Radical ways to fix housing costs
Radical ways to fix housing costs
As a property manager I am often asked what is wrong with the housing market, especially the rental market. I don’t truly have the answer though I do have a few radical ideas I would suggest be implemented to deal with it in the future.
I hear young people say housing is too expensive, and older people say I would downsize but I want to stay in my home or in my neighbourhood. These two issues have a common denominator. We have not built the correct housing to meet the needs of the market, and we continue doing this.
What is the wrong housing? Housing needs to meet the needs of the residents in the area the housing is built. This is different for every province, city or region of Canada. What works in Downtown Vancouver is not going to work in Winkler Manitoba.
Step one then means we should not have a federal housing policy. The federal intervention should relate to funding only and let the provinces, and regions develop what works for them.
Having said that there are two policies one federal and one regional that should be changed to help build the right product.
The first one is reverse mortgages. These should be eliminated. The basic premises of the reverse mortgage is based on a person who can’t afford to live in the property they currently own. In our great wisdom to help these people stay where they are, we have said why not go into debt to continue to live where you are. The only people who truly benefit from the reverse mortgages are the lenders creating the debt. What individuals fail to understand is they are not just creating debt for the person who owns the property, possibly for their descendants as well. If we eliminate the reverse mortgage people would be required to sell the property they live at and move elsewhere. Often they are staying in homes that are larger than they need. This would free up larger homes for people who are in need of that product, mostly young families. It would also force developers to build other products to meet the needs of the people selling these homes.
The second factor is basement suites. Basement suites have the same effect as the reverse mortgage. It provides a person or party who doesn’t need or can’t afford the property they live in to continue to reside at the property. If a person or family buys a home with a basement suite it means they did not need that size of house. Similar to the retired person who doesn’t want to move, they are living in a home that is not the right size for them. I don’t have any issue with the size of house you live in, my point is if you need assistance from a reverse mortgage or basement suite to afford the home you can afford that home.
By eliminating basement suites then more houses, particularly family size homes would enter the market.
The third problem that affects housing costs is the amount of rental properties in the market. If people have the option to rent at market price they can delay buying until they are ready to settle in a place.
Our current housing policies and building is based on people buying a home and living in it for a long time, which is what happened 20, 30 or 40 years ago. A number of things have changed over the years, including a decrease in the number of kids families are having, the number of times people change jobs, divorce rates and immigration.
Young people today are not staying in a job as long and not only are they changing jobs they are able to move from city to city, or provice and even a new country. What this means is that more people today are more nomadic since the industrial revolution. If people are nomadic why are we trying to build properties that are designed for people and families to live in long term. The amount of rental properties developed in Canada in the past thirty years has not kept pace with the growing nomadic demand. The biggest problem with this is a home with a basement suite can be sold to a new owner and take that rental product out of the market. That decreases supply and increases rental prices. The developers love only building homes to sell for this reason.
How do you have developers build more rental housing, make it a part of the permission to build other properties. For every three homes or condos they build they must build a rental unit as well.
These are hard to implement and would have a drastic effect on the market immediately including decreasing the price of homes that seniors were counting on to use the equity for their retirement. Selling their home and moving to a smaller less costly property allows them to use that equity they built up without using debt to access it.
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