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Without affordable housing, Vancouver risks becoming an economic ghost town

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Re: Without affordable housing, Vancouver risks becoming an economic ghost town

#381

Post by gozur88 »

kansface wrote: post #348
fiatmoney wrote: post #217

Earlier quoted context omitted.

Prop 13 has nothing to do with real estate price inflation. If anything, shifting of property tax burdens from long-time homeowners to new homeowners would tend to suppress prices. Shifting that burden evenly across the population would tend to cause more churn as long-time homeowners get pushed out, but would do nothing to increase aggregate housing or lower aggregate prices. Although, you can get pretty far into th…

> Prop 13 has nothing to do with real estate price inflation. Its hard to imagine the current real estate inflation in the case where home owners had to pay taxes against the fair market value. In other words, home owners would at least see some value in new construction. As it stands now, there is only downside.

>Its hard to imagine the current real estate inflation in the case where home owners had to pay taxes against the fair market value.

Prop 13 exists in California because that's exactly what was happening. Prior to its passage you paid on the assessed value of you house, and it didn't stop prices from double digit percentage increases every year.

People who'd owned their homes for decades were being forced to sell because the assessed value of the house had gone up so much they could no longer afford to pay the taxes.

Re: Without affordable housing, Vancouver risks becoming an economic ghost town

#382

Post by brc »

thescriptkiddie wrote: post #220
msvan wrote: post #82

It seems like many major cities of the world are experiencing this problem, and no city has been able to come up with a good solution. It always leads to displacement and newspaper articles about displacement, but no real solutions. Here are a couple of solutions: 1. Build really tall. Hasn't worked out all that great in Hong Kong, though. 2. Rent control. This is often unfair and inflates price of non-rent controlle…

> Rent control. This is often unfair and inflates price of non-rent controlled apartments. There's the rub. Virtually all rent control schemes in North America only apply to a subset of properties (usually the shitty ones), which isn't fair and often doesn't work. Meanwhile, Germany has a long history of successful rent control, perhaps not coincidentally because it applies universally.

They are crappy because of the rent control.

It is always and every time a terrible idea. It should never be implemented anywhere, at any time, for any reason.

Price fixing destroys markets and creates a tiny subset of winners at the expense of everyone else.

Re: Without affordable housing, Vancouver risks becoming an economic ghost town

#383

Post by dragonwriter »

fiatmoney wrote: post #217
gorkemyurt wrote: post #211

One of the main reasons of the housing crisis in the Bay Area is Prop 13 ( https://en.wikipedia.org/wiki/California_Proposition_13_(197... ) Prop 13 basically keeps the property taxes constant (or 1% increase) as the value of your house increases (doubles or triples). Your tax gets re-calculated only if you sell your house and the new owner starts paying potentially multiples of what the previous owner has been payin…

Prop 13 has nothing to do with real estate price inflation. If anything, shifting of property tax burdens from long-time homeowners to new homeowners would tend to suppress prices. Shifting that burden evenly across the population would tend to cause more churn as long-time homeowners get pushed out, but would do nothing to increase aggregate housing or lower aggregate prices. Although, you can get pretty far into th…

> Prop 13 has nothing to do with real estate price inflation. If anything, shifting of property tax burdens from long-time homeowners to new homeowners would tend to suppress prices.

As I see it, the long-term expected costs for a purchaser with an average expected time to hold are neutral compared to an equal-revenue scheme that didn't favor long-term property owners over newer property owners. (Given the same assessed value.)

OTOH, the future costs of holding property are lower compared to the same alternative for current property holders (since, even with a short holding period, some of the early, highest-relative-tax-burden years are sunk costs under Prop 13) under the same comparison.

So, rationally, people are just as likely to want to buy property, and less likely to want to sell it once they've already bought it. This reduces supply and increases market clearing price.

Re: Without affordable housing, Vancouver risks becoming an economic ghost town

#385

Post by maxlamb »

ISL wrote: post #325

If apartments are 25% vacant on speculation grounds, that's quite a bubble. I don't intend to do it, but for curiosity's sake: How does one go short on houses? "I'll pay you to let me borrow your house and sell it to someone else. Later, I'll get you an equivalent house." Never heard of anyone doing such a thing, but at the right up-front payment, I bet someone would take the deal.

Looks like people are already doing that: http://www.cnbc.com/2015/10/30/why-investors-are-shorting-ca...

Re: Without affordable housing, Vancouver risks becoming an economic ghost town

#386

Post by CountSessine »

refurb wrote: post #199
badloginagain wrote: post #116

Earlier quoted context omitted.

That requires the government to acknowledge there is a problem and come up with a clear strategy to solve the problem. The BC Provincial Government is working very hard to ignore it as a problem, where they won't even commission studies to generate data on how bad the problem is (or isn't). The federal government has also signaled their distancing from the Vancouver housing issue. Also, the real problem is foreign ow…

Also, the real problem is foreign ownership. What evidence is there that foreign ownership is a major problem? I've heard plenty of anecdotes, but no actual data. I do know that Vancouver real estate agents are milking the "yellow peril" for all it's worth. "Buy now before China owns all of Vancouver!". Suffice to say, Canadians are doing what American's did in the early 2000's. They are going into a crazy amount of…

What evidence is there that foreign ownership is a major problem? I've heard plenty of anecdotes, but no actual data. I do know that Vancouver real estate agents are milking the "yellow peril" for all it's worth. "Buy now before China owns all of Vancouver!".

It's pretty easy to find them. Google 'Andy Yan'; he's an economist at UBC who did the most recent study.

Suffice to say, Canadians are doing what American's did in the early 2000's. They are going into a crazy amount of debt to buy housing, which is only pushing prices up even higher.

Vancouverites are going into unsustainable debt, but at this point mostly for condos, which remain expensive but affordable. The detached house market is long past being affected by CHMC policy and borrowing rules; not even doctors and lawyers can afford the $5-6 million dollar homes that are such a big part of the market here, not even with leverage.

This is part of what I try to tell people when they say that the Vancouver housing market is a 'bubble' - it isn't a bubble because it isn't being driven by leverage; it's being driven by regulatory differences in Canada and China; China has a punishing inheritance tax, and Canada has the most lax rules in the OECD for importing money and buying real estate. There simply is no 'bubble' here to burst. That's not to say that the situation isn't extremely unstable, but without leverage this simply isn't a 'bubble'.

Re: Without affordable housing, Vancouver risks becoming an economic ghost town

#387

Post by zevyoura »

gearoidoc wrote: post #356
vkou wrote: post #332

Earlier quoted context omitted.

Senior engineers at Microsoft/Amazon/Google earn ~200-400K USD. (All-in) If you can 'live well' in the more expensive Vancouver at a 110K CAD salary, you could easily save an extra 100-200K USD by moving to Seattle.

Those companies are very much outliers. Does those 3 all have development operations in Seattle? Your figures don't seem to stack up RE Google: https://www.glassdoor.ca/Salary/Google-Seattle-Salaries-EI_I...

"All-in" means total compensation (stock and bonus included), not just salary.

Re: Without affordable housing, Vancouver risks becoming an economic ghost town

#388

Post by brc »

jseliger wrote: post #42
cdnsteve wrote: post #19

Vancouver real-estate is like buying gold for foreign investors, without paying tax. "suggesting the typical wealthy foreign family buying Vancouver real estate pays little or no income or capital gains tax" http://www.theglobeandmail.com/report-on-business/economy/ho...

This is the best response I've seen so far. Real estate is actually a great export for cities and countries, at least properly considered: http://www.slate.com/articles/business/billion_to_one/2013/1... . Seattle has a bunch of similar articles about "outsiders" supposedly driving up housing costs. Which is absurd: steel frame construction and elevators are very old technologies that allow humans to build just about…

Well, correct. There are lots of other expensive things you can buy which don't have any issue with price increases no matter now many people want to buy. Boats, for example. If lots of people start buying boats, then the number of boats being made increases, but the price of boats doesn't really change.

We can build units quickly and relatively cheaply (certainly the cost of building has fallen over time, certainly on a like-for-like quality basis. As you say, steel frame buildings with lift access can create housing units quickly and cheaply.

The issue is restrictions on supply caused by government policies and nimbly-ism, plus a general desire to shelter parts of the community from market forces.

It wouldn't matter how many Chinese investors wanted to buy apartments if supply kept up with demand.

Re: Without affordable housing, Vancouver risks becoming an economic ghost town

#389

Post by throwaway23333 »

yelnatz wrote: post #206
eigenvector wrote: post #160

Earlier quoted context omitted.

The article's gist is that Vancouver lacks the "otherwise desirable economic climate" that makes the SFBA, Manhattan and London housing markets at least tolerable. Rather than being a side-effect of explosive economic growth as in SF, the housing prices are totally out-of-step with the local economy.

It's really painful. Having average home price of $1.8m while the median salary is at $60k. Something really needs to be done to help out Vancouverites.

I don't understand why everybody keeps talking about the "average home price" and comparing it to salaries. Homes in good neighborhoods in Vancouver are nowhere near that price unless you want to live in a little mansion. And I'm fairly certain that the median salary is largely comprised of the service industry.

The other thing I keep seeing is "in Quebec it's much more affordable..."

Yes, and your salary would be much lower and your taxes higher. Apple and oranges?

Re: Without affordable housing, Vancouver risks becoming an economic ghost town

#390

Post by pmiller2 »

Agustus wrote: post #334
yellowbeard wrote: post #283

Earlier quoted context omitted.

Prop 13 has been argued (I'd say convincingly) to reduce liquidity: http://www.nber.org/papers/w11108 (Less churn - opposite of what you hypothesize)

How does Prop 13 work? The people who wrote that paper are saying that it is a subsidy; absolutely not. The tax rate is frozen, so as I understand it, the person simply pays a lower rate, it is not a system where a tax is paid and then has it refunded to them. I am going to be highly critical of an economic research paper that looks at a tax as a subsidy, so here we go: 1. A tax rate lower because of a law than your…

> Bakersfield, as far as I know, has no rent control, so there is an argument that this is essentially a rounding error.

Bakersfield is also a terrible place to live, from what I hear.

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