Posted in a Canadian channel before, because I am Canadian:
The housing crisis arises out of one problem, and one problem only:
Housing as an investment.
That’s not to say foreigners are to blame - at less than 2% of the market, they don’t have any real impact. British Columbia’s laws against foreign home ownership is nothing more than a red herring, a bullshit move designed to flame racism and bigotry. Yes, some of them are just looking to build anchors in a prosperous first-world country, but most are honest buyers.
A better move has been the “speculation tax”. By taxing more heavily any home that remains empty, it encourages property holders to actually rent these units out, instead of holding out for people desperate enough to pay their nosebleed-high rents.
But all of this misses the real mark: housing used purely as investment.
Now, to be absolutely clear, I am not talking about landlords who have a “mortgage helper” suite, or who have held on to a home or two that they previously lived in. These are typically the good landlords that we need - those with just two or three rental units, and that aren’t landlording as a business, just as a small top-up to their day job or as an extra plump-up to the retirement funds they are living off of. By having many thousands of separate landlords instead of one monolith, healthy competition is preserved.
No, there are two types of “investors” that I would directly target:
- Flippers
- Landlords-as-a-business.
1) Flippers
The first group, flippers, also come in two distinct types:
- Those that buy up homes “on spec” before ground has even been turned, and then re-sell those same homes for much more than they bought shortly before these homes are completed. Sometimes for twice as much as they paid.
- Those that buy up an older, tired home, slap on a coat of paint, spackle over holes in the walls, paper over the major flaws in hopes that inspectors don’t catch them, and shove in an ultra-cheap but shiny Ikea kitchen that will barely last a decade, then re-sell it for much more than they paid for it.
Both of these groups have contributed to the massive rise in housing purchase prices over the last thirty years. For a family that could afford a 3Bdrm home in 2000, their wages have only increased by half again, while home values have gone up by five times by 2023.
And this all comes down to speculation driving up the cost of homes.
So how do we combat this? Simple: to make it more attractive for owner-occupiers to buy a home than investors.
A family lives in a home that they own for an average of 8 years. Some less, most a lot more. We start by taxing any home sale at 100% for any owner who hasn’t lived in said home as their primary residence for at least two years (730 contiguous days). We then do a straight line depreciation from the end of the second year down to 0% taxation at the end of the eighth year. Or maybe we be kind and use a sigmoid curve to tax the last two years very minimally.
Exceptions can exist, of course, for those who have been widowed, or deployed overseas, or in the RCMP and deployed elsewhere in Canada, or where the house has been ordered to be sold by the court for divorce proceedings, and so forth. But simple bankruptcy would not be eligible, because it would be abused as a loophole.
But the point here is that homes will then become available to those working-class people who have been desperate to get off of the rental merry-go-round, but who have been unable to because home prices have been rising much faster than their down payment ever could.
This tax would absolutely cut investors off at the knees. Flippers would have to live in a home much, much longer, and spec flippers would be put entirely out of business, because they can’t even live in that house until it is fully completed in the first place.
2) Landlords-as-a-business
The second group is much simpler. It involves anyone who has ever bought a home purely to rent it back out, seeking to become a parasite on the backs of working-class Canadians in order to generate a labour-free revenue stream that would replace their day job. Some of these are individuals, but some of these are also businesses. To which there would be two simple laws created:
- It would become illegal for any business to hold any residential property whatsoever that was in a legally habitable state. This wouldn’t prevent businesses from building homes, but it would prevent a business from buying up entire neighbourhoods just to monopolize that area and jack up the rent to the maximum that the market could bear.
- Any individual owning more than 5 (or so) rental units (not just homes!) would be re-classified as operating as a business, and therefore become ineligible to own any of them - they would have to immediately sell all of them.
As for № 2, a lot of loopholes can exist that a sharp reader would immediately identify. So we close them, too.
- Children under 24 “operate as a business” automatically with any rental unit. They are allowed ZERO. Because who TF under the age of 25 is wealthy enough to own rental units? No-one, unless these units were “gifted” to them from their parents, in an attempt to skirt the law. So that is one loophole closed.
- Additional immediate family members are reduced by half in the number of rental units they can own. So if a husband has the (arbitrary, for the sake of argument) maximum limit of five, the wife can only have two herself. Any other family member who wants to own a rental unit, and who does not live in the same household, must provide full disclosure to where their money is coming from, and demonstrate that it is not coming from other family members who already own rental units.
By severely constraining the number of investors in the market, more housing becomes available to those who actually want to stop being renters. Actual working-class people can exit the rental market, reducing demand for rental units, and therefore reducing rental prices. These lower rental prices then make landlording less attractive, reducing the investor demand for homes and reducing bidding wars by deep-pocketed investors, eventually reducing overall home values for those who actually want to buy a home to live in it.
Plus, landlords will also become aware of the tax laid out in the first section that targets flippers. If they own rental units that they have never lived in as their primary residence, they will also be unable to sell these units for anything other than a steep loss. They will then try to exit the market before such a tax comes into effect, flooding the market with homes and causing prices to crash. They know that they are staring down two massive problems:
Being stuck with a high-cost asset (purchase price) that only produces a low-revenue stream because renters have exited the market by buying affordable homes, allowing plenty of stock that is pincered by the spec tax that heavily taxes empty rental units, thereby lowering rental prices well beneath the cost of the mortgage on the unit.
By putting these two tools into effect at the same time, we force a massive exodus of landlords out of the marketplace, crashing home values to where they become affordable to working-class people, thereby massively draining the numbers of renters looking for places to rent. Those places still being rented out - by owners who have previously lived in them, or by investors who couldn’t sell in time - would significantly outnumber renters looking for a place to rent, thereby crashing rental prices as renters could then dictate rents by being able to walk away from unattractive units or abusive landlords.
Full disclosure: I own, I don’t rent. But I have vanishingly little sympathy for greed-obsessed parasites that suck the future out of hard-working Canadians who must pay 60% or more of their wages for shitbox rentals to abusive landlords in today’s marketplace. Most people (and pretty much anyone under the age of 30) who don’t already own no longer have any hope of ever owning a house, as their ability to build a down payment shrinks every year, while home values accelerate into the stratosphere.
Landownership is wrong all together.
If you think about it, it is completely absurd, why anyone assumes the right to 'own' a piece of land. Or even more land than the other guy. Someone must have been the person to first come up with the idea of ownership, but it is and was never based on anything other than an idea, and we should question it.
After all inheritance of landownership is a major cornerstone of our unjust and exploitative society.
That sounds like a solution but isn't. In my experience, the corporations I had as landlords were completely aware of what they are allowed to do and are obligated to do. The private landlords I had were the craziest bitches imaginable. Stuff didn't happen as it should have, laws were intentionally misinterpreted and twisted, etc.
The reason why my experience differs so much is laws. Here in Germany, we've got strong renter's protection laws. They are still too weak in some places but really, really clear in most. So while my private landlord tried to make me pay for repairs, the company doesn't bother with such illegal bullshit, sends over a contractor they work with regularly and shit gets done.Or contribute to political campaigns….or a thousand other things they abuse.
investors should not be able to either.
yep
Cries in New Zealand
Hmm, I think large corporations should never be allowed to purchase residences though anyone is allowed to create a corporation in the US you'll just need to declare a CEO, COO, and a treasurer. This could be a simple mom-and-pop family business with 3-4 people/employees, this could prevent a lot of normal people/small business owners struggling to create a profit from purchasing workspaces, their own home, work equipment.
I wish every corporation buying residential properties a very haven hills alabama
is is basic leftism. if you think that statement is wrong, you're not a fucking leftist
The average Joe and Jane are terrible landlords.
This just results in larger complexes being owned exclusively by the ultra rich. This idea outlaws the very concept of a co-op.
No more landlords? That sounds like communism.
One to four units should only be owned by people and the owner should have the obligation to live in it or there should be a radius around their property in which they can't own a second one.
Five to eight units should only be owned by well regulated corporations with the fiscal responsibilities this implies. The alternative would be co-ops.
Nine and more should be under a non profit state corporation that charges rent based on trying to break even only (that's how road insurance for people works around here, price is adjusted based on the previous year's cost to the corporation, it's way cheaper than private equivalents elsewhere in the country).
You run into a problem that you need to mitigate for this to work: qualifying for a mortgage.
A landlord can rent to you for a year--or less--and they assume the risk of you not paying and needing to evict you. Their income verification can be a lot more loose as a result. A bank is going to be in a relationship with you for 15-30 years; they want to be pretty sure that you're going to be able to meet your financial obligations for that whole time period. As a result, they're going to be quite a bit more strict about proof of income, etc.
Renting can be cheaper, too; a tenant isn't on the hook for repairs to a unit, but when I need a new roof in my house, or the water heater goes out, I get to pay every penny of that myself. Yeah, the mortgage is cheaper, but just because you can afford the mortgage doesn't mean that you can afford everything else that goes into owning a home.
You also get into weird and perverse tax and zoning incentives that can make it difficult to build any kind of affordable housing; Dems say they want affordable housing, right up until someone wants to put it in their neighborhood, then they start acting like Republicans.
Yes, the lack of affordable housing is a huge problem. But it's not quite as black and white as it often seems.
