The U.S. housing market vs. the Canadian housing market

Sort of, but in practice not really (particularly when interest rates are higher, like now). The only meaningful way to realize that extra wealth is to sell. But then you’ve got to live somewhere, but everywhere else has (on average) gotten proportionally more expensive too. The only way to really capture that wealth is to downgrade or to go to an area that has underperformed, neither of which are typically appealing options, nor are they generally aligned with our notions of “increased personal wealth”.

What’s really happened is that non-homeowners have effectively gotten effectively poorer since their only options are to pay increasingly-large rents or buy at inflated prices.

Let me know what happens to prices when everyone has to pay 8% soon.

Also for reference, everone should know 592k CAD is 433k USD and 1.2M CAD is 880 USD.

By all means it’s expensive and has changed relatively fast. But Toronto isnt even top 25 for most expensive cities. Most rankings ive seen dont even have it in the top 50. I think people are surprised by this because its changed fast and feels expensive but in reality its cheaper than the major metros in the US, mich of Western Europe, China, Japan, SK.

> If it continues for another decade, we can presume no young person today will ever be able to afford a home.

In Toronto. Welcome to having a large, growing city. Generally speaking young people dont buy homes in NYC, Tokyo, London, Hong Kong, SF, and about 50 other places. Probably 2/3rds of the world population are living in metros like this.

This is a pattern we also see in Europe. Homeowners, largely older, get richer and richer by just standing still, while at the same time controlling politics so that fiscal policy supports this and new construction is made expensive by regulations.

It surprises me that Canada, with a relatively younger population, has similar issues.

I live in Toronto as well, and did penny pinch from the time I graduated (2016) to buy to buy my 1st condo here in 2020. I keep hearing statements like these, but if we're being honest unless this was an investment property, a 2nd home or you were moving away to a different city altogether, money is only made on paper. While the condo price has gone up, so has the prices of all the other houses. If you were to sell your condo to realize your gains, the next property you buy has gone up proportionally as well.

How do you afford something that high? Were you coming into this with a trust fund or are you one of those 300k+ per year engineers? I make 130k and feel my 220k mortgage (7.5% interest sadly) is scary.

Every time I watch one of those House Hunter type shows in Canada or just look at the home prices in my old home in Charleston I’m boggled by purchases.

Because the way I play this out... imagine you list your apartment for 1.2 but nobody can afford it so it stays unsold. Your neighbor lists for 1.1 and it doesn't sell either because nobody can afford that. Eventually you go oh shit it's never going to sell, lower it to 1.0. You play that game until it's low enough for somebody to afford it.

It's kinda crazy to think about it but the reason homes are so unaffordable is precisely because enough people CAN afford them at this price. So yeah I am curious, who are your new neighbors?

I mean, the US isn’t as bad as Canada (as the article states), and this is already the case here. Most young people who manage to buy a house either get substantial help from parents, or buy in the middle of nowhere because they are able to capitalize on having a WFH job. Everyone else is stuck renting, at least until their parents die (if they have homeowner parents that is).

Family wealth going up is somewhat written in fake money. Especially if you’re paying a mortgage with a rate that might renew at double.

Toronto is still super desirable but I think there’s real risk, versus it being a guaranteed good investment the way the boomer generation has been hammering into us about real estate. Can you imagine buying a home at $900k, only for it to fall 33% in value and your mortgage interest payments double?

You want to lay blame? 30% of all homes in the last year have been bought by speculators and rental investors.

That’s right… one in three homes were bought by someone who will never live in it, but who has hoarded it in order to ransom it back to the community for more than it’s worth, thereby denying another working-class family the ability to exit the rental market and contributing directly to our housing problem.

No wonder shit is so out of whack here.

I think it's a global phenomenon. I own an apartment in an European country and I also saw my neighbors selling theirs for 2 or 3 times what I paid for mine. The same trend can be observed in basically all European capitals. I don't think this is a Canadian problem.

I think it's dangerous to jump straight to witch hunts. First the scapegoat was golden visas, then it was Airbnb's, then "the rich" whatever that means, and now the Canadian government too? Which one is it?

But this collective delusion that the house prices of homeowners has gone up is a huge part of the problem, in part because if house prices halved, it would be a huge problem but probably not as large as people think, mainly because people can largely just walk away from underwater mortgages (in Canada AFAIK).

The only people who benefit are those hoarding real estate, not individual homeowners. This is the core problem with neoliberal private property.

The issue is at the municipal level (mainly), and the provincial level (less so).

Look at what California has been doing in the last 2 years. You force constraints on zoning regulations down on the lower level entities. You force permitting time limits and acceptance rates. You force a minimum level of multifamily lots per population.

It's really really really not as hard as it's presented. It's just in political gridlock.

It was completely asinine for Trudeau to refer to potentially restricting the number of foreign students[1] because, while this is a contributing factor, he sidestepped the primary driver which is that the largest reason for Canada's population growth[2] is our (permanent) immigration targets, where said policy is set primarily by the federal government (although some provinces have overlapping programs for immigrants such as Quebec).

[1] https://www.theglobeandmail.com/politics/article-trudeau-hou...

[2] https://www.cbc.ca/news/canada/canada-record-population-grow...

Federally they can do an immigration moratorium. Immigration-driven population increase is clearly making quality of life worse for Canadians.

It's too bad that's such important discussions happen in private. Between this and the shenanigans with the Ontario Premier and developers, I think it is obvious that most politicians don't actually want to solve the problem.

I'm hoping we get something like a single issue party with a mandate to implement a land value tax.

I agree in general. There is some stuff the federal government can do, which is to return to funding social housing. The Federal government for a long time provided subsidized housing in the post war period up to the 1970s-80s.

> If I had a singular policy suggestion, after having talked to some friends in the industry, it would be to pump federal money into expediting site plan approvals and environmental assessments done at a county or municipal level.

I've seen similar. One of the biggest issues that is almost never talked about is development (land improvement?) taxes occur late in the process. So when it comes to multi-dwelling development, there is substantial risk the developers have to take on and manage, because they could get slapped with losing all their profits in surprise taxes near the end of the project (besides all the risks for building costs in general). I think the stats is in the ballpark of 2/10 building are successes, 6/10 are break even, and 2/10 are are losses. At $100-$400 million a piece for a medium sized tower, imagine taking on that risk profile... I can't. So cities need to understand the risks they're transferring to development, and fund their infrastructure upgrades through good and solid planning upfront.

Another related idea I saw from a youtube video on Vancouver I think it was, was the return to the Vancouver standard house plan. It was one of the post war house plans, and while there were a couple variations and you could make superficial changes, it was extremely cheap to get approvals for because the city was basically approving the same structure every time, and were so used to it the reviews were cheap and easy.

So you're right, just finding the opportunities to optimize that process for both the City and Developer is essential. And also allowing basement apartments and other medium density development. The giant towers are hella expensive if that's the only density getting built.

Given the amount of time and prep that is put into government communications and policy, if they actually had some concrete policy to announce after the retreat it would have meant that the whole retreat was actually a sham and they had something planned all along.

The government has switched out the housing minister from a dud to a rising star, and had a retreat where they listened to a bunch of experts. These are promising things to notice, but if they are only now changing tack on this issue, it will likely take months from now until we see a coherent policy response.

As we've seen, the accumulated potential energy in the housing market has now grown to such an extent that we don't know what to do with it. Eventually, the "sandpile effect" is likely to come into play, since the laws of nature always wins.

The solution (in my opinion) is simple. Increase taxes on unearned income and balance that with decreased taxes on earned income (i.e. productive activity). Unfortunately this looks like political suicide in a climate where a large portion of the population has gone all in on a strategy of investing in unearned income.

We've embraced the exploitative aspects of capitalism at the expense of the creative aspects and it has made our societies sick and fragile.

Have they identified the root causes?

I would think dropping capital gains taxes on your primary residence, and have a property tax that scales with the market value of your home, would make the housing market more efficient.

I think the 2 bigger taxes difference are: 1. Property tax in Canada is often 80% less than much of the US. (0.28% in Vancouver vs 1.3% in Bay Area, CA vs 2.2% in Austin, TX) 2. Interest on $750k is tax deducible in the US, however with low interest rates, many people just take the standard deduction anyway.

It seems to me that the incentive-difference is that in the US, the tax code is telling you to flip often, or not flip at all.

Another big difference in tax policy, if I recall correctly, is that Americans don't pay tax on mortgage interest. Seems to me, that incentivizes Americans to over-leverage on paying mortgage interest. Don't worry though, in Canada these days, we too over-leverage on mortgages, because otherwise we're homeless, as per the article. I sure wish I could tax-deduct my mortgage interest, because that's the main thing I spend money on.

People critical of immigration aren't necessarily critical of the immigrants themselves but they are critical about the level of immigration during a housing shortage.

I believe governments don't want to address this because of the ugly truth it would expose.

At the heart of the issue is sky high deficits and an ageing population putting pressure on federal budgets and the easiest way to grow the budget is to continually increase the tax base.

The local population doesn't wan't to or can't afford to have children and it's more beneficial for the government to import full grown adults who will contribute towards GDP immediately. All costs from doing this (i.e not just financial costs) are passed onto the citizens. Those with assets actually pay the least in this system since they financially benefit from increased increased rents, suppressed wages and larger target markets.

This is not a phenomenon unique to Canada. It is common problem in developed nations.

So, this is conflating two completely different issues, in a rather counterproductive way.

There is "complaining about immigrants", which is racist stuff like "I don't like the fact that the composition of my neighborhood is changing, I don't like the fact that the people from other places are different than me, I don't like that my school has to hire a Mandarin interpreter for parent council meetings".

Then there's a completely different thing, complaining about unsustainable immigration levels. Which has nothing to do with disliking the immigrants themselves, and might even involve a great deal of concern about their welfare. This is what you get when the situation is so bad that even Ukrainian refugees want to go back to Ukraine because they didn't realize how hard it would be to fend for themselves in Canada.

As one person aptly put it, this is the kind of complaint that happens when a host invites a hundred guests to a party and only orders three pizzas. You aren't complaining because you don't like the other guests, you're complaining because the host's all-are-welcome attitude is completely irresponsible when they have no intentions of making accommodations available.

Leftist and their leftist policies invite as many immigrants as they possibly can to an area with limited housing. Then it's shockedpikachu.jpg when the reality of supply and demand occurs and they clutch their pearls and ask "what could we have done to stop this?!" When in reality land, conservatives are telling them "we told you so". So instead of taking ownership of their mistakes thus proving conservatives were right, they gaslight everyone into thinking anything even remotely pointing towards the influx of immigrants is an issue is racist, effectively shielding themselves from blame.

This tactic of blaming any opposition as "racist" has been insanely effective in the West for the past four or so decades. Reality is catching up, and people left and right are seeing through the BS.

No one hates the immigrants, who wouldn't leave a third world country for Canada? The blame is firmly on the leftist politicians in Canada that are speed running the housing crisis.

https://archive.ph/4xWtC#selection-823.0-823.13

Whether that's protecting farmland/parks/forests/etc., increasing immigration, increasing building standards, etc...

In fact, I don't think it's viable for any party to drop support for even two of those. e.g. I doubt there's much of a voting base for someone who's both hard on immigration and relaxed on environment issues to allow for huge housing developments on protected lands.

How are you quantifying this? If this is true, how is it not reflected in some manner in prices? In other words, who are are the buyers propping up prices?

I'm not trolling, because if what you're saying is true it suggests that there is something fundamentally fraudulent about the Canadian housing market.

What would you all pay for such a thing? I'm ashamed of how little it actually costs, you can't even rent a car park in my old city for the same amount.

If this really is hacker news then you can either find somewhere good to live with a bit of searching or you aren't particularity good at hacking the basics of life.

Isn't Canada's housing problem caused by a supply crunch? Other than the Canadian government going into the real estate business and start building medium and high-density appartment blocks, what role does the Canadian government have in this mess?

Also, please note that this issue is plaguing basically the whole European housing market as well.

Median income after taxes: $68,400 [1] Median rent (2 bedroom): $2,300 [2] Average tax rate (single worker): ~32% [3]

If we apply the 30% rule (it's ok to spend up to 30% of pre-tax earnings spend on rent), your assertion doesn't hold up - well over 50% of Canadians are making plenty of money to afford rent. Of course, in expensive cities where rents have far outpaced wages things are going to be bad but that's true pretty much everywhere in the West these days. If anyone has better numbers, please share.

[1] https://www.policyadvisor.com/magazine/what-is-the-average-i...

[2] https://www.zumper.com/blog/rental-price-data-canada/

[3] https://www.oecd.org/tax/tax-policy/taxing-wages-canada.pdf

Why blame "government" and not capitalism? Canadian Gosplan didn't conspire to set housing prices at insane and rising levels. It was the market mechanism doing its own thing.

Despite how hard that is to believe, market equilibrium may not have been reached and prices may still rise.

In a properly functioning market we should see rising supply to meet demand.

Unfortunately regulation (zoning) prevents that. So until regulation improves to allow for more supply, everything else is a bandage.

That, or make it so somehow people stop wanting to live in large metros by eg creating economic opportunities in other cities.

Thing is, historically, Canada was incredibly innovative. It seems there was a culture shift somewhere in the 90s where "getting a good job" became the goal of Canadians.

We can see this echoed in education data. Canada has become the most educated nation, but is so because of an exceptionally high rate of vocational training. Canada lags well behind when it comes to research-focused education.

As seen in the link's charts, the US housing market crashed in 2006 because, after a period of innovation stagnation (Dotcom bust, 9/11), new innovation was taking hold. Investors left housing to ride that train, and thus the price declined. The people of Canada do not appear to have it in them to offer anything other than housing to investors.

Wages will have a much harder time heading up unless the federal government implements a moratorium on immigration, both temporary visas (e.g. foreign students) and permanent residence permits. The only way to (equitably?) do this is by turning off the tap going forward and denying/capping new immigration applications.

Plenty of people are already living that reality, it's called renting.

Long-term though I don't see a way for the Anglosphere to thrive unless immigration increases, given low birth rates.

So yes, there are regional differences but they impact each other and can broadly be considered a single market.

You've got excess demand over supply, so prices go up. Just like with anything else, the solution is to add more supply. Build more houses and prices of houses will go down.

I'd like to see literally any kind of rail, but for rail to be viable the Feds would actually have to enforce the law that passenger trains get priority. They're the only people who can sue about it and that's basically why Amtrak sucks. New rail is largely a pipe dream if we can't even leverage the miles and miles of rail we already have.

Subsidiaries would help, since most placed want to grow, but can't. Encouraging municipal internet would help since remote work could bring money into more rural areas and kick start the process of making them worth living in. Honestly, I just think we need strategies to encourage people to leave cities and more to smaller places. Or at least establish new cities outside of the normal bounds of the city a bit further away. The US has the space. There's no reason for everyone to crowd together.

I wonder if it will be just as fashionable in the future. All you need is a parking garage and a bathroom to make it scale!

https://www.numbeo.com/property-investment/rankings_by_count...

“Canada is on track to host around 900,000 international students this year, Miller said in an interview that aired Saturday on CBC's The House. That's more than at any point in Canada's history and roughly triple the number of students who entered the country a decade ago.”

There is a perverse incentive to attend what amount to for-profit scams in Canada owing to their immigration policies giving preference to folks with Canadian degrees.

The fact that Toronto and Vancouver haven't even set up container apartments in several places around the city is all the proof you need that folks don't care, which means they shouldn't be given a choice on whether or not to solve the problem. This should get mandated with fines for the city itself if it doesn't help the people who can't help themselves because the system's been designed to prevent them from getting help.

In reality, Canada and the U.S. have a "common market" of sorts that allows talent to move back and forth fairly easily. On top of this, cities tend to "specialize" in certain industries, and it's much easier to move the talent to the industry than move then industry to the talent.

This means that Hollywood stays in Los Angeles, and Canadian actors move south; Silicon Valley stays in San Francisco and Canadian programmers move south; Wall Street stays in New York and (some) Canadian Bankers move south.

I'm not challenging you on this, I'm really curious to know why you said this.

why can't people live in the YT?

You want a cheap house? Sub 300k? Come to the Midwest, you’ll get one easy. Oh what’s that? You’d rather live right in downtown San Francisco or Manhattan? Well…

Sometimes I think about just selling my expensive city apartment and moving out to a small rural mountain town and finding a wife there.

in 95% of the country you can buy a house for under $400k.

What? Have you seen real estate prices in Hong Kong and Singapore? The US is pretty cheap compared to the rest of the world.

The postwar years saw a huge boom in housing construction which created a few decades of housing availability that may just never exist again nor should it. Housing as a vehicle for building wealth and housing becoming unaffordable for the younger generation are two sides of the same coin.

The problem is the government interfering with the housing market by giving handouts under the guise of affordability, which just pushes prices even higher. Combine that with restrictions around building new houses, and nobody should be shocked we're in the situation we are.

No need to come up with a complex scheme for public housing. Vienna's system is already a big shitshow with a ton of people unable to access public housing.

Far better for the government to just get out of the way, and build enough supply that we don't see such a massive increase in prices.