In case anyone still wants to somehow debate whether the Liberals will deliver affordable housing.
“Housing needs to retain its value,” Mr. Trudeau told The Globe and Mail’s City Space podcast. “It’s a huge part of people’s potential for retirement and future nest egg.”
Absolutely fucking wrong. The immense value tied up in housing is killing the economy…
So written, a condo owner whose property value went up 50% over the past five years.
I don’t get what the point is except for investors.
People using it as a “retirement holdings” might try to sell and then find they can’t afford to live anywhere in retirement.
People saving property to leave an inheritance have kids waiting for their parents to die so they can afford a home to own.
Actually, w.r.t. to retirement savings it can be valuable as a lot of the better assisted living arrangements will require an upfront payment of hundreds of thousands of dollars for unexpected expenses along with a regular rent expenditure.
This is arguably an awful way to finance elder care and doesn’t justify making housing unaffordable but that stored value is useful if you think you’ll need assisted living.
It really sounds like the issue there is just another subset of housing (un)affordability.
Oh, definitely… and the consolidation of assisted living into fewer and fewer PE firms should scare the shit out of everyone - but it is important to remember that a few people would be screwed if the housing market suddenly collapsed… that said, we absolutely should deflate this market - we just need to consider some fixes for the house-wealthy cash-poor older folks who might be really fucked by this.
So in 30 years when I need assisted living but was never able to afford a house, what am I supposed to do? Die in the street?
Our government really should have better programs to assist seniors and there should be non profit, government owned and operated assisted living available. Over 1 million seniors needed to use the new dental benefit so clearly there is an issue with how canada treats their seniors financially.
then find they can’t afford to live anywhere in retirement.
I think the plausible circumstance is them selling and moving out of Canada, really it’s the logical thing to do when you destroy the eco system you inhabit for gains. Then the money also gets spent out of Canada, we might spend less on healthcare cost for the elderly but I could see the math working out to be a net loss.
I think the plausible circumstance is them selling and moving out of Canada
Or moving to SK
How? What country is going to jump at the chance to take in a 70 year old immigrant?
Housing CANNOT be an investment, and I say this as a homeowner whose house value has nearly tripled since I bought it. I bought a house simply because I didn’t want to rent for the rest of my life.
It’s obviously absurd to claim to want affordable housing and refuse to cause prices to go down. If housing is an “investment” then you are by definition fucking over all subsequent homebuyers. Everybody needs a place to live.
It shouldnt be an investment but it should still have value. As in it shouldn’t be commoditized but should still be a way to “store” wealth.
Can you elaborate on this? I’ve always thought that housing is an absolutely terrible “store of value”. Given the fact that appreciation at a population level, by definition means housing will be less affordable for the next generation. How is value for one generation balanced against subsequent ones. Also, it’s an incredibly inefficient way to build a nest egg or whatever. If you pay a mortgage like most people do, over 15-30 yrs, you’re paying something on the level of 150%-200% of its value over time. It seems to me a more rational way to build value is to keep housing costs low, allowing people to invest that difference (mortgage interest) into either investments or savings, rather than paying it to a bank.
I get that the US doesn’t really have a culture of saving, but I feel like this is rationalized by the “my house will be more valuable when I retire” crowd. It’s so easy to save now, with efficient investment products broadly available to individuals. Maybe it’s time to let the house as the bulk of your wealth go, and make housing affordable again.
How is value for one generation balanced against subsequent ones.
I don’t know actually. By market regulation? By ensuring new housing isn’t a PITA to build and telling NIMBYs to fuck off? You’d also need to regulate the other way. Ideally a maintained house wouldn’t have its value changed that much over time. And it would be adjusted to inflation.
if you pay a mortgage like most people do over 15-30 yrs, you’re paying something on the level of 150%-200% of its value.
Yes and your net worth accumulates 50%-66% of what you pay. That’s better then the 0% for renting. AND you don’t need to complete the mortgage to sell the home and reclaim that stored wealth.
And yes housing should be affordable. I’m saying all this within the context of some kind of free market economy with some kind of private property. Being able to add most of your home payments to your net worth is very helpful in the long run. Especially if you need the Monet, you can switch to renting. Again, ideally, that would be the same cost as a mortgage, as the landlord would be using that rent to pay down their mortgage or whatever.
It depends on your definition of “storage”. Like I said, I bought because I didn’t want to give money to a landlord for the rest of my life. The best-case outcome in my mind was breaking even when it comes time to sell. Any more than that necessarily increases housing costs for every subsequent generation.
I’m not saying you’re in any way wrong, but for my own understanding, are schemes to help people onto the housing market not effectively the same thing, while still retaining value for those who expect to do things like funding retirements with their existing properties?
No, because that government money to fund those programs has to come from somewhere, and it’s almost always debt that future generations end up saddled with, so it’s still making younger folks pay for it either way.
Fair argument, but in principle lots of taxation is about redistributing wealth to those who need it, and it doesn’t have to result in debt for future generations.
Well yeah. People’s entire life savings are wrapped up in their houses. We all saw what happened in 08 when the housing market crashed. It would cause absolutely massive fallout if people’s largest asset that they’ve been investing in their entire lives lost a bunch of value. It’s unfortunate that they’re not more affordable, but devaluing them would be catastrophic.
Devaluing them in a deliberate and controlled manner is much better then waiting for a crash.
Slowing their appreciation seems like a better solution for people who bought in the last few years. Having their homes lose value in a controlled manner would ruin some people. They’d not only lose money on their life savings, they’d be trapped, unable to ever move without paying even more money, or filing bankruptcy if they don’t have more money to lose.
Slowing appreciation below inflation is depreciation/losing value. It’s a hard tagert to nail, but if we can keep the needle between static price and inflation; we’re doing well.
They’d not only lose money on their life savings, they’d be trapped, unable to ever move without paying even more money, or filing bankruptcy if they don’t have more money to lose.
This already happens, we just don’t hear about it. And we normally blame the homeowner for falling into a preditory trap.
Also the building envelope and internals IS a depreciating asset, always has been. It takes effort to maintain it.
Right now it’s just the land values rocketing so high that on many places the crack shacks sitting on top depreciates slower than land value increases. So people’s homes are still losing money, it’s just the land underneath them goes up faster.
Edit:
They’d not only lose money on their life savings
Diversify yo bonds.
- Wu Tang Financial
I think we should clarify what devaluing mean - I think it’s reasonable for a house purchased in the 90s to not decrease in value if proper maintenance is applied - but what’s our rationale for housing to be a profitable investment? Why, rationally, should it gain value over time… and why should that gained value outpace interest rates, the stock market, and wage cost-of-living increases?
I’m in favor of devaluing real estate because it’s currently astronomically overvalued and viewed as an investment vehicle - if it were reasonably valued I’d be in favor of land having a flat value relative to inflation and construction having a slow depreciation rate as the materials age and require more active maintenance… with the only real increases in value coming from renovations or other active investments in the quality of the house.
Why is it that teleporting back in time, surrendering cash according to inflation, buying a house, teleporting forward in time, selling that house - then repeating that on a loop… why is that an infinite money glitch?
Similar to nature abhorring a vacuum - capitalism abhors a free money glitch (and in all other cases, free money glitches get absorbed by arbitrage).
I’m all in favor of preventing corporations and investment firms from purchasing houses, and also foe heavily taxing private home ownership after the first one. I think that would bring the demand down to reasonable levels. The houses would still appreciate due to increasing population levels through birth and immigration, but it would hopefully keep it in the affordable for average people realm. It makes sense for your largest investment in your entire life to appreciate. It absolutely doesn’t make sense when a home triples in value in 3 years. That is causing its own financial catastrophes.
But in a society where no one but the wealthiest can afford to own property, does it still make sense for its value to continue to appreciate, putting it further and further out of reach until everyone is renting from corporations who own the housing stock, except those born into wealth?
The fundamental issue with housing as an investment is that it is a monolithic and non-fluid vehicle, which makes it worse when leverage comes into play. Whereas stocks can be purchased/sold at any time in an instant and have fractional costs (sometimes as cheap as 10$ per stock), houses are not, and fast fluctuations in prices could heavily impact your ability to realize your gains. So it is, on that aspect, a terrible investment.
For large companies owning thousands of units, this is not an issue since they are spreading the risks across the units (by buying diversely located units of all types). They can also quickly execute purchases and sales since they are in that exact business.
So the argument that houses are ways to pass down wealth is misguided: they are terrible ways to pass down wealth, and parents should leave a trust fund or safe investments rather than a house if their goal is to build generational wealth - housing should be passed down for personal reasons.
I’m not smart enough regarding macroeconomics to know the right answer, but I feel like there has to be a solution that makes home ownership affordable for new entrants into the market without causing the value of existing homes to tank so hard and fast that we end up with a 2008-style crash again. I’m pretty confident that getting large-scale corporate investment out of the picture is part of the solution, and I don’t care if the method involved there hurts the corpos pretty bad. Maybe an oppressive rent-control scheme that makes keeping the properties untenable for corporate owners, forcing them to want to sell as fast (and therefore as cheaply) as they can. I don’t know what zoning laws are like in Canada (compared to here in the US), but I think merging zoning for low- and mid-density residential such that suburban NIMBYs can’t block multi-family units from being build is another necessary step. As far as everyday folks who bought into the housing system, I’d like to see them as protected from the fallout as possible, especially since (at least the US) government has been all-too-happy to let home ownership replace pensions as the primary way people are “supposed” to retire.
I think a rent cap could be a good way. It could be raised wrt to inflation. Then, government housing, better loan systems for non profit and maximize density to allow building taller rather than wider (making land cost minimal), but not tall enough that would create increased cost (elevators are expensive to maintain for example). A lot of initiatives need to be put in place, but one that could be effective is to lower costs of construction and find ways to increase productivity by improving resource management
The thought of an across-the-board regulation based rent cap never crossed my mind, but that actually could be effective and fair. If there was some kind of easy to understand formula based on the unit, potential landlords would easily be able to calculate whether it makes financial sense instead of simply cutting costs and squeezing as much rent out as possible. There wouldn’t be an incentive to kick people out (can’t jack the rent) but there would be one to keep it maintained/updated since they’d be competing on everything but price. Honestly, I wouldn’t mind if my rent went up a bit if it meant my unit would be properly maintained or I had the freedom to move somewhere similar without doubling my rent.
Edit: you could make it more enticing to the current landlords by easing some renter protections, like making it much easier to remove problem tenants
