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The numbers don’t lie: The housing crisis is not caused by a supply shortage (www.policyalternatives.ca)

submitted 3 days ago by sbv@sh.itjust.works to c/canada@lemmy.ca

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the housing crisis has been created by banking practices that have directed excessive amounts of credit into the property market, and especially residential mortgages. As a result, buyers can bid prices up to ever-higher levels, resulting in a market where people must pay more for the same type of housing. Hence financialization can be defined as an inflationary tendency in the housing market that is induced jointly by banks’ desire to expand mortgage lending and buyers’ confidence that the value of their properties will rise.

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However, the image of a bubble bursting and prices returning to a more rational “equilibrium” level does not seem to apply to the housing market. Because housing is a necessity, people are willing to pay high prices for it. Bidding wars can therefore persist even when relative supply grows, so long as credit markets enable them.

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[-] sbv@sh.itjust.works 31 points 3 days ago

Housing is seen as a huge part of Canadians' retirement planning. Politicians are afraid to do anything to lower the price of housing (remember Carney's housing minister saying they didn't want to reduce house prices?) because they think they'll be punished by voters. Because of that, house prices keep increasing.

It'd be great if there was a bi-partisan consensus to gently let the air out of the balloon by carefully lowering the amount of money available in mortgages, or the amount of money exempt from taxes on the sale of a primary residence. By all means, increase supply at the same time, but we also need to make homes less of an asset.

[-] avidamoeba@lemmy.ca 7 points 3 days ago

Letting air out can happen a lot quicker if you give a good reason to people not to care about their home price. For example by providing an equivalent or otherwise decent government pension. My inlaws fall into that bucket.

[-] sugarfoot00@lemmy.ca 2 points 3 days ago

I agree with letting air out of the balloon slowly. That's what rezoning and densification shoots to do. It is slow because development is slow. But limiting available capital (ie: competing for mortgages)? In what world does that make sense? And if primary residence cap gains aren't exempt, then anybody that had to move for work would get screwed. That's a corporate friendly policy, not a people friendly policy. The goal here is for people to own houses, and for there to be penalties for owning more than one. But that's exactly where policy is right now.

[-] sbv@sh.itjust.works 1 points 2 days ago

I agree with letting air out of the balloon slowly. That's what rezoning and densification shoots to do.

My experience with densification was seeing 600k houses (that I could almost afford) be replaced with 2-4 1.1m houses (that I could not afford).

We should pursue densification and rezoning are positive for many reasons, but price isn't one of them.

But limiting available capital (ie: competing for mortgages)? In what world does that make sense?

A world where prices are increasing faster than wages. We've had historically low interest rates since 2008, which has made borrowing large sums easier, meaning people can afford to pay more for houses.

That was great for people who got in early: they could get cheap money that wouldn't reduce their quality of life. But it means they could bid up the price of houses. Folks coming after had to pay higher and higher prices, until they did start to see a quality of life hit.