Sounds like a great idea with guardrails - primary residence, first timers only, no pledging home on additional debt, some size cap, and some type of sq footage and bedroom minimum to encourage building of family focused condos.
Yes, I can sympathize with the fact that even the so-called “experts” may occasionally miss the root cause of the problem. But to miss it by THIS MUCH?
The Canadian Housing problem is not even remotely linked to supply and demand. And without addressing the structural, fiscal, and monetary policies I described – the proposed solutions are just an illusion…
Building more units w/o the changes I described, will be like pouring gasoline on a fire… The housing bubble has necessitated new ideas, but as long as we can’t stop all the foreign and domestic speculators from China, India, Rusia, and the USA from buying 10, 50, or 100 housing units – owning a home by the younger generations will not materialize…
Nearly one in five homes is now bought by institutional and/or foreign investors—not individuals—adding further competition. As a result, the share of first-time home buyers has shrunk, leading more millennials to rent well into their thirties and forties…
When fintech startups are raising hundreds of millions and are allowed to offer “all-cash” for immediate housing purchases (in exchange for a significant fee or lucrative lease payments) – watch out
When billions are invested in all the “Buy Now Pay Later” and “Lease To Own” fintech startups - the young families are no match for such “unicorns” supported by the largest VCs on the planet.
Also, the Canadian taxation of mortgages is structurally flawed and provides a huge incentive to speculators – both foreign and domestic. And I talked about it for years…
It all boils down to disallowing mortgage interest deductibility in exchange for not taxing the capital gains at the time of selling. Hence, Canadian families keep asking: what is it good for? And the honest answer is: ABSOLUTELY NOTHING…
The solution to housing abuses is quite simple. It’s similar to the way Canadian employers need to comply with the Labour Market Impact Assessment (LMIA) regulations. In the USA, it is the U.S. Department Of Labor that issues The Office of Foreign Labor Certification (OFLC).
LMIAs and OFLCs verify that there is a need for the job the employers are offering to foreign workers and that there are no Canadian/American workers to be hired instead…
Similar criteria can be applied (call it Home Buyer Impact Assessment, or HBIA) - to allow institutional home buying ONLY when there is no retail home buyer interested to buy the property and live in it…
We already use LMIA and OFLC to control who has the right to work in Canada and the USA. It ensures that Canadian/American citizens are not disadvantaged by foreign workers. So, shouldn’t we use HBIA to prevent the abuses of homeownership by foreign and domestic speculators.
Just imagine, without LMIA and OFLC, what would prevent greedy employers from bringing foreign workers to all enterprises - at a huge discount and much lower wages?
And yet, we allow foreigners, domestic speculators, hedge funds, and VCs - to take advantage of young Canadian and American families seeking a place to call home. It’s time to smarten up…
Creating an FHA type program for first time buyers, with mortgage loans securitized and attractive to international buyers might be a path. Since the "cure" would disrupt the sacred cows (Big 5 Banks who currently own/hold/securitize the mortgages (with CMHC guarantees for the riskiest)), they'll need to be incentivized since they have the administrative power to process applications and smoothly close. I am basically advocating for the American system with prudent guardrails to solve the generational home ownership problem. BMO and TD have operated in the US long enough to understand the administrative side so what is needed is a Fannie/Freddie entity (convert CMHC?) Including Canadian mortgage loans into the international MBS market isn't the stretch it seems (but it is bold.)
The system/policy mentioned above is inflationary. Therefore, it could only be introduced in a crisis/extreme credit event like 2008-9. The event will occur, just ask Warren and think of his naked swimmers on the beach analogy. My former home in Little Italy isn't really the million dollar nest egg it seems to be ($229K in 1999) and neither is yours, whatever the origin story. How these prices are deflated is painful to ALL. Can new homes bee built like the post-war period? Why not?
I'm spitballing here but having been involved in both countries mortgage banking for some time, I read your proposal with great interest.
What happens to the tax free nature of gains on a primary residence in this scenario? Certainly that would have to go away if interest is deductible. There could be a deferred gain if you reinvest in a primary residence within a certain time period but there would need to be a final bill paid on the gains I would assume. Helps with the generational issue as well. If you did not use the deduction, no taxable gains. I have always thought this would be a benefit to the country. But tough to make the change.
Sounds like a great idea with guardrails - primary residence, first timers only, no pledging home on additional debt, some size cap, and some type of sq footage and bedroom minimum to encourage building of family focused condos.
Yes, I can sympathize with the fact that even the so-called “experts” may occasionally miss the root cause of the problem. But to miss it by THIS MUCH?
The Canadian Housing problem is not even remotely linked to supply and demand. And without addressing the structural, fiscal, and monetary policies I described – the proposed solutions are just an illusion…
Building more units w/o the changes I described, will be like pouring gasoline on a fire… The housing bubble has necessitated new ideas, but as long as we can’t stop all the foreign and domestic speculators from China, India, Rusia, and the USA from buying 10, 50, or 100 housing units – owning a home by the younger generations will not materialize…
Nearly one in five homes is now bought by institutional and/or foreign investors—not individuals—adding further competition. As a result, the share of first-time home buyers has shrunk, leading more millennials to rent well into their thirties and forties…
When fintech startups are raising hundreds of millions and are allowed to offer “all-cash” for immediate housing purchases (in exchange for a significant fee or lucrative lease payments) – watch out
When billions are invested in all the “Buy Now Pay Later” and “Lease To Own” fintech startups - the young families are no match for such “unicorns” supported by the largest VCs on the planet.
Remember, the US Housing Bubble has never reached Canadian proportions. As crazy as it looks, it doesn’t even come close to the madness of the Canadian housing prices in Ontario and BC – all else being equal… https://www.linkedin.com/pulse/canada-worlds-greatest-manufacturer-housing-bubbles-oleg-feldgajer/
Also, the Canadian taxation of mortgages is structurally flawed and provides a huge incentive to speculators – both foreign and domestic. And I talked about it for years…
It all boils down to disallowing mortgage interest deductibility in exchange for not taxing the capital gains at the time of selling. Hence, Canadian families keep asking: what is it good for? And the honest answer is: ABSOLUTELY NOTHING…
The solution to housing abuses is quite simple. It’s similar to the way Canadian employers need to comply with the Labour Market Impact Assessment (LMIA) regulations. In the USA, it is the U.S. Department Of Labor that issues The Office of Foreign Labor Certification (OFLC).
LMIAs and OFLCs verify that there is a need for the job the employers are offering to foreign workers and that there are no Canadian/American workers to be hired instead…
Similar criteria can be applied (call it Home Buyer Impact Assessment, or HBIA) - to allow institutional home buying ONLY when there is no retail home buyer interested to buy the property and live in it…
We already use LMIA and OFLC to control who has the right to work in Canada and the USA. It ensures that Canadian/American citizens are not disadvantaged by foreign workers. So, shouldn’t we use HBIA to prevent the abuses of homeownership by foreign and domestic speculators.
Just imagine, without LMIA and OFLC, what would prevent greedy employers from bringing foreign workers to all enterprises - at a huge discount and much lower wages?
And yet, we allow foreigners, domestic speculators, hedge funds, and VCs - to take advantage of young Canadian and American families seeking a place to call home. It’s time to smarten up…
Creating an FHA type program for first time buyers, with mortgage loans securitized and attractive to international buyers might be a path. Since the "cure" would disrupt the sacred cows (Big 5 Banks who currently own/hold/securitize the mortgages (with CMHC guarantees for the riskiest)), they'll need to be incentivized since they have the administrative power to process applications and smoothly close. I am basically advocating for the American system with prudent guardrails to solve the generational home ownership problem. BMO and TD have operated in the US long enough to understand the administrative side so what is needed is a Fannie/Freddie entity (convert CMHC?) Including Canadian mortgage loans into the international MBS market isn't the stretch it seems (but it is bold.)
The system/policy mentioned above is inflationary. Therefore, it could only be introduced in a crisis/extreme credit event like 2008-9. The event will occur, just ask Warren and think of his naked swimmers on the beach analogy. My former home in Little Italy isn't really the million dollar nest egg it seems to be ($229K in 1999) and neither is yours, whatever the origin story. How these prices are deflated is painful to ALL. Can new homes bee built like the post-war period? Why not?
I'm spitballing here but having been involved in both countries mortgage banking for some time, I read your proposal with great interest.
What happens to the tax free nature of gains on a primary residence in this scenario? Certainly that would have to go away if interest is deductible. There could be a deferred gain if you reinvest in a primary residence within a certain time period but there would need to be a final bill paid on the gains I would assume. Helps with the generational issue as well. If you did not use the deduction, no taxable gains. I have always thought this would be a benefit to the country. But tough to make the change.