017-2018 for $600, Alex
posted by Damienmce at 10:37 AM on January 9


No one ever has an answer when I ask in various real estate threads where all of the people who can afford houses come from

(1) They did it a long time ago. The turnover rate (in the U.S.) is under 3% annually, so the average person has been in their property for almost 20 years.

(2) Your parents. There's a once-in-history liquidation of middle class wealth going on as Boomers downsize and their preferences for urbanism have increased.

(3) Rich internationals. Financialization and gross inequality mean that there is a ton of money sloshing around and extremely few profitable or even stable places to put it. Major metro real estate is one of these outlets.
posted by Reasonably Everything Happens at 10:38 AM on January 9 [10 favorites]


Economists have successfully predicted 9 of the last 5 depressions.

Which isn’t to say that there won’t be a problem eventually, but I’m not holding my breath based on this prediction.
posted by Tell Me No Lies at 10:38 AM on January 9 [5 favorites]


flat or dropping rates were essentially guaranteed for so long.

It's this kind of statement that makes me feel no one should be allowed to take out a mortgage because everyone is too bad at finance.

There was never any guarantee. There was most especially no guarantee extending five years into the future. The fluctuation of interest rates over time is a fundamental feature of any modern economy. Basing the foundations of your personal finance on such thinking, to the point that an increase of 75 bp over more than a year imposes a serious stress on your finances, is just incompetent. Which would be fine if you actually had to absorb the results of your (not very well)calculated risk, but soon enough non-homeowners will be being expected to subsidize your rescue.

Mind you, this is a separate issue from whether housing policy generally makes sense, or whether housing costs are out of control.

(I also note that the discussion of YVR omits its recently-implemented anti-money-laundering rules relating to real estate purchases. I doubt they are the main driver in slowing the housing market, but I equally doubt their role isn't meaningful.)

(I feel like it wasn't too long ago that someone was telling me in another housing thread that balloon payments are totally fine because Canada has them and "all you have to do is refinance.")
posted by praemunire at 10:44 AM on January 9 [2 favorites]


No one ever has an answer when I ask in various real estate threads where all of the people who can afford houses come from,
https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=15&ved=2ahUKEwiCxbabp-HfAhXwmq0KHbB3DWgQFjAOegQIBhAC&url=https%3A%2F%2Fvancouver.ca%2Ffiles%2Fcov%2F2017-09-29-city-of-vancouver-2016-census-income-data-release.pdf&usg=AOvVaw1cVNvQiN6TzRcyGzp0fcuI

Here's a pretty good answer. Vancouver has (very) good income growth for a large metro in 10 years, which drives move-up growth. The charts show there are areas in the city where the median household income passes $140k per year. It also identifies that the percent of lower income households/individuals has fallen in the same period, from 38% to 31% and that households earning $100k plus have risen from 25% to 31%. In short, it's income profile is very similar to San Francisco in the US. This PDF http://www.bcstats.gov.bc.ca/Files/d34b6809-451e-43f3-81b5-8cd9b8521b0c/BuildingPermitsbyRegionalDistrict.pdf has building permits, which show the number of units constructed per year. I don't know Vancouver area well enough, but the line for Vancouver/Coast DR (page 8 I think) is pretty low, about 4000 units per year, also much like San Francisco. The fastest growing cities in the US are building at 3-10X of that.

As to where (physically) they come from, Vancouver has a larger percent of foreign-born than any city in the US, and is #4 in the world behind Dubai, Brussels, and Toronto. That's pretty impressive.
posted by The_Vegetables at 10:45 AM on January 9 [2 favorites]


It's this kind of statement that makes me feel no one should be allowed to take out a mortgage because everyone is too bad at finance.

Guarantee was probably a bad word to use; I didn't mean it quite so literally. What I should've said was that people decided the risk that interest rates would rise anytime in the next five years, let alone enough to cause major financial issues, was probably low enough to go with variable-rate. Not that that significantly changes anything where your argument is concerned, you're probably pretty right about how most people (including me really) understand financial markets and economies.
posted by chrominance at 11:15 AM on January 9


You know what's crazy is that Vancouver and Toronto don't even have the highest median incomes. They're ranked 18 and 20, respectively. Though I guess you don't need to pull the actual median up, all you need is to stretch out the top to get enough people in the tail.

*Note, though the wikipedia article says household income, these are family incomes. It looks like I can't retitle the wikipedia article or I would have corrected it.
posted by If only I had a penguin... at 11:28 AM on January 9 [2 favorites]


There was never any guarantee. There was most especially no guarantee extending five years into the future.

For the last two-ish decades it's been a pretty safe risk to bet on short-term financing in Canada. I've done it---my typical mortgage renewal period is 1 or 2 years depending on which will offer me the best bank rate. Dropping or static rates have ensured that this has been a very effective strategy for me at minimizing interest paid since the mid 2000s when I bought my first property.

Is it a risk? Sure, but a 1-2 year timeframe is somewhat predictable, and I've been comfortable with it. I'm comfortable with it now.

Has cheap money driven property bubbles? I'm sure that's a factor.
posted by bonehead at 11:34 AM on January 9


[half serious] Having lived in both small-town Alberta and Toronto, I think that part of the reason that prices in Toronto and Vancouver in particular are so high are because those are the only two cities where you can get Canadian healthcare without having to put up with Canadian winter.
posted by clawsoon at 12:03 PM on January 9 [2 favorites]


I'm always surprised that Halifax, in particular hasn't become a major Canadian centre, on the same scale. Its climate is not quite as nice as Vancouver's, but it's considerably nicer than Toronto. Particularly now when boomers are looking for nice retirement options.
posted by bonehead at 12:07 PM on January 9 [1 favorite]


Here's a recent RBC affordability report (PDF). The fun chart is Vancouver, on page 3:
Buying a single-detached home is for the rich only (it would take almost 120% of a typical household’s income to cover ownership costs).
Page 10 of this report (PDF) has a list of the world's least affordable cities. They use the "median multiplier", or the ratio of median house prices to median income. The worst, with median multiple listed:

Hong Kong: 19.4
Sydney: 12.9
Vancouver: 12.6
San Jose: 10.3
Melbourne: 9.9
Los Angeles: 9.4
Honolulu: 9.2
San Francisco: 9.1
Auckland: 8.8
London: 8.5
San Diego: 8.4
Toronto: 7.9
Bournemouth & Dorsett: 7.3
London exurbs: 6.9

The report also has some discussion of what drives high prices. They have noticed that housing affordability crises are almost all happening in cities with urban containment policies. In Toronto, that's the Greenbelt. In Vancouver, that's the Urban Containment Boundary. See page 11 of the report for the graph they offer in support of this hypothesis.
posted by clawsoon at 12:44 PM on January 9 [3 favorites]


I'm in Toronto renting a very affordable place near Yonge and Bloor (moved in 8 years ago) and I can never ever ever ever move. Like, to the point where my hesitance to leave it played a role in a recent breakup. I love my place so I'm fine staying put indefinitely, but it's still rapidly become untenable to live in this city for those who aren't so lucky.
posted by yellowbinder at 1:05 PM on January 9 [1 favorite]


I think it's perhaps unfair to blame urban containment as a problem. It's inner city low density residential zoning and NIMBYism that's the problem. (As in SF, for example.) Containment policies simply make these short-sighted systemic issues particularly painful.
posted by seanmpuckett at 1:07 PM on January 9 [2 favorites]


The report also has some discussion of what drives high prices. They have noticed that housing affordability crises are almost all happening in cities with urban containment policies. In Toronto, that's the Greenbelt. In Vancouver, that's the Urban Containment Boundary. See page 11 of the report for the graph they offer in support of this hypothesis.

Wendell Cox is a stopped clock on urban policy; in his world, every urban problem that can't be blamed on transit can be blamed on zoning policy, everything that can't be blamed on zoning policy can be blamed on transit and most things can be blamed on both. He's been debunked widely, but has still never once in his life seen a city that doesn't need more freeways and less regulation, which is very convenient for the anti-urbanist lobbies.
posted by Homeboy Trouble at 1:14 PM on January 9 [9 favorites]


I think Toronto's low density problem is mainly in the inner suburbs (i.e. the ones that are still in Toronto), though. THere are entire swaths of single-family-home neighbourhoods where nobody wants to allow anything higher density than a few townhouses.
posted by If only I had a penguin... at 1:16 PM on January 9 [2 favorites]


My current dictatorial dream for Toronto would be to change the zoning so that all current single-family residential within a 10-minute walk of a subway station (800-1,000m) is changed to allow triplexes up to 4 storeys high. It isn't very radical but I'd imagine that every house in the affected areas that wasn't already a monster house would be converted to some kind of duplex or triplex in a very short period.
posted by any portmanteau in a storm at 2:01 PM on January 9 [1 favorite]


From your second link, Homeboy Trouble, it sounds like urban containment does increase housing costs, but it's not the only factor and in many cases other things (like regulations or NIMBY-ism enforcing low housing density that If only I had a penguin... mentions) are the dominating causes of higher prices.
posted by clawsoon at 2:03 PM on January 9


Here (PDF) is the most recent criticism of the Wendell Cox paper by Todd Litman.
posted by clawsoon at 2:26 PM on January 9


Page 19 of the Litman report has a graph showing that housing+transportation affordability in San Francisco and Seattle is not that much different from that in Chicago or Atlanta.

Does that pass the smell test?
posted by clawsoon at 2:35 PM on January 9


I think I've figured out why the Litman report comes to some of the odd-looking conclusions that it does, like saying that Seattle and San Francisco have unremarkable affordability: In its rankings, it appears to treat someone in the first quintile, who makes $2,000 a month and spends half of it on housing and transport, as facing the same affordability challenges as someone in the fifth quintile who makes $9,000 a month and also spends half of it on housing and transport.

The Litman report makes some very good criticisms of the limitations and ideologically driven conclusions of the Cox report, but I think it might be making some questionable data choices of its own.

Are there any reports out there which combine the actual-median-income numbers of Cox with the not-everybody-wants-a-big-house numbers of Litman?
posted by clawsoon at 3:02 PM on January 9 [1 favorite]


Page 19 of the Litman report has a graph showing that housing+transportation affordability in San Francisco and Seattle is not that much different from that in Chicago or Atlanta.

Does that pass the smell test?


It does to me -- for one thing, it's based on expenditure survey data which I think is a pretty good data source.

The other thing is that figure shows housing and transportation expenditures relative to income, so the absolute cost needs to be lower in a lower-income area. For instance, the current H+T map from the CNT shows that at the metro level, the average transportation costs are almost the same between Seattle and Atlanta ($12.7 vs 12.9K/hh/year), and the average housing costs in Seattle are higher ($1734 vs $1353/month), the total incomes in Seattle are higher ($75.6K vs 63.6K) such that even though the H+T costs are higher in Seattle ($33.5K vs 29.1K) the costs as a share of income are lower (44.3% vs 45.8%).
posted by Homeboy Trouble at 3:14 PM on January 9


For me, getting on that first rung meant leaving Toronto and taking advantage of Alberta's recession (and my being pretty employable in my public servant niche), which means carrying costs on my townhouse that are lower than rent on a very small 1 bedroom near a streetcar route back in Toronto. Sure, the tradeoff is that between my house and having a job with a DB pension I'm likely trapped in Alberta for the rest of my adult life, but disposable income feels good. Or so I tell myself.
posted by blerghamot at 3:45 PM on January 9


FTFA: "A survey last fall by Ipsos Canada on behalf of insolvency trustee MNP found one in three Canadians worry that rising rates could push them into bankruptcy." One. In. Three. Now that is some crazy uncertainty in way too many people's lives. Expect to see that fear show up in all kinds of places.
posted by Gotanda at 3:47 PM on January 9 [2 favorites]


I think Toronto's low density problem is mainly in the inner suburbs (i.e. the ones that are still in Toronto), though. There are entire swaths of single-family-home neighbourhoods where nobody wants to allow anything higher density than a few townhouses.

And just as many that won't even allow townhouses, or the dividing of large lots (e.g. 50ft x 100ft).

My current dictatorial dream for Toronto would be to change the zoning so that all current single-family residential within a 10-minute walk of a subway station (800-1,000m) is changed to allow triplexes up to 4 storeys high. It isn't very radical but I'd imagine that every house in the affected areas that wasn't already a monster house would be converted to some kind of duplex or triplex in a very short period.

Absolutely! It would be radical - and it's desperately needed.

As long as those conversions are legal and healthy. So many people want to put in basement apartments with no thought to the safety and health of the inhabitant - you have to have proper fire exits, and you should have proper light and ceiling heights. In 2012, I viewed a basement apartment in Toronto where 1/2 of the space had ceilings less than 6' high (sometimes only 5'3") - and they still wanted $950/month. We turned them down, only to have the landlord call to offer to lower the price (to $925, not exactly a big discount). Apparently, we had been the shortest people to view the place.
posted by jb at 4:07 PM on January 9 [4 favorites]


Homeboy Trouble: The other thing is that figure shows housing and transportation expenditures relative to income

But relative to what income? Mean or median? If it's mean income, it's going to make places with high income inequality look better affordability-wise, isn't it?

And doesn't that measure still have the problem that a rich person spending 50% of their income on a mansion and a poor person spending 50% of their income on a hovel are counted as having the same affordability struggles?

I'm trying to figure out what affordability measure I'd actually like to see. On the income side, I think it would be based on first-quintile or -quartile incomes, since that's where affordability problems are going to be most obvious and most important. I'm not too worried about affordability for rich people. On the expenses side, hmm... that's harder. What data do you use to avoid coming to the conclusion that affordability is fine 'cause there are lots of tiny moldy basements for poor people to live in?
posted by clawsoon at 4:15 PM on January 9 [2 favorites]


I was actually figuring that the conversions would be people tearing down existing housing and making purpose built duplexes and triplexes instead of monster houses. Flippers are going to flip but at least this way they're helping to solve a problem.
posted by any portmanteau in a storm at 4:37 PM on January 9


I live in Sydney (the second least affordable city in the world according to that list) and we are following Vancouver in that property prices are plummeting at the moment.

‘Experts’ are predicting it will get a lot worse before it gets better and that prices haven’t dropped this far this fast since the GFC. People are acting shocked but did they seriously just expect prices to go up forever?

I don’t actually mind a correction - and I say this as someone whose property is also going down in value - just because things were getting ridiculous and it’s been clear for a long time that Sydney was quickly becoming a city of the haves and the have nots simply based on if you had property and when in the cycle you managed to buy.

Having said that there’s a difference between a gentle downward slide which makes property more affordable for everyone and a massive drop that ends in a recession in which case we’re all screwed. Here’s hoping for Vancouver and Sydney that it’s the former and not the latter.
posted by Jubey at 6:39 PM on January 9 [1 favorite]


Why is there no mention of the effect of Chinese money on the real estate market? That seems like much more of a driver than anything else.
posted by BReed at 2:37 AM on January 10 [1 favorite]


"No one ever has an answer when I ask in various real estate threads where all of the people who can afford houses come from."

A great many of them are investors. The two largest groups are corporate investors and individuals from foreign countries.

Well-off individuals and families from foreign countries, particularly from countries where they deem it prudent to offshore some of their assets to protect them from their own government, have been snapping up homes in the US, UK, Australia, New Zealand, and Canada, all countries deemed safe/stable. They've primarily focused on selected locations within those countries, but as the number of foreign investors has expanded from the truly wealthy down to middle class people/families, they're also purchasing homes outside the well-known locations (Sydney, NYC, London, Toronto, Vancouver, etc.).

The problem with foreign purchases of housing stock is that most of those homes then sit empty for much or all of the time, especially when the purchases are made to hide/launder funds (though now that middle-class investors are purchasing, more of them may become rentals).

Corporate investment into residential housing became a big thing during the Great Recession in the US. The truly wealthy, flush with cash, were looking for better returns than what they could get in the stock market. Housing prices had cratered. Voila - they formed companies to buy up lots of housing stock which they then rented out. Some of the houses are put back on the market, but as rents have been increasing, too, they're finding it profitable to be in the single-family-home rental business. And once again: local prospective home buyers are competing against buyers who can pay cash and easily outbid them.

At any rate, this poses two problems for local housing needs: a portion of the local housing is un- or under-utilized; and local buyers aren't just competing amongst themselves for homes, but against people who are paying cash and can easily afford to outbid them.

Tl;dr: housing markets are no longer local, and they are being disrupted by non-local buyers flush with cash.
posted by Lunaloon at 5:47 AM on January 10


It's widely suspected that billions of dollars of Chinese money has been laundered through BC in the past decade, and that the real estate has been a big part of that activity. Police efforts to reign this in recently spectacularly collapsed---afaik no one has publicly come clean as to why yet.
posted by bonehead at 9:23 AM on January 10 [1 favorite]


Why is there no mention of the effect of Chinese money on the real estate market? That seems like much more of a driver than anything else.

Every time I read into this, it seems that there is some foreign investment but it's really not that big of a percentage - and always focussing on it tends to bring out some really nasty xenophobia.

Investment purchases are a big part of the story, but in Canada, most of those investors are Canadian. They are the upper-middle and upper classes who buy to let, who inherit houses, etc. In my local neighbourhood (just outside downtown, within walking distance of 2 subway lines) there are 3 houses sitting empty. These are million-dollar houses, which could be rented for $3000+/month. But they are empty because they are meant for just investment. The reputed owner is definitely Canadian and has local ties.
posted by jb at 10:16 AM on January 10 [1 favorite]


I think it's fair to say no one has good data on this.
Yan’s analysis shows while the rate of foreign property ownership is as low as one per cent in some segments of the Metro Vancouver housing market, it’s above 20 per cent in others.

Yan found that of all City of Vancouver condos worth $1.5 million or more, regardless of when they were built, at least one in five were owned by foreigners (people whose primary residence is outside of Canada, regardless of immigration status or citizenship). Richmond and Coquitlam had similar rates. This isn’t a tiny number of “luxury” units in Vancouver. The median price of a three-bedroom condo, considered a suitable housing type for a local working family, was $1.62 million last month, according to the Real Estate Board of Greater Vancouver.

A 20 per cent proportion of foreigners owning higher-value condos is “a very high number” by international standards, and enough to “drive up housing prices for local residents,” said Manuel B. Aalbers, an associate professor of urban and economic geography at the University of Leuven in Belgium.
From a reanalysis of Yan's data:
Data that examines the value range of properties in Electoral Area A also shows a sizable number of non-resident owners.

They make up a nearly 15 per cent share of properties valued between between $400,000 and $599,999.

They also own a 19-per-cent share of properties valued between $600,000 and $799,999.

The ownership share climbs to 20.3 per cent for properties valued at more than $1.5 million.

The numbers suggest that, just like other parts of Metro Vancouver, residents could be competing with non-residents not only for luxury condos, but units worth as little as $400,000.
posted by bonehead at 10:25 AM on January 10 [2 favorites]


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