Could the Missing Middle Solve the Housing Crisis? | The Walrus
Could the Missing Middle Solve the Housing Crisis? | The Walrus
Victoria, BC, is making an ambitious move to densify neighbourhoods. It could be a model for the rest of the country
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Personally, I think the bubbles already popped, we just don't know it yet. Let's fast forward a year or two, when Vancouver and Victoria and Toronto, and all the other pumped up areas, are renewing their 1,300 sq ft 1.4 million dollar shacks at >6.25%.
In fact if the government and the Bank of Canada were actually serious about battling inflation and the ever so climbing housing bubble, they'd hint in the throne speech that the principle residence tax exemption is coming to an end for 2024. That would probably unleash a torrent wave of selling in the fall, that would maybe actually save some peoples behinds. But this of course won't happen..
Bubble has not popped.
When people are handing the house keys back to bank and saying fuck it, then you will know it has popped.
A good indication of that is when you start seeing for sale signs popping up everywhere and those signs stay there.
Seen it before elsewhere. Canada has done an amazing job with smoke and mirrors to keep the bubble inflated but Canadians have run out of money to prop it up.
When it pops, the government will have already run through all the ink in the money printing machines to do anything about it. Rough times ahead. Hopefully it doesn't come to that, but it seems the writing is on the wall.
That's what I'm saying though, is it's effectively popped, it just hasn't sunk in yet. Economic changes are what's known as "sticky," in that macroeconomic changes take time to spill down through the varying stratas that make up our economy. A change made today will not be felt or measureable for a few months, and so on.
Give it a year, and those signs will be staying out I think. Could be wrong, I'm not a prophet, but I agree that I also think rough times are ahead.
When people are handing the house keys back to bank and saying fuck it, then you will know it has popped.
When people are handing the house keys back to the bank and saying fuck it, then you'll know that you're no longer in Canada. No recourse mortgages aren't a thing here.
Lol, when someone doesn't have the money to pay the mortgage and realizes they are in way over their heads and file for bankruptcy, that's a no recourse mortgage right there. What's the bank going to do? Make you extend your mortgage for 70 yrs?
- Bankruptcy is not free of recourse.
- You may not even be granted bankruptcy.
- You're not just saying "fuck it" when you find yourself in a position where bankruptcy is on the table.
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There are are jurisdictions with no recourse mortgages. There you really can just say "fuck it", hand in your keys, and walk away. But Canada is not one of them.
Is it that you are not Canadian or is it that you focus your attention on US media and have forgotten that Canada is a different country?
Oh, I'm not saying they can walk away and just hand in their keys, done and dusted. Granted bankruptcy? You do understand that all loans in Canada are civil matters. If you move through the proceedings of declaring bankruptcy, and it's genuine because you don't have the money to continue to pay you mortgage, bills and debts, you think that you will be denied the option to proceed with that? Or do you think a consumer proposal to pay out all the outstanding charges on a defaulted mortgage and loan will be suitable when you can't pay it?
I don't even know of any places where you can just hand in your keys and walk away without reprocussions. But trying to pay for a repossessed house isn't really for many in that situation.
fmhy.ml user, so... most likely the former.
Instance shaming now? Hilarious.
Canadian for my entire life last time I checked.
Curious how you came to that conclusion based on a comment and instance?
track record from instances is poor
lots of tankies that just so happen to be whatever nationality that want to be
Lol. Want my fucking address?
Removing the principle resident capital gain exemption wouldn't help anyone without a home buy a home, it would just hurt people who already have a home. Also, capital gains aren't realized till you sell, so again not really helpful.
The way to alleviate the issue is implement a progressive property tax on second homes. Each home beyond the first has a 100% increase in property tax for every home besides the primary residence. 2 homes: 100% increase, 3 homes: 200% increase, etc.
Housing shouldn't be an investment, but punishing people who have only 1 house is the wrong way to go about this.
It's definitely fucking shitty, and you are absolutely right that it doesn't punish the people responsible OR help people priced out immediately. Don't get me wrong. But it's ultimately going to be one of the tools needed to pop the bubble. Your capital gains statement, is the key to how it'll work. It's going to hold quite a lot of people from selling is what its going to do. It's going to be one of the elements to stall the market. And that's what's needed to start spilling through the system. If it holds off folks from buying/selling and pumping up the market, it's going to stop the cycle. If you were hoping to sell your house that you bought for $300 at $700 in this crazy market, it's going to wipe out probably $70-$100k right off the top that you were going to spend on your new house, because that's now less money you have in your pocket. While this sounds minor at a micro scale, think about the effect of this at a macro scale + the fact your new mortgage will be at about 5-6% higher interest, which is also going to erode both borrowing power and will to borrow. We are talking about probably $200k of impact here for some, if not more (depending on personal situations). Especially in light of the financial conditions of general Canadians at the moment, that will likely be enough to remove a material amount of participants from the marketplace, because that $400k gain you were hoping to captialize on, in your move up, has now been severely eroded.
It also will hopefully stall the Toronto/Vancouver retirement plans, where the boomers who have capitalized on an ever rising marketplace, will suddenly be facing a big tax bill on the ol' dump and downsize plan. It cuts a lot off the top, so hopefully giving these folks some pause. If they are suddenly looking at a $200k tax bill, it might cool their jets a bit too. Which in turn would take a bite out of the market they were looking to turn to, as a result. Won't be every case, but it would likely remove some from entering the market.
It isn't perfect, and it won't solely cause the cycle to stop, but it's one of the tools that could be (and arguably should be) used. For everyone else, they can easily get themselves out of this tax issue they unfairly face, by remaining put where they are. Hence taking even more heat out of the market.
Your property tax bill is kind of a neat idea by the way. I don't know if it would be effective though, because property taxes aren't generally high enough to cause pause. A 100% property tax increase on my house for instance would only remove another $4k from my pocket. Don't get me wrong though, an out of the box tax solution like this will be needed to keep the prices surppressed, once the market pops. That and just an outright ban on HGTV, which while I have no actual objective proof, is I believe also responsible for the bullshit situation we find ourselves in.