Some banks mostly offer fixed-payment variable mortgages which allows homeowners to keep monthly payments the same, but leaves them vulnerable to paying little off the principal, experts say.
Not totally a CMHC issue here. People/businesses buying up housing as investments is the bigger problem and it should be clamped down on … ie: first 2 properties = basic taxes, increased by 2% for every additional property owned (3rd is basic + 2%, 4th is basic + 4%, etc).
That’s not nearly enough tax to make it effective, you need to increase the amount 25 or 50% for each additional home. Nobody should be using housing as an investment, it’s for living. This should also include any corporations owning investment properties as well.
Then gov’ts should be forced to jump in and start limiting how many units any single entity should own … because gov’ts are supposed to take care of the people who vote for them, not the businesses that donate to them – in a perfect world anyway.
I always fall back on the fact that humans managed to survive millennia without big business while big business wouldn’t last one day without humans. Ergo we are the most important part of that equation.
If it’s purchased as an investment, but still rented out, how does that make housing less affordable?
I fully support vacant home taxes, but the idea that investors (and people often blame foreign investors specifically) are to blame seems flawed to me.
If there was enough housing supply, prices would drop, no?
Housing becomes less affordable because suddenly rent has to cover the owner’s profit as well as the cost of the mortgage. No one is going to invest in housing if there is no profit, and they are going to do what they can to make the profit as high as possible.
A landlord is essentially a middleman between the mortgage holder and the resident. Renting can make sense, especially for people who are not living somewhere for a long time, but currently people are renting simply because there is no way they can afford to buy a house.
There’s nothing saying rent has to cover the owner’s expenses.
If no one rents a home, the owner must either: leave the home empty, or lower the rent. Either way, if the home loses money, a rational investor has to sell. Enough people selling causes prices to drop.
I guess what I’m saying is that taxing people who own multiple properties extra is a really weird fix.
Wouldn’t building more homes be a better long term solution?
If no one rents a home, the owner must either: leave the home empty, or lower the rent. Either way, if the home loses money, a rational investor has to sell.
Doesn’t the investor get to list the loss as a tax write-off?
The investor can always wait. There’s a housing crisis, so people need somewhere to live.
Wouldn’t building more homes be a better long term solution?
We need to do both. Addressing the issue from the supply side and demand side makes sense.
That’s only true if the expected increase in value covers the cost in carrying the property. If property values don’t increase dramatically over time, waiting just loses money.
There’s a housing crisis, so people need somewhere to live.
Exactly what I’m saying. Demand is, for the most part, inelastic. Each person requires some amount of space. Owning multiple properties that are occupied satisfies housing demand as much as each person owning their own home. As far as I figure, only vacant homes artificially inflate home prices/rent.
I don’t mean to say that people should be stuck renting forever. Everyone should have the opportunity to own their home.
Owning multiple properties that are occupied satisfies housing demand as much as each person owning their own home. As far as I figure, only vacant homes artificially inflate home prices/rent.
As we said above, the renter has to cover the costs of the property, plus the landlord’s profit.
That’s just not how rent works. Tenants don’t care what the landlord’s expenses are. If a home is priced above what people are willing to pay, it’ll sit empty.
Investors overbid for properties at yesterday’s low interest rates that aren’t sustainable at the current rates but at yesterday’s rents. Investors didn’t take into account that interest rates can rise. Let me rephrase. Investors bet that interest rates will stay low and thus took on huge mortgages so they could outbid another investor or wannabe homeowner. This bet didn’t pan out. Instead of taking a loss and selling the properties, they increase rents to what makes the properties sustainable at today’s rates. That’s it. Investors are asking for renters to cover their failed bet. The amount of housing is a more or less fixed in this equation given the short time frame these effects occurred on. That’s how this investor behaviour is making housing less affordable. Moreover it has a larger negative effect on the economy by tying up income into an unproductive asset class instead of having it flow to productive areas of the economy. And so the argument is made that we should curb this behaviour by helping investors make the decision to sell, in the short term. That would lower prices and allow wannabe homeowners to buy as well as more rational investors who have the capital to buy and sustain at today’s rates but lower rents.
Not totally a CMHC issue here. People/businesses buying up housing as investments is the bigger problem and it should be clamped down on … ie: first 2 properties = basic taxes, increased by 2% for every additional property owned (3rd is basic + 2%, 4th is basic + 4%, etc).
That’s not nearly enough tax to make it effective, you need to increase the amount 25 or 50% for each additional home. Nobody should be using housing as an investment, it’s for living. This should also include any corporations owning investment properties as well.
Unfortunately, I would expect increases like that to just be tagged onto the eventual selling prices.
Then gov’ts should be forced to jump in and start limiting how many units any single entity should own … because gov’ts are supposed to take care of the people who vote for them, not the businesses that donate to them – in a perfect world anyway.
I always fall back on the fact that humans managed to survive millennia without big business while big business wouldn’t last one day without humans. Ergo we are the most important part of that equation.
Yep, I agree. That sort of limit not related to the value is the right way to deal with it.
If it’s purchased as an investment, but still rented out, how does that make housing less affordable?
I fully support vacant home taxes, but the idea that investors (and people often blame foreign investors specifically) are to blame seems flawed to me.
If there was enough housing supply, prices would drop, no?
Housing becomes less affordable because suddenly rent has to cover the owner’s profit as well as the cost of the mortgage. No one is going to invest in housing if there is no profit, and they are going to do what they can to make the profit as high as possible.
A landlord is essentially a middleman between the mortgage holder and the resident. Renting can make sense, especially for people who are not living somewhere for a long time, but currently people are renting simply because there is no way they can afford to buy a house.
There’s nothing saying rent has to cover the owner’s expenses.
If no one rents a home, the owner must either: leave the home empty, or lower the rent. Either way, if the home loses money, a rational investor has to sell. Enough people selling causes prices to drop.
I guess what I’m saying is that taxing people who own multiple properties extra is a really weird fix.
Wouldn’t building more homes be a better long term solution?
Doesn’t the investor get to list the loss as a tax write-off?
The investor can always wait. There’s a housing crisis, so people need somewhere to live.
We need to do both. Addressing the issue from the supply side and demand side makes sense.
Write-offs are only applicable if some other part of the business is making money
If the entire business is owning a few properties and they are all in the red, there’s nothing to write off against
For small-scale landlords the loss would count against their regular income. For professional landlords, they probably have other properties.
I’m not 100% certain on the details, but yes. A landlord can reduce their taxes on other income but that doesn’t mean they aren’t still losing money.
That’s only true if the expected increase in value covers the cost in carrying the property. If property values don’t increase dramatically over time, waiting just loses money.
Exactly what I’m saying. Demand is, for the most part, inelastic. Each person requires some amount of space. Owning multiple properties that are occupied satisfies housing demand as much as each person owning their own home. As far as I figure, only vacant homes artificially inflate home prices/rent.
I don’t mean to say that people should be stuck renting forever. Everyone should have the opportunity to own their home.
As we said above, the renter has to cover the costs of the property, plus the landlord’s profit.
That’s just not how rent works. Tenants don’t care what the landlord’s expenses are. If a home is priced above what people are willing to pay, it’ll sit empty.
Investors overbid for properties at yesterday’s low interest rates that aren’t sustainable at the current rates but at yesterday’s rents. Investors didn’t take into account that interest rates can rise. Let me rephrase. Investors bet that interest rates will stay low and thus took on huge mortgages so they could outbid another investor or wannabe homeowner. This bet didn’t pan out. Instead of taking a loss and selling the properties, they increase rents to what makes the properties sustainable at today’s rates. That’s it. Investors are asking for renters to cover their failed bet. The amount of housing is a more or less fixed in this equation given the short time frame these effects occurred on. That’s how this investor behaviour is making housing less affordable. Moreover it has a larger negative effect on the economy by tying up income into an unproductive asset class instead of having it flow to productive areas of the economy. And so the argument is made that we should curb this behaviour by helping investors make the decision to sell, in the short term. That would lower prices and allow wannabe homeowners to buy as well as more rational investors who have the capital to buy and sustain at today’s rates but lower rents.