Housing crisis.. Made in Canada

It’s really not that complicated.  If you really want to resolve the housing crisis you just need to do these FIVE things

• 1. Bring back 35 year amortization periods and increase qualifying home prices to $1,250,000 or higher.
• 2.Remove rent control rules.
• 3.Halt new immigration until we can build up enough support services to handle what we have already. *(exception below)
• 4.Cut back on the municipal, provincial gov’t Red Tape to build any type of residential housing and that includes purpose built rental apartment buildings.
• 5.Create a hiring program to entice and incentivize people to get into skilled trades …and bring over people from outside Canada if you have to (this would be my exception to point 2 above)
• Do this and you’ll soon have more housing units available than you could even dream of.  It could be done in 3 to 5 years.  It’s just not that complicated.

A CLOSER LOOK

1-35 YEAR AMORTIZATION AND HIGHER MAXIMUM PURCHASE PRICE.

No, I don’t want anyone to have a mortgage for 35 years. But I do want people to be able to buy now, today!  So, there is huge myth being perpetuated by the media and a lot fear mongering about these items. Realty check..  Canadians pay their mortgage off in around 17 years or less, on average.  Surprised?  Don’t be.  New homebuyers are usually younger, between 25 and 35 years of age. Their incomes go up.  They need a break to be able to get into the housing market. They need to extend the amortization to reduce their payments. In years, their incomes will have increased. In 10 years, they will have paid their mortgages down significantly and will be earning an even higher income.   

That’s the pattern. That’s real life.  Don’t get fooled into thinking your/our incomes are static. That’s just not reality.  Give people a chance to own a home.  Simple fix.  

 2-RENT CONTROL.. GET OUT OF THE WAY PROVINCIAL AND FEDERAL GOV’T.

Want to speed up new construction even faster?  Remove rent controls today..Now! Immediately.!  Some of you might think landlords will jack their rents way up and affordability will be impossible. And this will likely happen but ONLY TEMPORARILY.   

If rent controls were abolished, Investors will see this as an opportunity. You’ll see individual investors buy single family homes with the intent of renting them to make a profit. You’ll also see developers build apartment buildings with that same intention. 

But this will also increase the supply of homes and rental units. What happens when we have too much supply? Prices moderate and even fall. This is basic economics 101. It’s taught in every school around the world.
Oversupply will follow. Too much supply, not enough demand, prices go down. You now have a market driven rent price. And that’s what rents should cost.

Look, rent controls are the reason why you haven’t seen any new purpose built rental building come to the market in decades.. The investors and owners don’t want to take the chance of not being able to raise their rents high enough to cover their operating costs. Look at the rate of inflation over the past 4 years.. 7% and 8%.. Yet rents could only increase by between 0% and 2%.

3-HALT ALL IMMIGRATION FOR A YEAR OR TWO.

We’ve allowed too many people into Canada over the last 4 years.  Why our gov’t did this is a mystery. The number of immigrants and migrants was never clearly disclosed and not discussed. The gov’t let in over 3 million people (Permanent residents, temporary work visas, students, asylum seekers and others) over the last 5 years. And that number is probably a low estimate.. We don’t really know. The gov’t has admitted they don’t have a good handle on this number.  Yikes! 

4- CUT BACK ON PROVINCIAL AND MUNICIPAL RED TAPE TO BUILD NEW HOMES.

There’s a great white paper study released in February 2023 entitled Purpose-builts Rental Compendium Report by industry associations on what the obstacles and problems are with building Purpose Built Rental properties.. They also give some great examples of why we need individual rental property owners in Canada and why they serve a very important need. 

If you want to know what the problems are with why we are not seeing more purpose built rental buildings going up, just read this.  

Here’s a link to the study   https://www.bildgta.ca/wp-content/uploads/2023/02/Purpose-Built-Rental-Whitepaper-FINAL.pdf

One of the lines I like to quote from the study says it all..(this is for Toronto but it can be applied to many cities across Canada)  “Rental project development timelines are taking an average of 100 months.” That’s just a ridiculous amount of time.  

And another quote  “Rental supply additions from rental and condominium projects to total 135,000 units over the next 10 years…but falls well short of rental demand projections of 312,000units.”

Hey gov’t… get outta the way!

4- WE NEED MORE SKILLED LABOUR AND TRADES PEOPLE.

I tell my son and others this.. If you want a good career that is recession proof, learn a skilled trade. You’ll always have work!  

https://www.cbc.ca/radio/costofliving/skilled-trades-shortage-cost-of-living-1.7169441

We are falling behind in so many areas.  Canada expects 700,000 of the 4,000,000 people that work in skilled trades to retire by the end of this decade. Canada is not looking to replace these people. Instead, Canada has focused on bringing in University graduates.   And while I applaud a University education, we need to change this attitude that College or Trades schools are a lower class. That’s just not true and it’s not good advice.

Let’s entice skilled  trades people to come here.  Let’s motivate Canadians to learn a trade. Demand will be there for years and decades to come. And yes, I still think we should halt immigration temporarily but let in those that can help us.   

Your best interest is my only interest. I reply to all questions and I welcome your comments. Like this article? Share with a friend.

Steve Garganis: 416-224-0114; steve@canadamortgagenews.