What is this affordable housing?
We hear a lot these days about affordable housing, but I am not sure what that means.
At least here in Greater Victoria, housing seems to be very affordable – as soon as a development comes on stream, everything sells out in days. Any house in any condition comes on the market and is sold in a flurry of multiple offers.
But the average shack costs a million bucks, so what gives?
A lot of folks say that the affordability solution lies in building ever more supply – but is that realistic? You would need to dump hundreds of thousands of new homes on the market instantaneously to saturate it to the point where prices tumble.
But housing development doesn’t work that way. Houses are built in small batches – often after long periods of zoning, planning, and a myriad of other hurdles jumped.
Furthermore, when the government provides access to easy money to “provide more stock” that seems to incentivize folks to bid higher on limited choices. And I see nothing but trouble ahead with the concept of senior governments meddling in the zoning game.
So how about this idea? Instead of increasing supply we reduce demand. Maybe a major re-think needs to be done by these folks who believe they gotta own a home and are afraid of missing out.
I can’t blame them for dreaming that the investment opportunity is significant. It certainly worked for me over a period of 30-odd years – but can the ever-increasing appreciation of housing as an investment keep going on forever?
When most companies stopped paying for pensions, or self-employed folks needed to plan for retirement, housing was a pretty good bet – and certainly better than low interest bank products or overly managed mutual funds, etc. on offer.
But housing as an investment simply drives prices higher. Furthermore, the amount of down payment required these days is just way beyond a whole lot of people’s capacity.
And if you can “get into the market,” homes come with a lot more expenses than just the massive mortgage you just qualified for by the skin of your teeth.
So let’s offer up an attractive alternative. Let’s make rent tax deductible. Let’s allow renters to claim thousands on their taxes and optionally roll their refunds into their retirement plans or tax-free savings accounts.
The feds offer billions to developers to build housing stock, so they could certainly incentivize building rental units as equally profitable.
They could ensure lifelong rental protections and establish building maintenance accounts. If/when renters gain the resources to buy a home, limit the rent increases to the next tenants coming along to the consumer price index or similar.
If housing can be made “affordable” why not rent too? It would also be good for the economy if everyone had a little extra to spend on other things besides gargantuan mortgages.
