Housing costs

[danbrotherston]

But I don't even know if that would help, it would only matter if they are limited by space, most of the restaurants I see are not limited by space...if they are limited by customers, raising prices will drive away some of those customers.

Costs have to come down...or rather, economics must change, increasing inequality means there just isn't as much money in the hands of people who will spend it anymore.

Many restaurants claim that they are now limited by space, because they can no longer seat enough people. On the other hand, fewer people may be wanting to eat out: whether this is because of COVID risks or income loss is arguable (I personally think it's more of the former).

But how to reduce rent costs? Rent control really doesn't work. And why should restaurants (and bars?) pay less rent than other businesses? And a government rent subsidy doesn't make sense.

If it's OK to charge $2000+/month for an apartment, or $400K+ for a condo, then commercial rents will follow. Nice places in nice locations will be expensive, and I don't see why that shouldn't be reflected in the prices.

Lol...I also think people pay too much in rent on housing.

As for how to reduce rent costs..that is a challenge, and I don't have any easy answers, beyond the fact that parking minimums and other anti-development policies that prevent infill development and prioritize sprawl make the situation worse.

But it does come back to income inequality, if wages had grown at a similar rate to housing...there wouldn't be an issue...

[jeffster]

Many restaurants claim that they are now limited by space, because they can no longer seat enough people. On the other hand, fewer people may be wanting to eat out: whether this is because of COVID risks or income loss is arguable (I personally think it's more of the former).

But how to reduce rent costs? Rent control really doesn't work. And why should restaurants (and bars?) pay less rent than other businesses? And a government rent subsidy doesn't make sense.

If it's OK to charge $2000+/month for an apartment, or $400K+ for a condo, then commercial rents will follow. Nice places in nice locations will be expensive, and I don't see why that shouldn't be reflected in the prices.

Lol...I also think people pay too much in rent on housing.

As for how to reduce rent costs..that is a challenge, and I don't have any easy answers, beyond the fact that parking minimums and other anti-development policies that prevent infill development and prioritize sprawl make the situation worse.

But it does come back to income inequality, if wages had grown at a similar rate to housing...there wouldn't be an issue...

If income had grown at the same rate as housing than housing would be much more expensive. The market dictates the price of housing. Low-interest rates have an effect on the housing market.

Currently, I think KW is doing a decent job of filling in either old land and/or vacant land. Just in the Homer-Watson/Blockline Rd, we have 6 fairly large apartment buildings that weren't there that long ago. Though I don't believe it's all anti-development policies, quite often it's a lot of NIMBY'ism. Many people are OK with high density and infill projects - just as long as it doesn't affect them. It's funny actually to watch the Arrow apartment finally go up, as Auburn had such a fight with that, which if memory serves me correctly, dates back to 2006 or 2007. It shouldn't take 14 years or more to complete something.

[danbrotherston]

Lol...I also think people pay too much in rent on housing.

As for how to reduce rent costs..that is a challenge, and I don't have any easy answers, beyond the fact that parking minimums and other anti-development policies that prevent infill development and prioritize sprawl make the situation worse.

But it does come back to income inequality, if wages had grown at a similar rate to housing...there wouldn't be an issue...

If income had grown at the same rate as housing than housing would be much more expensive. The market dictates the price of housing. Low-interest rates have an effect on the housing market.

Currently, I think KW is doing a decent job of filling in either old land and/or vacant land. Just in the Homer-Watson/Blockline Rd, we have 6 fairly large apartment buildings that weren't there that long ago. Though I don't believe it's all anti-development policies, quite often it's a lot of NIMBY'ism. Many people are OK with high density and infill projects - just as long as it doesn't affect them. It's funny actually to watch the Arrow apartment finally go up, as Auburn had such a fight with that, which if memory serves me correctly, dates back to 2006 or 2007. It shouldn't take 14 years or more to complete something.

The "market" for housing is not a free market...low interest rates, parking minimums, zoning restrictions all affect the market. The market for income too is not a free market, and since the 70s substantial effort has gone into depressing the labor market in North America.

But the suggestion that income growing at the same rate as housing is somehow leads to a situation where housing is more expensive supposes that the economic forces which have depressed income and inflated housing have remained the same and the numbers have simply been translated, that is obviously not what I meant, instead I am obviously suggesting a hypothetical world where housing hasn't become unaffordable because the market forces depressing income and inflating housing which have made it unaffordable were never applied. I was pointing out that the forces which have driven inequality up and income down are just as important as the ones which have driven housing up.

As for the claim that we are developing a lot of housing, yes we have had a recent resurgence of development, basically going from near zero infill to non-zero infill.  But in a historical context, housing is still being built very slowly and there are still enormous hurdles to any development. This is why we see large notable buildings which on the whole, add only a small amount of housing, instead of thousands of smaller developments that would add more total housing and lead to a better community. There are vast swaths of the city where there has been zero development, and population has been decreasing--this is not a situation which leads to affordable housing.

As for policies, NIMBYism is powered by policy, NIMBYs get to come out and scream at council to reject developments specifically because those developments require council approval because the zoning code is restrictive. Yes, just like bike lanes, you will never find someone who "opposes" them, they are only ever opposed when they affect that person...it does not change the fact that these folks are against development/change even though they claim not to be. Fundamentally, change is a necessary thing, stopping it creates problems. But the problem is not these folks, it's a natural human tendancy, the problem is a government which panders to them with policies which stop change. Without those policies, those folks would get angry, but eventually just learn to live with the change.

[ijmorlan]

As for how to reduce rent costs..that is a challenge, and I don't have any easy answers, beyond the fact that parking minimums and other anti-development policies that prevent infill development and prioritize sprawl make the situation worse.

But it does come back to income inequality, if wages had grown at a similar rate to housing...there wouldn't be an issue...

Unless more housing is built, housing will be expensive no matter what happens to wages. In the long term there are only two fundamental ways to make housing in an area more affordable: increase the supply (build more), or decrease the demand (people move away). Measures like using tax money to build affordable housing just move the expense around a bit.

[danbrotherston]

As for how to reduce rent costs..that is a challenge, and I don't have any easy answers, beyond the fact that parking minimums and other anti-development policies that prevent infill development and prioritize sprawl make the situation worse.

But it does come back to income inequality, if wages had grown at a similar rate to housing...there wouldn't be an issue...

Unless more housing is built, housing will be expensive no matter what happens to wages. In the long term there are only two fundamental ways to make housing in an area more affordable: increase the supply (build more), or decrease the demand (people move away). Measures like using tax money to build affordable housing just move the expense around a bit.

Decreasing demand and increasing supply doesn't necessarily require people move away or building new housing, some people are 'overhoused'--we see this in neighbourhoods where the population is decreasing because people don't move when their children leave. And there are cases where more profit is extracted from housing people inequality leads to "excess money" that people want to invest...not to mention things like airbnb. Wealth inequality increases these things.

[panamaniac]

As for how to reduce rent costs..that is a challenge, and I don't have any easy answers, beyond the fact that parking minimums and other anti-development policies that prevent infill development and prioritize sprawl make the situation worse.

But it does come back to income inequality, if wages had grown at a similar rate to housing...there wouldn't be an issue...

Unless more housing is built, housing will be expensive no matter what happens to wages. In the long term there are only two fundamental ways to make housing in an area more affordable: increase the supply (build more), or decrease the demand (people move away). Measures like using tax money to build affordable housing just move the expense around a bit.

Well, we could soon be facing a decrease in demand, so there's that ....

[dtkvictim]

As for how to reduce rent costs..that is a challenge, and I don't have any easy answers, beyond the fact that parking minimums and other anti-development policies that prevent infill development and prioritize sprawl make the situation worse.

But it does come back to income inequality, if wages had grown at a similar rate to housing...there wouldn't be an issue...

Unless more housing is built, housing will be expensive no matter what happens to wages. In the long term there are only two fundamental ways to make housing in an area more affordable: increase the supply (build more), or decrease the demand (people move away). Measures like using tax money to build affordable housing just move the expense around a bit.

You can decrease the demand without having people moving away, but simply by slowing the rate of growth to match supply (or better yet, let supply catch up). This is a federal problem though, since Canada's growth is almost entirely immigration. But since our economy is based on never-ending growth, and GDP growth is essentially in lockstep with immigration, I don't expect we'll see lower immigration rates any time soon.

You are partially right about your first statement, but what about when local wages have become completely detached from the cost of housing? If you look at the government reported incomes for any somewhat large city in Canada, and compare it to the cost of housing... it just doesn't make sense. I am more than double the median individual income, and my spouse is above the median as well, yet all we can look at in the housing market is the bottom ~15%. I don't think there is enough local individual wealth to make up for this difference from wages.

[ijmorlan]

Decreasing demand and increasing supply doesn't necessarily require people move away or building new housing, some people are 'overhoused'--we see this in neighbourhoods where the population is decreasing because people don't move when their children leave. And there are cases where more profit is extracted from housing people inequality leads to "excess money" that people want to invest...not to mention things like airbnb. Wealth inequality increases these things.

Sometimes building more is a matter of dividing a large unit into smaller units, that’s true.

Good point about overhousing. The amount of floor space demanded can vary a lot depending on how people choose to live. And in turn the amount of vacant land required to accommodate that floor space can vary a lot depending on how we build our buildings. And in turn the amount of land required on a large scale depends on how we build our cities.

I wouldn’t worry about AirBNB, any more than I would worry about a potato chip factory.

AirBNB takes real estate that is originally built to be occupied by a long-term occupant, and makes it easier to break it up into a lot of short-term occupancies. A potato chip factory takes plain potatoes and breaks them up into small crispy snacks. In both cases, they can only operate if there is demand for their output, and more of their inputs can be created.

(there are some knock-on effects from AirBNB, things like short-term occupancies tending to attract undesireable parties and criminality; but I’m thinking more about the overall effect on supply and demand)

[ijmorlan]

You are partially right about your first statement, but what about when local wages have become completely detached from the cost of housing? If you look at the government reported incomes for any somewhat large city in Canada, and compare it to the cost of housing... it just doesn't make sense. I am more than double the median individual income, and my spouse is above the median as well, yet all we can look at in the housing market is the bottom ~15%. I don't think there is enough local individual wealth to make up for this difference from wages.

If some people don’t have enough housing, they need more. If construction costs are preventing them from obtaining housing, then increasing wages may allow them to (indirectly) fund the cost of building more. If it’s just not possible to build more housing, however, it doesn’t matter how high their wages go; all the higher wages will do is bid up the cost of the existing stock.

We have to be careful about how we talk about this because to many people the most obvious way to allow more construction is to eliminate agricultural zoning and allow the suburbs to spread forever, which would be (already is) an environmental, health, and economic disaster.

Better ways to allow more construction are to dramatically loosen the zoning code and eliminate pointless restrictions. It’s simply nobody’s business whether I build a single-family house, semi-detached, or townhouses on a big-enough plot of land. Some people might not like townhouses coming into their nice suburb full of gated mansions, but part of living in a city is that one will generally not approve of everything that happens in the city so that is just tough. Similarly, if apartments built into upper floors of a strip mall will rent, it’s nobody’s business to say that they shouldn’t be built there. It’s easy to wander around Google aerial photo view and find places all over the city where hundreds or even thousands of living spaces could be built without even knocking down an existing building or tree.

This is why Toronto house prices are so crazy. In most of the city it is illegal to build at a higher density than single-family houses. So the wealthiest people pay whatever they need for the existing houses and everybody else has to try to find apartments being built in the few places where higher density is permitted. Same thing in Vancouver, except to an even more absurd extent.

In particular, rent controls or other price controls cannot solve the problem; all they do is make it so that instead of needing to have lots of money, a prospective occupant needs connections, or a great resume, or be willing to pay a bribe (OK, that might imply lots of money, but it’s a complicated combination of money and willingness to engage with a corrupt system), or some such. Price controls cannot actually house more people, only construction can do that.

[danbrotherston]

Decreasing demand and increasing supply doesn't necessarily require people move away or building new housing, some people are 'overhoused'--we see this in neighbourhoods where the population is decreasing because people don't move when their children leave. And there are cases where more profit is extracted from housing people inequality leads to "excess money" that people want to invest...not to mention things like airbnb. Wealth inequality increases these things.

Sometimes building more is a matter of dividing a large unit into smaller units, that’s true.

Good point about overhousing. The amount of floor space demanded can vary a lot depending on how people choose to live. And in turn the amount of vacant land required to accommodate that floor space can vary a lot depending on how we build our buildings. And in turn the amount of land required on a large scale depends on how we build our cities.

I wouldn’t worry about AirBNB, any more than I would worry about a potato chip factory.

AirBNB takes real estate that is originally built to be occupied by a long-term occupant, and makes it easier to break it up into a lot of short-term occupancies. A potato chip factory takes plain potatoes and breaks them up into small crispy snacks. In both cases, they can only operate if there is demand for their output, and more of their inputs can be created.

(there are some knock-on effects from AirBNB, things like short-term occupancies tending to attract undesireable parties and criminality; but I’m thinking more about the overall effect on supply and demand)

Ultimately, Airbnb removes units from the local real estate market. It isn’t residents of KW which are renting Airbnb’s, therefore it reduces supply of housing for residents. Yes, I believe housing residents should take precedence over housing short term visitors.

Now, not all Airbnb’s are equal. A person renting a room in their home that they wouldn’t have otherwise is an increase in housing. But in some markets Airbnb has removed an astonishing number (like >25%) ouf units from the local housing market.

[plam]

This is why Toronto house prices are so crazy. In most of the city it is illegal to build at a higher density than single-family houses. So the wealthiest people pay whatever they need for the existing houses and everybody else has to try to find apartments being built in the few places where higher density is permitted. Same thing in Vancouver, except to an even more absurd extent.

In particular, rent controls or other price controls cannot solve the problem; all they do is make it so that instead of needing to have lots of money, a prospective occupant needs connections, or a great resume, or be willing to pay a bribe (OK, that might imply lots of money, but it’s a complicated combination of money and willingness to engage with a corrupt system), or some such. Price controls cannot actually house more people, only construction can do that.

There has got to be more supply, yes. There are two things that people haven't really mentioned. It's not just a Toronto-Vancouver problem, it's a problem that is shared in many parts of the world (though not all; check out Quebec City prices for instance---but I think that's a demand issue).

The other thing is interest rates. They make the list price higher, though not monthly payments.

Ultimately, Airbnb removes units from the local real estate market. It isn’t residents of KW which are renting Airbnb’s, therefore it reduces supply of housing for residents. Yes, I believe housing residents should take precedence over housing short term visitors.

Now, not all Airbnb’s are equal. A person renting a room in their home that they wouldn’t have otherwise is an increase in housing.  But in some markets Airbnb has removed an astonishing number (like >25%) ouf units from the local housing market.

In KW airbnb probably isn't that much of an issue. I think it's more of an issue in places which actually get tourists and which should have hotels. But taxis and hotels have kind of had a monopoly on the market for a while. (Not that I think the sharing economy is always better, but these services clearly add competition).

[taylortbb]

Ultimately, Airbnb removes units from the local real estate market. It isn’t residents of KW which are renting Airbnb’s, therefore it reduces supply of housing for residents. Yes, I believe housing residents should take precedence over housing short term visitors.

I'm not convinced Airbnb eliminates nearly as many units as people believe. If Airbnb didn't exist, many of those investors wouldn't purchase the property in the first place, and without buyers many of the properties that were developed as condos would instead be developed as hotels.

In a place like SF, which has such heavy restrictions on development that new towers are rare, I might believe Airbnb conversions happen faster than new construction. But in downtown Toronto? The absence of Airbnb would require the construction of far more hotels, and many condo developers would likely be hotel developers.

[plam]

I'm not convinced Airbnb eliminates nearly as many units as people believe. If Airbnb didn't exist, many of those investors wouldn't purchase the property in the first place, and without buyers many of the properties that were developed as condos would instead be developed as hotels.

The pandemic was one data point: one could have counted how many airbnbs suddenly went onto the rental market. We certainly looked at places in Wellington, NZ which did a quick switchover. Comparing overall rents is kind of tricky, though, because there are a lot of confounding factors (like a global pandemic).

[taylortbb]

I'm not convinced Airbnb eliminates nearly as many units as people believe. If Airbnb didn't exist, many of those investors wouldn't purchase the property in the first place, and without buyers many of the properties that were developed as condos would instead be developed as hotels.

The pandemic was one data point: one could have counted how many airbnbs suddenly went onto the rental market. We certainly looked at places in Wellington, NZ which did a quick switchover. Comparing overall rents is kind of tricky, though, because there are a lot of confounding factors (like a global pandemic).

I'm not sure I get your point.

The pandemic destroyed the short term rental market, and for Airbnbs that meant investors tried to make them in to long term rentals. But I don't think that changes my point that if Airbnb was illegal, capital would be reallocated and we'd build more hotels and fewer condos. The hotels would just face pandemic bankruptcy (or bailouts) rather than conversion in to long term rental.

If we eliminated all the Airbnbs in Toronto, people wouldn't stop visiting Toronto. They'd just stay in hotels, which we'd now need more of. Land values wouldn't drop, and while the short term effect would be an increased supply of rental units (likely reducing price growth), the long term effect would be fewer condos built, constraining rental supply, and putting us back in the same scenario.

[ijmorlan]

If we eliminated all the Airbnbs in Toronto, people wouldn't stop visiting Toronto. They'd just stay in hotels, which we'd now need more of. Land values wouldn't drop, and while the short term effect would be an increased supply of rental units (likely reducing price growth), the long term effect would be fewer condos built, constraining rental supply, and putting us back in the same scenario.

You said it better than I did.

It’s very difficult to achieve positive results in the economy by identifying an apparent problem (really a symptom) and legislating it (the symptom) out of existence. It’s a bit like taking Tylenol to eliminate a persistent pain in the throat. Works great, until you die of throat cancer.

A huge example of this is parking minima. Not enough parking in the City, huh? No problem, we’ll just require all developers to include sufficient parking in their developments. Works great, until half the city is parking lots, public transit isn’t economical, and everything is so far apart that walking isn’t an option for most people.