so was mine and then I renewed at 16.5. Although it is a great thing to have when you bought at 250,000, a million dollar home is beyond the range of most Canadians and a million is low in this market. Until the housing availability catches up with the demand and the market comes down and until interest rates go lower as well there are going to be a lot of tales like that above. People need to learn to say I can't afford it.
Cost of housing in Canada
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The problem is, if you can't afford a mortgage payment you likely can't afford rent either.
Rents are ridiculous due to low supply, because the money for developers was in building subdivisions not apartments. Combine that with homeowners not wanting renters in their neighbourhoods, and you end up with one bedroom apartments costing $1700 a month in places like Ottawa.
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Oh, lets not forget the role municipal and provincial governments play in driving landlords out of the rental market by putting rent increase caps and by wildly favouring tenants rights over landlords…
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The balance has definitely shifted too far toward tenants, but those rules came about because of terrible landlords. A lot of rental issues could be fixed with more supply, allowing people to choose where they live, and what they are willing to pay.
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But how do you get the supply without landlords willing to build?
Anyone who has ever lived in an RHU will tell you that governments make generally crappy landlords…
Brad Sallows
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Rent controls must be like communism; they've never really been properly tried.
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You incentivize building... I don't have all the answers to how government can do it, I'm just a weatherman, but I suspect there are smart people who do have reasonable answers.
I do know that the current regulatory system favours single family dwellings, so perhaps removing obstacles for building multi-family dwellings is the right first step. It might anger a few suburban homeowners, but I suspect a crime wave caused by homelessness might anger them more...
Edit: A simple solution could be to offer zero interest loans from the government to developers who build units under a certain rent level... The developer saves on interest, and the government get's to play the good guy with people struggling to find a place to live.
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right now housing isnt being built, housing that the various governments have already approved over years at the same time construction workers are being laid off while complaining out of the other side of their mouth about a labour shortage. Until the cost of not developing becomes part of the calculus you will see no improvement
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In the early 80's I was paying 21 3/4's mtge when I got transferred back to Wpg. Difference is, houses were not as expensive/and or did not consider a really expensive residence. Additionally 6 3/4 mtge seemed to be the average rate over the years.
Brad Sallows
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Incentives aren't needed, and governments are not typically effective at out-guessing markets which it comes to what works and doesn't. What is needed is to remove disincentives and distortions.
Whether or not regulations favour single-family is less important than the fact that families favour it. The insistence of authorities to shape the winds and tides (people) is at the root of much dysfunction.
Any kind of subsidy will distort market behaviour. Every scheme to produce "controlled" units means someone must choose who gets one and who doesn't, which is an opportunity for corrupt behaviour.
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The government has incentivized home ownership for decades, so I fail to see how incentivizing developers to build rental units would be any different. The central banks keeping interest rates artificially low also incentivized home ownership, so granting an artificial boost to rental developers is again not something outside of what has already been done.
I get that if you own a home already, and are well settled into having it paid-off/have it paid-off, you likely don't care much about the rental market. The problem is, when people can't afford to live in the system as it exists, they push for changes. Those changes could in the end be targeted at those people who they see as having an unfair advantage, so it's best to try to keep people operating inside the system.
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The "principal residence increase in value is tax free, without limitation" is an obvious example of federal tax policy influencing the housing market.
too true and that includes legal disincentives as well. It takes the same effort to construct a condo complex as it does rental. Rental should guarantee continued future income but government intervention on behalf of tenants makes that a risky proposition. Far better to build the same structure, sell it and reap the profits immediately. But there is no quick fix. There aren't enough residences to go around and until that problem is solved prices will continue to soar. Builders were basically screwed out of two years worth of construction by stupid regulations re; covid. When that ended there was a lack of materiels so prices for them were out of reach if a builder was to achieve any profit so availability is two years behind. Now throw in avarice. Builders are pushing for changes in zoning so they can put more units in an acre, asking for height caps to be lifted and many are buying up little houses on decent lots and replacing them with two or three units to sell at the price they paid for one. Each of these requested changes has to go through court; delaying things even further and when they do clear and if they do because it is in no way a certainty the construction is geared to higher incomes.
The only solution to my mind is to push pause on the population growth until things catch up and that would require a change in policy by the feds so it isn't likely
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Ontario builders aren't pushing for anything,.....they've had everything you mentioned as problems for a year now. Three per lot, no court, no appeals by locals., yet new house prices haven't dropped.
Read this.... https://www.ola.org/en/legislative-business/bills/parliament-43/session-1/bill-23
This presupposes that the market is the appropriate mechanism for 100% of the problem. The challenge with that is that ‘the market’, left to its own devices, will seek to maximize profit and has no overriding vested interest in ensuring pretty much everyone has access to a safe roof over their head. That leaves people at the bottom of the wealth scale shit out of luck, with real property increasingly accumulating into the ownership of a smaller proportion of wealthier people or businesses. And I say this as someone who ‘won’ this game, with about 1/3 value remaining on the mortgage of a very nice and large fully detached house that has doubled in value, as well as a rental condo unit that we fully own. If mortgage rates were lower, we’d consider a second one. We made it, and my pure selfish best interest would be to take the same stance as you- but I don’t feel ethically able to do that. I have family living the other side of this coin and it sucks.
We have these things because 1) we both have good jobs, and more importantly, 2) my wife’s parents died very prematurely and she inherited her portion of pretty good equity. This let us get into the market, kind of ‘just in time’. We couldn’t repeat that to nearly the same extent now.
The rules of the game favoured us. They don’t favour a lot of other people. The market doesn’t really care if you have to pay half your take home income or more to make rent; as long as someone can pay it, landlords will charge it. Just as the market is fine with there always being a certain percentage of people unemployed, so too it’s fine with a certain percentage being unhoused, until and unless it becomes an economic imperative to change that.
So no, as proud as some 1800s economists would be of your fervent devotion, this is not an issue that is appropriate to be left fully or even mostly without government intervention in the form of various policies. As a society we’ve evolved at least a bit beyond being ok with people being left completely to fend for themselves. While government intervention is by its nature less efficient, some problems are not amenable to being solved by pure profit motive. Sometimes the cost benefit analysis needs to be undertaken by those with a different motive, and some of the costs need to be shared among those of us with the luckier role of the dice.
IKnowNothing
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These stories send me on a roller coaster. Sympathy at the situation. Vindictive "well this is your fault for bad decision making" apathy/cruelty as the details roll out. Then guilt at taking my financial education for granted.
Then.... after finding out about the massive spike in variable rate mortgages at the riskiest, lowest reward time possible.....
the roller coaster settles into an anger at the lack of story about how broken our mortgage industry is, that a "mortgage advisor" is a salesperson with no/ insufficient fiduciary duty to their clients. Yes people are accountable for their decisions. Yes this was a series of bad ones. But at the same time- huge swathes of people making the same bad decision at the same time in unprecedented numbers, and then not getting the advice to rectify it early (converting to fixed early during the rate run up) reeks more of broad-based professional failure/ a profession whose goals are misaligned with the needs of society than a reason to shit on an aesthitician/construction worker combo.
So back to sympathy.
And they still can't be satisfied Bruce. Niagara on the Lake has at least 4 significant requests for variants before city hall right now.
IKnowNothing
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Housing that is presold from before covid sitting in limbo as unfinished subdivisions grow up in weeds while the develop plays chicken trying to get the buyers to walk so they can resell for higher.
It's a mess. 1.2 million homes approved and permitted in Canada. No easy way to force action that won't have negative consequences down the line. No money to incentivize action.
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Most people in personal finance are allergic to the word fiduciary.
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I also feel sympathy, but admittedly very little.
Despite making very good money, I'm priced out of the market right now mostly for reasons beyond my control. I need a correction, at least a small one, to make any progress. But I'll also allow my tolerance for risk is pretty low and it is, as best I can tell, a risky market to get in to right now. And so my rent continues to pay somebody else's mortgage.
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