Everyone talks about “affordable housing” these days as if it’s taken for granted that we all want it.
The problem is that we don’t.
Not really. In theory maybe, but not in practice.
How often do we hear the clarion call: “We must crack down on speculators?”
The nature of home ownership makes us all speculators.
We all know how the game works: if you go down 20% and the price goes up 20%, your capital has doubled.
So you sell, upgrade to a higher mortgage or second property, keep some of the money, and keep going until retirement. You naturally want prices to keep rising. Why wouldn’t you?
“Ponzi scheme” has been used to describe this and it’s not far from the truth. We are all complicit to some degree.
Non-homeowners, meanwhile, are being left behind as home prices are increasingly out of reach.
Using some standard definitions of affordability and a few numbers on the back of a napkin, a family with a median annual income of $84,000 and a down payment of $100,000 could barely “afford” a condo. room.
That’s if interest rates don’t rise, which appears to be the case.
Also keep in mind that this is the median household income, which means half of the households couldn’t even afford that one bedroom condo.
(In practice, many manage to make it work by pushing their finances to the bearable limit, or even beyond. I myself have been “housing poor.” It’s unhealthy and unsustainable.)
So what would affordability mean in practice?
I just saw a report that the average three-bedroom townhouse — a modest but respectable home — in Port Coquitlam is now selling for nearly $1.1 million.
For this to be “affordable” for only half of beginning households would require a devaluation of 50%. Probably more after factoring in maintenance costs, lamination fees, etc.
In other words, “affordability” in practical terms would mean “foreclosure” for most homeowners and “bankruptcy” for many.
That’s why we don’t want it.
Nobody knows how to go back in time.
It’s not a “supply issue” either.
It’s almost entirely the value of the land that keeps going up and we’re not getting any more money from it, with good reason. Building more units will not magically cause land devaluation. Densification, on the contrary, increases the value of land, kicking down the street without solving the problem.
There are many benefits to restricting foreign ownership and building more non-market or purpose-built rental housing. We can, and certainly must, do more. This is not an argument against growth or sustainable development.
But unless we are willing to accept massive foreclosures and widespread economic collapse, these measures, for all their merit, will not solve the “affordability” problem, which is really a “land value” problem.
The question we really have to ask ourselves is, what will?
-Erik Minty, Port Coquitlam