Housing costs

[plam]

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.

My point is about data collection, not about the downstream implications. I think it's important to know how much capacity is actually in airbnbs.

Also, zoning. Your statements are true in an unregulated market, but I'm pretty sure that both hotel and condo supply are constrained by zoning, which restricts supply of these two types of things (which should be sort of comparable) differently. Airbnb kind of evades the whole zoning thing.

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

I think this is the largest factor. And regulations regarding mortgages. If mortgages were capped to 3x your family income, max, houses would be a lot cheaper.

However, developers are the ones raking in the cash with low interest rates. 1) Their own loans to finance a new build is very low, so it’s lower risk to build. 2) Being that they have large amounts of cash, they can lobby the government to make getting mortgages easier for their clients. The amount of money that goes to Ottawa, the influencers, MP’s, etc., is insane.

Capped mortgages would result in cheaper houses for sure. One could argue fewer houses as there is less incentive to build them. I'm not sure I buy that argument, but it is an argument. People not thinking of houses as investments would probably help in general.

Perhaps this should move to a different thread?