Housing will never be affordable as long as it’s treated like an investment.
Owning a home IS an investment. Renting is not.
Nobody would want to own a home if they didn’t get some kind of return on investment when it came time to scale down/retire/put it in your will, etc.
“Affordable housing” should really be “affordable renting”.
EDIT: if you’re going to downvote, at least explain why. This is the reality of the housing/rental market we all live in. Don’t shoot the messenger.
Do you get a return on investment directly in merely owning a car? No, of course not. People still buy cars. (To avoid confusion: cars open other economic opportunities, but just sitting on a car by itself is not an investment.)
On the other hand, if cars did become an investment, people would hoard cars and they would be less affordable for people who actually use cars productively. High real estate prices are similarly hurting the economy.
Cars and homes are two totally different things. Why even compare the two?
Also, some people do buy cars to resell at a profit. The vintage and classic car industry is one example of that.
Houses are an investment because they sit on land that increases in value over time. Some people don’t even profit from the sale of their house, but from the sale of the land.
What is the argument, then?
Stats Canada makes it clear that rental housing is affordable for those making less than the median income (25% of expenses spent on housing), and that most mortgage holders are not spending more than 30% of their household income on housing.
By definition, it’s all affordable if you aren’t making well below the median income for an individual (which is $32,000 after tax).
Can we use more low-cost housing? Absolutely.
I’ve never argued against that, but I think people need to understand the definition of affordable housing and what that actually means.
When you profit off of merely sitting on land, you are essentially leaching off of society. Economists call this “economic rent”, which is a kind of theft where a person gains from the productive activity of others, without producing anything of value themselves. This is why the nickname for a land tax is “the perfect tax”. You didn’t “produce” anything from the increase in real estate price. Like a car, your house structure itself is actually a depreciating asset and is worth less every year.
This is different from a productive investment like a share in a company, because a company can use that money to invest in useful capital, like factories or workers. This is why Canada’s obsession with real estate “investment” is causing the economy to contract in terms of GDP-per-capita.
Your last few paragraphs denying that there is a housing affordability crisis in Canada is completely and ridiculously outside the mainstream. Literally no expert agrees with you.
You’re being downvoted because this is the attitude that got us into, and is keeping us in, this mess. Let us be precise with terms: housing is not a speculative investment. You don’t buy a house because you presume it will appreciate 100-1000% by the time you sell it. That attitude leads to the paradox that the government is unable to stop: you either build/allow affordable housing, lowering prices and crashing people’s speculative investment, or you restrict new home building through restrictive zoning and NIMBYism run wild, letting houses appreciate to the point of unaffordability.
You buy a house to live in long term: to buy it back from the bank and own it all to yourself. You have right to sell it for an equal or roughly price tracking rate with inflation. That’s a good investment. Every Canadian has the right to buy affordable housing. Saying affordable housing is affordable renting is not only reductive but downright prejudicial: people don’t rent because they’re poor. They rent because they want the freedom to move without selling a house. They rent because they are building lives as students or young families or their careers. They rent because they choose to invest their money in something other than house equity. And all the real, concrete policies which help new homeowners (ie building more housing) help renters: these two groups are not at odds with each other.
You don’t buy a house because you presume it will appreciate 100-1000% by the time you sell it.
Do people buy homes expecting that they will *lose * value over time?
Yes, I do think people BUY homes (as opposed to renting one) because it WILL gain value over the life of ownership. Someone living in a house for 50 year should be able to sell it and live off the earnings until they are dead. Why not?
Every Canadian has the right to buy affordable housing.
I agree, but not every Canadian understands the expectation of what “affordable housing” really means.
It’s generally recognized that “affordable housing” means housing that does not exceed 30% of a HOUSEHOLD income before tax.
Stats Can says that people with mortgages allocated 1/3 of their goods and services spending to shelter costs ($30,000 / year) with $17,000 going towards mortgages.
By comparison, renters only spend 25% of their spending towards rental payments ($12,200).
Both would still be considered “affordable housing”, yet it’s clear that someone making a median income would realistically be able to afford rental housing, and not homeownership.
Saying affordable housing is affordable renting is not only reductive but downright prejudicial: people don’t rent because they’re poor. They rent because they want the freedom to move without selling a house. They rent because they are building lives as students or young families or their careers. They rent because they choose to invest their money in something other than house equity.
Yes! I completely agree! Renting is not a downgrade from homeownership, but it is distinctly different. That’s why I’d argue that owning a house is an investment, while renting is not (although, renting allows you to invest in other areas).
We need more affordable rental space, so that every Canadian who earns an income can afford a place to live.
I simply think it’s unrealistic to believe that every Canadian could ever be able to afford to buy a house with an individual income below the median ($32,000).
Oh so you wouldn’t want to own a home if it didn’t pay well? Yeah. Same. And why should I get so shafted for wanting to live in a small apartment as opposed to ‘investing’ in a home?
A home is meant to be a depreciating asset like a car is. You need to maintain and repair it in order to sell it. You live in it, therefore it would be okay to pay a bit for it, buuuuut thanks to government subsidies and bankers and housing shortages, you are guaranteed to profit.
I don’t support downvoting you. I disagree with you, but you’ve made a concise and detailed argument for neoliberalism.
A home is meant to be a depreciating asset like a car is.
It is. Granted, it has become crazy expensive to buy a new home, so the used market has risen to compensate. Actually, we’ve seen the same thing happen in cars recently. New cars have become crazy expensive, so the used car market has gone up in price too.
But that’s outside of investing. Nothing says depreciating capital cannot be an investment. Consider a widget that cost $100 to buy and after one year is completely worn out and worth $0. But that widget during its useful life produced trinkets that you were able to sell for a profit of $120. There you go, a 20% return on investment, even though the capital is now worth nothing.
Cars and houses will always fundamentally be investments as long as they remain useful tools of production.
Houses are literally subsidized into being safe investments. The neoliberal government has decided that this is best for business.
A home is meant to be a depreciating asset like a car is.
A car and a home are two very different things, so they can’t be compared here.
Even the land your home is on increases in value over time, and I’ve yet to see a home in good condition that’s worth less than the amount it was purchased for. Unless you’re talking about those ghost cities in China.
What exact reason would you give to devalue a perfectly good home?
A car and a home are two very different things, so they can’t be compared here.
With respect to depreciation they are quite comparable. Deprecation is just the reflection of the remaining lifetime value of something.
Depreciation just tends to be more obvious in cars, because:
- Cars have pushed the technical advancement envelope a lot faster than houses. A 20 year old house still feels like something that was built recently. A 20 year old car feels like it was built by a much earlier civilization. This keeps greeter interest in having the absolute latest model in cars.
- Because of #1, people are more likely to recondition a home back to new condition. If a support structure in a house is seeing signs of rot, you are bound to fix it. If a car’s frame starts to rust through, you’re apt to throw the car away and get a new one.
I’ve yet to see a home in good condition that’s worth less than the amount it was purchased for.
A home in good condition has approximately the same remaining lifetime value as a new home, so that stands to reason. Not to mention that with ever more stringent building codes, new construction cost has gone up, up, up. The used market always follows the new market.
Even the land your home is on increases in value over time
Land does, but that’s independent of the home. I mean, they are usually sold together, but the buyer will determine their utility value independently. Two identical houses will not fetch the same price if one of them sits on more desirable land.
Well, a home needs to be repaired and improved before sale. This is part of what the market demands. Gets more complicated with land, yeah… leads me back to zoning laws. If the land is so valuable in the suburb of a city, it should have multi-unit housing on it. Then the rich are forced to pay that raising cost and the poor get an increased supply of housing.
I did not downvote, but I’d like to offer my point of view.
Owning a home IS an investment. Renting is not.
I think this is a superfluous distinction. Purchasing real estate can be an investment vehicle if you aim to recoup the investment through appreciation (land speculation) or income generating usage (like rentals). It may also not be an investment if you just want to purchase a property to live in it - this is a passive asset, much like a car. You can “rent” your car (and time) to the gig economy, and car prices can rise and you can make a profit by selling one, but in a stable supply market that’s not the norm so cars are generally not regarded as investments. Conversely, renting retail space for commercial usage is an obvious example of income generation on top of a rented property, so rental costs are a factor in other types of investments.
Nobody would want to own a home if they didn’t get some kind of return on investment when it came time to scale down/retire/put it in your will, etc.
Plenty of people want to own a home regardless of financial returns. Ownership has its perks, there are plenty of people willing to pay for it. It is a bit of a luxury good nowadays, but one that is very entrenched in most cultures as a symbol of “making it”.
