I've talked to Patrick Condon. Honestly, I don't think he's looked carefully at what's been happening to land lift. He assumes that the higher home prices go, the more land lift there is, which can then be taxed to pay for below-market housing. In fact, rising construction costs are squeezing land lift from one side, and rising house prices (the value of the land without any redevelopment at all) are squeezing land lift on the other side. Finally, municipal governments desperate for revenue (because property taxes are so unpopular) have been raising development charges, adding to the impact of rising construction costs. Land values have been falling, not rising, since around 2018. https://morehousing.ca/cost-bottleneck
I think Patrick Condon has things exactly backwards. Compared to most cities, Metro Vancouver has limited land, because of the ocean and mountains. Within a circle with radius 25 km around downtown Vancouver, less than 40% of the land is buildable. Because land is scarce, we can expect that it'll be expensive, more so than in a city or metro region with more plentiful land (like Edmonton or Montreal). This means that we should be allowing more height and density, reducing the cost of land per square foot of floor space. *Land* in Vancouver will be expensive, but there's no reason for *apartments* in Vancouver to be so scarce, expensive, and tiny.
I would also point out that Austin, Texas has been building so many apartments that rents dropped 12% in the year ending December 2023. https://morehousing.ca/austin
Do you think we can create conditions in Vancouver under which developers will build the kind of excess capacity Austin now has? We have less than 1% vacancy rates year after year. Austin started their building boom with 7% vacancies and ended up with 12%. Sounds like a different planet! I'm skeptical that investors here will take the kind of risks they did in Austin. I still don't think we'll get to affordable rentals by massaging the private market.
A technical point - the way vacancies are counted and reported in the US and Canada is different. In Austin, a 8% vacancy rate is what's needed to keep rents stable. In Vancouver, it's more like 3%. https://x.com/aarmlovi/status/1426186987728474112
"Do you think we can create conditions in Vancouver under which developers will build the kind of excess capacity Austin now has?"
Absolutely. Anything you build will be occupied. Any vacancy will get hundreds of queries. The incentives are there. The problem is that we have anti-growth institutions which make it very difficult to get approval.
What drives suppliers to try to increase their market share is that they have fixed costs. That gives them a strong incentive to try to expand their sales.
I can confirm I'm tearing out my hair. In Victoria, the average asking price for a 1 bedroom apartment is $2,150. That requires a monthly take-home income of more than $5,000, which requires an income of over $80,000 to come in under 40% of take home pay going to the rental. The average household income in Victoria is ~$65k a year. This is for a one-bedroom apartment, not a home suitable for raising a family, or even a two-bedroom suitable for a family with a child.
It's hard to have a discussion about ownership with rental costs that high. Rentals leave less and less room for savings for retirement, saving for a home, and starting a family and having a child. These rents go to owners who in some cases are more than covering their mortgages.
The conversation needs to shift. Something needs to change. Capital gains on principal residences over $1 million, renters should either be entitled to larger TFSA/RRSP contribution room for every year they don't own, or they should be able to make rental payments tax deductible -- or perhaps both. As our own PM said, the difference in wealth between homeowners and renters is very very large. How is it that OAS is paying out retirees $750 a month if they have an income of ~$86k a year, and renters are getting absolutely destroyed with these prices with little hope of just having a single-bedroom apartment that doesn't sabotage their futures?
Look at the happiness rates. Those over 50 in Canada are the 5th happiest in the world, while those under 30 are 58th. Their futures aren't being stolen, they are already stolen.
"The conversation needs to shift. Something needs to change. "
I'm reading a book on reconstruction following major disasters, like an earthquake. If we had an earthquake that had wiped out a quarter of the housing in Vancouver and Victoria, and we needed a crash program to suddenly build a lot more housing, what would we do?
Probably something similar to the wartime effort made after WW2 to build homes. Build them fast, cheaply, and everywhere. Make approvals automatic for pre-approved designs. I'm sure there are other levers the government can pull to make developments cheaper.
I realize the feds and BC are doing some of these things (all? and others, too). Still, it feels like someone is using a garden hose on a house that's on fire and about 1/4 of the building is left to burn (I don't have your skill at developing easy-to-understand metaphors, like how we regulate housing like a nuclear power plant and tax it like gold mine, I think that's it?). Yes, over time, the fire will go out because the house will burn itself out, and in the meantime, the water from the garden hose will help, but it does nothing for people right now. To take this seriously, the demand valve needs to be shut off, not turned to medium pressure (immigration via foreign students and TFWs), which again works to benefit those over 50 in the form of a bigger tax base and suppressed wages/cheap labour.
We need to get the housing prices under control before we can work to address the population crunch we allegedly face through immigration so our taxes can fund the baby boomers, who themselves failed to plan for what their healthcare and support will cost as they age, if we don't, we will undermine support for immigration so severely that both issues will become even worse.
In the short term, immigration is definitely the most important lever that the federal government can pull. From the perspective of BC, though, we're still going to have people moving here from the rest of Canada. And because of Covid, where people want to live and work doesn't line up with our pre-Covid housing stock - things are going to continue to be miserable until we can build a lot more housing everywhere.
Noah Smith comments that right now, it feels like a lot like the 1970s - a time of exhaustion and pessimism.
A developer comments that in Edmonton, he can purchase land and deliver housing in the same calendar year. That's the kind of speed we need. Talking to people at the municipal level, I often feel like they're moving in the right direction, but they're being really slow and cautious. We need to move faster.
Yes, a cultural shift perhaps. Sometimes that requires people to retire and be replaced by the generations facing this issue. Relatedly, thank god Edmonton has already become one of the more progressive cities around zoning. I imagine their rental costs will continue to rise quickly and squeeze affordability just as they have everywhere else.
Upzoning can have an effect on affordability, but it won't be enough if affordability isn't a condition of upzoning. See Patrick Condon's article https://www.biv.com/news/economy-law-politics/patrick-condon-behold-vancouver-where-there-are-housing-solutions-be-found-8271577 Well worth a read, I think.:-)
I've talked to Patrick Condon. Honestly, I don't think he's looked carefully at what's been happening to land lift. He assumes that the higher home prices go, the more land lift there is, which can then be taxed to pay for below-market housing. In fact, rising construction costs are squeezing land lift from one side, and rising house prices (the value of the land without any redevelopment at all) are squeezing land lift on the other side. Finally, municipal governments desperate for revenue (because property taxes are so unpopular) have been raising development charges, adding to the impact of rising construction costs. Land values have been falling, not rising, since around 2018. https://morehousing.ca/cost-bottleneck
I think Patrick Condon has things exactly backwards. Compared to most cities, Metro Vancouver has limited land, because of the ocean and mountains. Within a circle with radius 25 km around downtown Vancouver, less than 40% of the land is buildable. Because land is scarce, we can expect that it'll be expensive, more so than in a city or metro region with more plentiful land (like Edmonton or Montreal). This means that we should be allowing more height and density, reducing the cost of land per square foot of floor space. *Land* in Vancouver will be expensive, but there's no reason for *apartments* in Vancouver to be so scarce, expensive, and tiny.
I would also point out that Austin, Texas has been building so many apartments that rents dropped 12% in the year ending December 2023. https://morehousing.ca/austin
Do you think we can create conditions in Vancouver under which developers will build the kind of excess capacity Austin now has? We have less than 1% vacancy rates year after year. Austin started their building boom with 7% vacancies and ended up with 12%. Sounds like a different planet! I'm skeptical that investors here will take the kind of risks they did in Austin. I still don't think we'll get to affordable rentals by massaging the private market.
A technical point - the way vacancies are counted and reported in the US and Canada is different. In Austin, a 8% vacancy rate is what's needed to keep rents stable. In Vancouver, it's more like 3%. https://x.com/aarmlovi/status/1426186987728474112
"Do you think we can create conditions in Vancouver under which developers will build the kind of excess capacity Austin now has?"
Absolutely. Anything you build will be occupied. Any vacancy will get hundreds of queries. The incentives are there. The problem is that we have anti-growth institutions which make it very difficult to get approval.
What drives suppliers to try to increase their market share is that they have fixed costs. That gives them a strong incentive to try to expand their sales.
I can confirm I'm tearing out my hair. In Victoria, the average asking price for a 1 bedroom apartment is $2,150. That requires a monthly take-home income of more than $5,000, which requires an income of over $80,000 to come in under 40% of take home pay going to the rental. The average household income in Victoria is ~$65k a year. This is for a one-bedroom apartment, not a home suitable for raising a family, or even a two-bedroom suitable for a family with a child.
It's hard to have a discussion about ownership with rental costs that high. Rentals leave less and less room for savings for retirement, saving for a home, and starting a family and having a child. These rents go to owners who in some cases are more than covering their mortgages.
The conversation needs to shift. Something needs to change. Capital gains on principal residences over $1 million, renters should either be entitled to larger TFSA/RRSP contribution room for every year they don't own, or they should be able to make rental payments tax deductible -- or perhaps both. As our own PM said, the difference in wealth between homeowners and renters is very very large. How is it that OAS is paying out retirees $750 a month if they have an income of ~$86k a year, and renters are getting absolutely destroyed with these prices with little hope of just having a single-bedroom apartment that doesn't sabotage their futures?
Look at the happiness rates. Those over 50 in Canada are the 5th happiest in the world, while those under 30 are 58th. Their futures aren't being stolen, they are already stolen.
"The conversation needs to shift. Something needs to change. "
I'm reading a book on reconstruction following major disasters, like an earthquake. If we had an earthquake that had wiped out a quarter of the housing in Vancouver and Victoria, and we needed a crash program to suddenly build a lot more housing, what would we do?
Probably something similar to the wartime effort made after WW2 to build homes. Build them fast, cheaply, and everywhere. Make approvals automatic for pre-approved designs. I'm sure there are other levers the government can pull to make developments cheaper.
I realize the feds and BC are doing some of these things (all? and others, too). Still, it feels like someone is using a garden hose on a house that's on fire and about 1/4 of the building is left to burn (I don't have your skill at developing easy-to-understand metaphors, like how we regulate housing like a nuclear power plant and tax it like gold mine, I think that's it?). Yes, over time, the fire will go out because the house will burn itself out, and in the meantime, the water from the garden hose will help, but it does nothing for people right now. To take this seriously, the demand valve needs to be shut off, not turned to medium pressure (immigration via foreign students and TFWs), which again works to benefit those over 50 in the form of a bigger tax base and suppressed wages/cheap labour.
We need to get the housing prices under control before we can work to address the population crunch we allegedly face through immigration so our taxes can fund the baby boomers, who themselves failed to plan for what their healthcare and support will cost as they age, if we don't, we will undermine support for immigration so severely that both issues will become even worse.
In the short term, immigration is definitely the most important lever that the federal government can pull. From the perspective of BC, though, we're still going to have people moving here from the rest of Canada. And because of Covid, where people want to live and work doesn't line up with our pre-Covid housing stock - things are going to continue to be miserable until we can build a lot more housing everywhere.
Noah Smith comments that right now, it feels like a lot like the 1970s - a time of exhaustion and pessimism.
A developer comments that in Edmonton, he can purchase land and deliver housing in the same calendar year. That's the kind of speed we need. Talking to people at the municipal level, I often feel like they're moving in the right direction, but they're being really slow and cautious. We need to move faster.
Yes, a cultural shift perhaps. Sometimes that requires people to retire and be replaced by the generations facing this issue. Relatedly, thank god Edmonton has already become one of the more progressive cities around zoning. I imagine their rental costs will continue to rise quickly and squeeze affordability just as they have everywhere else.