Note the gerund in the headline — I’m asking whether we’re in a moment when the housing crisis, as we’ve come to know and hate it, is actually in the process of ending.
It’s a safe bet that anything as complicated as ‘housing’ is always in the process of change. But in the last few weeks, there have been a wave of new indicators.
Here are just a few signs and signals, collected in one week from July 16 to 21.
The effects of past government actions, whether market incentives or tax penalties, are having an impact.
When was the last time you saw something like this?
Or this:
Whether you’re on the demand side or supply side of the argument, whether you think it’s about foreign capital or domestic interest rates, whether it’s because of the absence of government intervention or too much, whether it’s immigration or money-laundering, whether quantitative easing or generational wealth transfer, these factors are all impacting the market simultaneously.
Just as it took some time to get into this mess, it takes time to get out (or for another kind of mess to displace the current one).
My sense: the ending is coming, and fast. Or at least fast enough so that the issues and policies that will be fought over in the civic election, with a democratic mandate given to the victors, may actually be irrelevant.
We may end up rezoning the city to solve a problem that may be solving itself.
The end is near thanks to the federal governments more restrictive B20 mortgage rules rules (turning away 18% of homebuyers said the Globe the other day) and the fact that multi-unit starts and completions remain at highs unprecedented in recent decades.
All of this means that people should be cautious of politicians and groups that continue to propose new policies with the justification that “we’re in a housing crisis.” Persons may use the feeling of crisis as an opportunity to push through changes that normally would have been unpalatable to the public.
A recent example from the other day would be the decision to approve a building that cut into the view cone, but only if the less than 400 units provided where wholly rental. It seems like a big win in a housing crisis, but with the knowledge of the huge amount of multi-unit starts elsewhere in the region, and the fact that the market is cooling, eroding public benefits for a mere 400ish rental units is a deeply questionable tradeoff.
More broadly for the upcoming election there’s groups seeking broad upzoning. Not necessarily a bad idea, but we should be careful we don’t over exaggerate and do something hasty due to the feeling of a crisis that is actually going away.
Welcome to the word of ‘quantitative tightening’
The end is not near, but after a decade of asset inflating money printing the world has reached ‘peak house’. Now as central banks reverse course, and the growth of the money supply slows, prepare to see a slow, very slow, controlled melt of asset prices – including real estate.
What the central banks giveth – the central banks can taketh away.
Not much any local politician can do about it.
Possibly disturbing question: how long do these new rentals have to stay in the rental pool before they can be sold off as individual condos?
Hint: in some cases it’s only 10-20 years.
P
The units in the City of Vancouver built under the STIR or Rental 100 programmes (with DCL and CAC waivers) are for 60 years or the life of the building, whichever is greater, secured through a Housing Agreement. There are a few other buildings that were approved as market condos, but where the owner decided to lease them rather than sell the. Peter Wall’s recent tower on Richards is one of those – the rental isn’t secured, just a bonus for the rental market.
” …the feeling of a crisis that is actually going away.” We are no where near seeing this crisis going away. The changes to demand for real estate are a drop in the bucket to what is really needed to have a SUSTAINABLE real estate market, you know, a market that allows someone with no established housing equity and a decent paying job to be able to afford to buy a two- to three-bedroom apartment to house their family, let alone rent a two- to three-bedroom apartment to house their family.
In terms of politics? Sure, that’s an entirely likely possibility. If rents and and house prices enter a sustained fall, the energy will quite likely go out of the issue for a lot of people, especially if a lot of recent buyers go underwater.
But for so many people the crisis will likely not be over, though it may stop getting worse. It may simply return towards the normal middle class standards of respectability that most voters in North America reveal themselves to be fine with.
That is, until the next turn of the business cycle.
Though Vancouver has particular issues, it’s a global problem. I think that the shift to knowledge economy, where education is king, will only increase inequality. As the middle class shrinks our cities will increasingly become the preserves of the privileged and the poor. Politics will degenerate to match. In Canada we have been relatively insulated by our reliance on resource and (recently) construction jobs, and (relative to the U.S. at least) by the welfare state. We may be reaching the end of an extreme cycle (my guess is that Mr Price is right about that), but this only marks a local pause in a global secular trend.
The housing crisis will end when a person with average income can buy a 2 or 3 bedroom apartment. Until then we should expect our policies to be more aggressive with supply and demand.
Yes – with the caveat that we don’t want to crash the industry and suddenly put all those people out of work. The couple of guys I saw chatting on the Skytrain about falling off the wagon, and about the merits of working at various construction sites probably aren’t going to start programming computers if construction suddenly stops.
I wonder whether our crazy housing market may have temporarily shielded us from other aspects of rising inequality, and the politics that result.