The crisis

In six weeks Canada will ban anybody not a citizen or PR from buying a house. It’s the latest, and most profound, dumb move by politicians who are staggering through a housing crisis that’s really a financial one.

When it comes to real estate, governments are out of control. BC’s had an anti-Chinese property tax for a few years now, which has done nothing to corral prices. Ontario’s go-away anti-foreigner tax is now a withering 25% and province-wide. Nova Scotia – recipient of massive gobs of real estate money during the pandemic – now has a 5% acquisition tax on all CFAs (come-from-aways). Vacant house taxes have distorted the Vancouver market for a few years and are about to hit Toronto.

Meanwhile governments are tossing out regulations that for years have kept real estate equity in place – like zoning. Ontario shocked by decreeing anybody will be able to build a three-unit edifice just about anywhere, despite what any municipality (or neighbour) thinks. And Doug Ford is carving 7,000 acres out of the anti-sprawl greenbelt around the GTA to build, well, sprawl. Fifty thousand new homes.

If you own real estate, changes like these are consequential. Once the economy swings fully back into boom mode (next year) things may never be the same. Is that good? Or just another example of elected people making stuff worse?

The goal of all this is to (a) reduce demand by kicking out people buying high-end properties (which 99.5% of Canadians would never purchase) and (b) increase the supply of houses because that will make them more affordable (which will not occur).

Inconvenient facts: real estate sales have plunged this year. Down over 40% in October. Likely a 50% plunge in November. Inventory is building in the resale market, which proves we do not have too few houses to meet demand. Meanwhile sales of newly-built homes have essentially collapsed. In Toronto, to zero. And Canada’s largest builder, Mattamy Homes, has shuttered sales centres amid a 65% drop in buyers.

High-rise condo projects are being cancelled now at a helluva clip. The thousand proposed new units in the GTA alone just went dark. Of the 95,000 condos under construction in the region, about a third will be ready for occupancy in 2023 and the overwhelming majority will be hitting the rental market, or listed for sale after the buyers (who never planned on closing) fail to close.

Days-on-market are shooting higher in every major market. Bidding wars still exist for good places in prized, in-demand hoods, but elsewhere they are gone. Buyers have time to research and view, then make conditional offers providing a measure of protection. The FOMO is kaput.

Against this reality – a crisis of affordability, not supply, with unsold homes piling up – governments are racing to spend huge amounts of public money on building a gazillion houses at a time when materials are costly and labour in short supply. Nothing will be cheap. But politicians have created an expectation that this is the big fix. In reality, it’s the big lie. Nobody will be moving into a shiny new $300,000 townhouse in urban YVR or 416 soon. Maybe ever. And yet that’s all most people could comfortably afford. It’s time we leveled with citizens. A house is not a right. Do not gut your life trying to obtain one. Don’t waste your vote on people selling you gossamer.

Now, what of the unintended consequences?

More density in our cities is an absolute given. So is less green space. Grass, trees, bushes, squirrels and birds are just clutter now. They suck up valuable space where there could be 200 condo units and a bicycle storage room. Leafy neighbourhoods full of chestnuts and traditional SFHs? Fuhgeddaboudit. The rush to house as many as possible will facilitate triplexes and low-rise rental units where Audis once roamed. Municipalities are being disempowered, which threatens to forever alter local landscapes. Owners will be further encouraged to build suites and take in tenants, while turning garages into a laneway houses.

The above is happening now, or currently being legislated into daily life. The impact of densification is as yet unclear. And it’s tough to see how any of this makes real estate cheaper, more accessible or affordable. In fact, with zoning laws tossed, big houses turned into multiple units generate more income. Market values may rise, not fall. The rentiers and renters drift further apart on the scale of net worth.

I can’t find Canadian stats, but here is the American reality: newbie buyers’ share of the real estate market has gone from 41% to 26%. The kids been replaced by older, wealthier purchasers. The median age of buyers is the highest on record, at 53.

It’s time we buried the myth that everyone needs real estate. The day has come to stop discriminating against renting by showering tax-free gains on owners, allowing property to be bought with RRSPs or creating that new taxpayer-subsidized house-purchase account. One generation is being enslaved. Another enriched. Wake up.

About the picture: “We had to say good-bye to our dog Rusty this week,” write Fred and Anna. “He was a rescue dog and he rescued us many a time with his many adventures and boundless enthusiasms. Please share the pic with your readers if you feel so inclined. Hope all goes well. We’re busy being semi-retired and enjoying every minute of it.”