The problem is simple, if house prices go up faster than wage growth housing will never become affordable. It’s literally the definition of a pyramid scheme. Land cannot be an investment for anyone, not just multi-owners.
Prices need to decrease over time, and there’s no possible way for that to happen with zoning, infill, multi-family taxes, technically you could do it with a 100% capital gains tax on property value but your other suggestions even added together will not achieve a decrease in housing prices. All those do is slow the growth.
There’s only one way to drive property prices back down to affordable levels, tax all profit from simply owning a home (every single residential property) and then add more tax on top of that so that owning a property costs money, and therefore only people who use the property for something (living, business, etc.) will be willing to pay to continue owning it. This should be done on a regular basis (yearly likely) rather than all at once like a capital gains tax to prevent people getting “stuck” in properties.
Then use all that tax money to fund the government and drop income taxes entirely.
This is not going to happen for decades though, this kind of policy would vaporize all the equity for every homeowner in the country and currently that’s about 65% of the population, and it’s very unlikely you’ll convince 65% of the population to give up
$500,000+ just to fix this problem for “other” people. We have to wait for the ownership rate to drop much further first before policies like this will become viable.
Apart from being a terrible idea that almost exclusively targets the middle class (because poor people don’t own property and rich people should be diversified enough that it doesn’t matter), this does nothing to address what are three of the biggest factors in housing costs:
Housing demand (current population increase rate is not sustainable and it shows in areas other than housing)
Inflation (material and labour costs are up something like 40% or more since 2020)
Wage suppression (very much related to (1))
And the kicker to this is that dealing with the three items above will fix a lot more than just housing, whereas your idea doesn’t.
Want to know why material and labour costs are up? Because we have to pay more for land for businesses, and wages so people can afford homes. It’s a carryon effect of land values increasing.
We can always build more, but that’s never going to solve affordability. Supply and demand doesn’t apply to this situation like you think it does. Japan (and even just Tokyo) have had a flat or declining population for over a decade and housing prices are still going up.
Want to know why material and labour costs are up? Because we have to pay more for land for businesses, and wages so people can afford homes. It’s a carryon effect of land values increasing.
This might be a small part of it, but many materials are market commodities that have a lot more behind them than just land values - think copper, steel, lumber.
Also, your entire comment presupposes that land value is causing inflation rather than that land value is reflecting inflation. Land doesn’t print money, governments do, and banks do with debt - a direct consequence of a fractional banking, which is regulated by the government.
You’re thinking too few cycles deep. Even metal and lumber companies employ significant numbers of people or spend money on things which employ significant numbers of people, who all need to be paid more due to increased housing costs. The metal/wood needs to be exported by people, transported by people, with equipment made by people, using fossil fuels that are extracted by people.
It’s not uncommon for 50% of someone’s wage to be going to housing these days if they haven’t owned a home for a decade or more.
The amount of wealth being sucked out of the economy by real estate right now is obscene. My wife and I bought our first home in 2010, we now have around 1 million dollars in equity. We’ve paid only around $350,000 on mortgage payments in that period. So we’ve made $650,000 in 14 years simply by owning a home. That’s tax free, and essentially a third full time income that we did nothing to earn.
Many construction materials aren’t only affected by the Canadian economy, we are a very small part of it even if the material is produced here (ex. if it’s more profitable to export why would a company sell locally?). If global demand goes up prices here go up regardless of the situation.
Also, that money you’ve made isn’t real “made” until you sell, it’s an unrealised gain.
if house prices go up faster than wage growth housing will never become affordable. It’s literally the definition of a pyramid scheme
It’s not. A pyramid scheme is a business model where you get the most of your money by getting other people to join the business, instead of providing a product or service. Think MLMs
None of those are part of the solution.
The problem is simple, if house prices go up faster than wage growth housing will never become affordable. It’s literally the definition of a pyramid scheme. Land cannot be an investment for anyone, not just multi-owners.
Prices need to decrease over time, and there’s no possible way for that to happen with zoning, infill, multi-family taxes, technically you could do it with a 100% capital gains tax on property value but your other suggestions even added together will not achieve a decrease in housing prices. All those do is slow the growth.
There’s only one way to drive property prices back down to affordable levels, tax all profit from simply owning a home (every single residential property) and then add more tax on top of that so that owning a property costs money, and therefore only people who use the property for something (living, business, etc.) will be willing to pay to continue owning it. This should be done on a regular basis (yearly likely) rather than all at once like a capital gains tax to prevent people getting “stuck” in properties.
Then use all that tax money to fund the government and drop income taxes entirely.
This is not going to happen for decades though, this kind of policy would vaporize all the equity for every homeowner in the country and currently that’s about 65% of the population, and it’s very unlikely you’ll convince 65% of the population to give up $500,000+ just to fix this problem for “other” people. We have to wait for the ownership rate to drop much further first before policies like this will become viable.
Apart from being a terrible idea that almost exclusively targets the middle class (because poor people don’t own property and rich people should be diversified enough that it doesn’t matter), this does nothing to address what are three of the biggest factors in housing costs:
Housing demand (current population increase rate is not sustainable and it shows in areas other than housing)
Inflation (material and labour costs are up something like 40% or more since 2020)
Wage suppression (very much related to (1))
And the kicker to this is that dealing with the three items above will fix a lot more than just housing, whereas your idea doesn’t.
Want to know why material and labour costs are up? Because we have to pay more for land for businesses, and wages so people can afford homes. It’s a carryon effect of land values increasing.
We can always build more, but that’s never going to solve affordability. Supply and demand doesn’t apply to this situation like you think it does. Japan (and even just Tokyo) have had a flat or declining population for over a decade and housing prices are still going up.
This might be a small part of it, but many materials are market commodities that have a lot more behind them than just land values - think copper, steel, lumber.
Also, your entire comment presupposes that land value is causing inflation rather than that land value is reflecting inflation. Land doesn’t print money, governments do, and banks do with debt - a direct consequence of a fractional banking, which is regulated by the government.
You’re thinking too few cycles deep. Even metal and lumber companies employ significant numbers of people or spend money on things which employ significant numbers of people, who all need to be paid more due to increased housing costs. The metal/wood needs to be exported by people, transported by people, with equipment made by people, using fossil fuels that are extracted by people.
It’s not uncommon for 50% of someone’s wage to be going to housing these days if they haven’t owned a home for a decade or more.
The amount of wealth being sucked out of the economy by real estate right now is obscene. My wife and I bought our first home in 2010, we now have around 1 million dollars in equity. We’ve paid only around $350,000 on mortgage payments in that period. So we’ve made $650,000 in 14 years simply by owning a home. That’s tax free, and essentially a third full time income that we did nothing to earn.
Many construction materials aren’t only affected by the Canadian economy, we are a very small part of it even if the material is produced here (ex. if it’s more profitable to export why would a company sell locally?). If global demand goes up prices here go up regardless of the situation.
Also, that money you’ve made isn’t real “made” until you sell, it’s an unrealised gain.
It’s not. A pyramid scheme is a business model where you get the most of your money by getting other people to join the business, instead of providing a product or service. Think MLMs
Where do you think the money to buy the house from you later comes from? The next layer of the pyramid.