The housing problem is the housing market, but it can be solved

We have lived to see the day of a condo boom in Hamilton, Ontario. We have made housing into an object of speculation that sucks in money from here and everywhere, foreign and domestic. For those still wondering, the problem isn’t at heart “foreign”, it’s “money.”

It’s that housing, a basic human right, has been left completely to the market. Ironically, the housing market might not follow the simple ECON 101 supply and demand story; that’s what the first part below is about. The second is a stab at a utopian response that pushes the boundaries of today’s acceptable solutions.

Beyond supply and demand

I’m increasingly sympathetic to arguments that the market for housing isn’t just about supply and demand, with the former not meeting the latter. Most markets are about more than that (as so many challenges to the reductive economic orthodoxy have claimed), but housing seems to be especially prone to a richer analysis.

This is because housing both plays many roles in our social and economic life, and because of its recent history. Housing has been particularly important to the economic transformations of the second half of the 20th century.  (more…)

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Harper’s hopeless housing promises

Over the past ten days, Stephen Harper has introduced three new housing policy promises. However, they won’t help the crisis of affordability. The pattern is familiar: make things worse and prepare to blame others.

  1. First, there’s the promise to allow first-time home buyers with RRSPs to take an extra $10,000 out of their retirement savings for a down-payment. This will likely have only a small effect, but whatever effect it does have will further heat up the housing market by increasing demand here and there. This makes the housing crisis worse. (Bonus negative effect: it eats into retirement savings.)
  2. Second, Harper promised to bring back a home renovation tax credit: people who own homes and spend $1000 to $5000 on renovations will be eligible to get 15% back at tax time. Again this isn’t much (and it’s poor tax policy too), but ultimately it helps drive up property values. This too makes the housing crisis worse.
  3. Finally, Harper says he would gather data on foreign real estate buyers. While there is certainly lots of capital sloshing around the world and some of it is landing in places like Vancouver and Toronto housing, it’s unclear how much of our bubble is due to foreign money and how much of these fears are a xenophobic blame-game. Data will be good, but given how Harper has been blaming all of Canada’s economic woes on external factors, this looks more like an exercise in something similar.

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It’s certain that we are in the midst of a housing unaffordability crisis—that much Harper gets right. His proposed solutions, however, continue in the pattern of the past few decades, a pattern that has created bubbling housing markets that have left many shut out and scrambling. (more…)

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Forget global superstar, Vancouver’s housing troubles start at home

Vancouver was the star of a recent New Yorker article that shone a light on the city’s lack of housing affordability and linked this lack to an inflow of foreign buyers. Unfortunately, this link is extremely tenuous, as most of the support is anecdotal or based on very limited data. At the same time, there are good reasons to look for the sources of the lack of affordability much closer to home. Articles like that in the New Yorker allow for far-flung conclusions that end up bolstering a fatalist political narrative about the potential for meaningful change.

First, the data. The New Yorker author, James Surowiecki, offers two major sources to back his claims. The first is a Sotheby’s report stating that 40% of buyers of Vancouver luxury homes (luxury homes had an average low cut-off price of $2.8 million or three times the overall average price) in the first half of 2013 were foreign. At the end of his article, Surowiecki also cites Andy Yan’s interesting energy usage studies, the most recent of which showed that somewhere between five and ten percent of the city’s condos may be sitting empty at any given time. Of course Surowiecki cited the sensational statistic that almost a quarter of homes in one Coal Harbour census tract were likely vacant at census time. (more…)

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