Here's the thing about housing:

The delegates insisted on one hand that “housing is for living not speculation”, but on the other, emphasised the critical importance of real estate to China’s economic growth.

In other words, things are complicated. We want housing to be affordable to more people, but at the same time, we recognize that housing appreciation is kind of useful for overall economic growth. So we're a bit conflicted. And that may be why we tend to take contradictory actions.

Broadly speaking, the current playbook in Canada seems to be as follows: heavily tax new housing, force those who can afford new market-rate housing to subsidize those who can't, and then tax/ban foreign buyers.

Canada's new foreign buyer ban came into effect on January 1 of this year. And for the next 2 years, it prohibits companies and people who are not Canadian citizens or permanent residents from acquiring non-recreational, residential property in Canada. (What is the definition of non-recreational?)

While this may sound good to some -- finally, more homes for Canadians -- we're talking about a relatively small portion of the market, which is likely why there's also little evidence that any of our foreign buyer taxes have been all that effective.

It's really hard to imagine this one working much better. But it certainly sounds like something.

This Twitter thread by Richard Wittstock of Domus Homes (developer out in Vancouver) is a timely follow-on to yesterday's post about housing supply, land-use regulations, and specific policies such as inclusionary zoning. What Richard clearly describes in his thread is the economic impact of a Community Amenity Contribution (CAC) that requires developers to provide 20% social housing.

The thread will walk you through all of the specific numbers, but I think there are three important takeaways:

1. Everything has a cost. It is entirely disingenuous for anyone to refer to inclusionary zoning or other similar policies as a mechanism for "no-cost" affordable housing. Even if you believe it is the right public policy approach, there is still a cost. Social housing doesn't just appear out of thin air.

2. In Richard's thread, the remaining market rate condominiums end up needing to be sold for $1,750 psf in order for the entire project to pencil. This is a significant number. But in this case, it is a result of these homes needing to shoulder the cost of the social housing. It is basically saying "housing is too expensive, so let's make it more expensive so that we can use some of the incremental proceeds to finance less expensive housing."

3. If the math doesn't work, developers will not build new housing.

P.S. Thank you Volodya Gusak for pointing out Richard's thread to me.

Here's the thing about housing:

The delegates insisted on one hand that “housing is for living not speculation”, but on the other, emphasised the critical importance of real estate to China’s economic growth.

In other words, things are complicated. We want housing to be affordable to more people, but at the same time, we recognize that housing appreciation is kind of useful for overall economic growth. So we're a bit conflicted. And that may be why we tend to take contradictory actions.

Broadly speaking, the current playbook in Canada seems to be as follows: heavily tax new housing, force those who can afford new market-rate housing to subsidize those who can't, and then tax/ban foreign buyers.

Canada's new foreign buyer ban came into effect on January 1 of this year. And for the next 2 years, it prohibits companies and people who are not Canadian citizens or permanent residents from acquiring non-recreational, residential property in Canada. (What is the definition of non-recreational?)

While this may sound good to some -- finally, more homes for Canadians -- we're talking about a relatively small portion of the market, which is likely why there's also little evidence that any of our foreign buyer taxes have been all that effective.

It's really hard to imagine this one working much better. But it certainly sounds like something.

This Twitter thread by Richard Wittstock of Domus Homes (developer out in Vancouver) is a timely follow-on to yesterday's post about housing supply, land-use regulations, and specific policies such as inclusionary zoning. What Richard clearly describes in his thread is the economic impact of a Community Amenity Contribution (CAC) that requires developers to provide 20% social housing.

The thread will walk you through all of the specific numbers, but I think there are three important takeaways:

1. Everything has a cost. It is entirely disingenuous for anyone to refer to inclusionary zoning or other similar policies as a mechanism for "no-cost" affordable housing. Even if you believe it is the right public policy approach, there is still a cost. Social housing doesn't just appear out of thin air.

2. In Richard's thread, the remaining market rate condominiums end up needing to be sold for $1,750 psf in order for the entire project to pencil. This is a significant number. But in this case, it is a result of these homes needing to shoulder the cost of the social housing. It is basically saying "housing is too expensive, so let's make it more expensive so that we can use some of the incremental proceeds to finance less expensive housing."

3. If the math doesn't work, developers will not build new housing.

P.S. Thank you Volodya Gusak for pointing out Richard's thread to me.