A few of the totally man-made causes you possibly can’t afford a house in Canada

Toronto
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Canada

Cities like Vancouver and Toronto are talking a big game about the housing crisis, but they are actively making urban environments priceless

Author of the article:

Tristin Hopper

Publication date:

June 17, 2021 • 1 hour ago • Read for 5 minutes • 22 comments A Google Street View image of 1912 William St., a Vancouver property currently listed for $ 249,000. The lot, which is a 9 foot x 60 foot micro lot, consists of the gravel driveway with the shed in the back. Photo from Google Street View

When Prime Minister Justin Trudeau met other G7 leaders last weekend, he happened to represent the only country at the summit where it was most difficult for citizens to buy a house. Even British Prime Minister Boris Johnson came from an overcrowded island that makes it easier for citizens to scrape together a down payment on a condo.

According to the latest Demographia rankings on the unaffordable housing, Canadians have been netted more heavily than Americans, British or even Singaporeans in their own markets. This was only exacerbated by a late-night pandemic real estate surge that sent prices skyrocketing even in secondary markets.

Canada seems like an odd place to have a housing affordability crisis: we have practically unlimited land and lots of trees and gypsum mines to build them with. Here are some of the fully man-made reasons you cannot currently afford a home in Canada.

Foreign capital is obviously making a contribution

The story goes like this: Legions of foreigners (especially from China) have taken over large parts of the Canadian housing market as investment properties, raised prices and displaced an entire generation of would-be buyers.

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Critics of this notion will often point out that only 10 percent of Vancouver’s real estate market is owned by non-residents. However, with only a small fraction of a city’s housing market for sale in a typical year, even a modest amount of borrowed capital can tip the scales into the $ 1 million demolition range. For example, stock prices are routinely pushed into the stratosphere by buyers bidding a small fraction of a company’s available stock.

“While many downplay this factor (” It’s only X% of the buyers! “) Economics 101 will tell you that the marginal buyer determines the price,” BMO chief economist Douglas Porter wrote in a 2016 report.

Screenshot from VanFun.com, a website aimed at connecting Chinese buyers to Vancouver real estate. If the non-resident demand for a scarce commodity is strong enough to encourage the creation of such websites, it can be assumed that it is a factor making it unaffordable. Photo from VanFun.com

Still, it would be wrong to identify foreign capital as the singular factor driving the price of Canadian real estate up.

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New Zealand, for example, prohibits any foreign ownership of existing property within the country. That means that as a non-resident who wants to live among Kiwis (like Canadian-born director James Cameron), you need to be prepared to build your own home. Even so, New Zealand property prices have still risen a staggering 24 percent over the past 12 months.

This is what a $ 1 million home looks like in four Canadian cities
This is what a $ 1 million home in Toronto looks like right now

In recent years, the British Columbia government has also put in some important legislative measures to deter foreign buyers: a 20 percent foreign buyers tax and a 2 percent speculation and vacancy tax to penalize owners of empty homes. This has cooled the west coast housing market, but it hasn’t stopped Vancouver home prices from rising 11.4 percent in 2020. The moral? Foreign buyers can absolutely destroy a real estate market, but banning them isn’t a panacea for achieving affordable housing.

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Canadian cities are being actively manipulated to prevent a new offer

For several years, a team from the University of British Columbia has been working to catalog the zoning laws in Metro Vancouver. Their results show a region that is almost exclusively geared towards single-family homes. In the vast majority of Metro Vancouver’s 3,000 square kilometers, it’s illegal to build anything denser than a semi-detached house. In a city that talks endlessly about its affordability crisis, even the construction of a narrow street comes up against a Kafkaesque nightmare of bureaucracy.

Anywhere you see yellow it is illegal to build a townhouse or condo. Photo from UBC Sociology Zoning Project

The situation is similar in Toronto, where the majority of neighborhoods expressly prohibit everything except “single family homes”. San Francisco, one of the most expensive housing markets in the US, has a density problem visible from space. Aerial views of the city show a small core of skyscrapers in the city center, surrounded by a gray sea of two-story houses.

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As in any other market, houses get expensive when governments restrict their supply. If your local government suddenly started restricting the number of beets that can be sold in local grocery stores, the price of borscht would skyrocket overnight.

And right now, the per capita supply of housing units in Canada is lower than in any other G7 country. Canada’s high migration rate is helping to increase supply pressures, but that is no excuse for such an acute housing shortage as our immigration rate is proportionally lower than Germany, the UK and even Switzerland.

If you’re forcing cities to look like this, don’t be surprised if they get prohibitively expensive. Photo from Wikimedia Commons

In an email to the National Post, Leo Spalteholz, a real estate analyst from BC, named city restrictions on new listings the “# 1 root cause of high prices.”

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They are also the most insidious. When townspeople like Margaret Atwood go out of their way to resist even the construction of low-rise condominiums in their area, it ultimately leads to cities where housing supply is artificially stifled.

It is getting more and more expensive to build a house

Any green ordinance or code upgrade adds an extra cost to building a home.

The BC Step Code – a 2017 law that contains an escalating set of requirements aimed at bringing households to net zero emissions – will add an estimated $ 50,000 to the price of a new home at the highest level . A recent report by the Building Industry and Land Association found that the cost of getting a home approved and developed in the greater Toronto area has increased by as much as 878 percent since 2004. BC introduced a real estate transfer tax as a luxury tax in 1987 when the average home price in BC was less than $ 200,000. Now that the average house price in Vancouver is $ 1,359,516, the provincial government is charging $ 25,190.32 before new owners even move in.

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And a grid of local regulations is helping to drive building prices up. Vancouver now mandates a minimum number of EV charging points for new builds, and any construction project that works near trolleybus lines must hire a $ 90 an hour certified trolley overhead safety watcher to monitor the lines.

Even before the construction industry was overwhelmed by recent increases in the cost of lumber and other materials, the approval and construction of the average Canadian home was becoming increasingly expensive. And with so many Canadians living on the verge of home ownership, every new price comes out of the market at the expense of a different segment of the family.

No real estate transfer tax for motorhomes parked under the SkyTrain. Photo by Arlen Redekop / PNG photo

• Email: [email protected] | Twitter: TristinHopper

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