Housing Affordability

This is an issue that is relevant mostly in Vancouver and Toronto. Most of the rest of the nation has reasonably affordable housing but what is lacking is job opportunities. This issue sits squarely on the shoulders of the national government. There are two reasons: it did nothing to stop the criminal elements who were laundering money at the casinos and then in the residential real estate market in Vancouver (which then infected Toronto) and it has shown no leadership in helping the provincial and municipal governments.

Housing affordability is best considered under a simple economic 101 model. Prices are determined by supply and demand. Let’s look at demand first.

The national government has let down Vancouver. It allowed, in fact, effectively encouraged off-shore purchases of residential real estate in the city by not stopping organized crime syndicates from Asia and allowing the off-shore asylum industry to get out of hand.

Solutions are clear. Tax all Canadian citizens and near citizens on their global income. This means that all citizens that have a Canadian passport, even though they may reside in Hong Kong, must pay taxes to Canada based on their global income. This parallels what the United States does. Further anyone that is a near citizens by way of owning a residential home in either Vancouver or Toronto should also pay taxes on their global income. Ownership in other cities where there is not the same pressure on price would be exempt. The logic is that these citizens or near citizens that do not live in the country are using Canada as a safe haven get away place if something goes wrong in the country of residence. There needs to be a price to pay.

Part of this proposal is that law firms and trusts cannot shelter the identity of the people for whom the residential real estate is held. This would be a nation of people. Corporations only have the status and rights that the people are willing to assign to them. All real estate must be associated with a real person who can be looked to pay tax. The veil must also be pierced on companies. The trail of ownership must go up to someone that has control of the entity and that person will pay taxes on their global income.

On the supply side the national government should work with all of the parties in the supply chain to increase supply of new housing. This includes:

  • Reducing the requirement for pre-sales in a project. This reduces the need to sell to foreign buyers. This may be accomplished through the private equity market system that is being developed in Calgary
  • Reduce the various taxes from all levels of government. Currently taxes are about 20% of the costs of a new home
  • Eliminate municipal taxes on new projects until the homes are rented or sold, allowing for an increase in speculative supply increases
  • Streamline the dispute resolution process between all stakeholders
  • Demand that permits be issued in a reasonable time period (6 months from time of submission)
  • Streamline the zoning process by which projects that fit the community plan will receive rezoning within 3 months
  • Develop a housing supply mandate whereby each community will contribute to solving the supply problem by having its proportionate share of new housing in the community. This is part of the responsibility of living in a city. Communities cannot continue to demand lower cost housing and at the same time not allow new homes in their community. Instead, the focus of community groups would be how the new housing will be accommodated.
  • Reduce the land cost on new developments by increasing the amount of entitled land available
  • Increasing the supply potential of the land increases the supply of new homes which means that some developers will look down market to find a niche (increasing affordable housing)
  • Recognize that the development industry is part of the solution not the creators of the problem.
  • Seek innovation in building systems to reduce time and costs of construction.
%d bloggers like this: