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When governments burn the future to save the past they do it with housing
In the United States, there is a clear age gradient for voting: the young vote for the left, the old vote for the right. This is partly due to changing racial composition, but not entirely. Young whites are much more likely to vote Democrat than Republican. But in Canada, this is not the case. Here, there is almost no age gradient at all in vote intentions.
A standard model for politics is a combination of (1) people’s opinions on social issues settle fairly early in life and as Cthulhu swims leftward their views end up further and further right, and (2) as people age they become more economically secure and less and less likely to benefit from redistribution.
Canada violates this model for a few reasons. Our welfare state – which spends lavishly on the old – is the lynchpin of our nationalism: “We aren’t like those damn Americans” the Boomers cry as they hold on to their OHIP cards and wait for 8 hours in an emergency room. What it means to be a Canadian these days is to support large government and this keeps the old attached to the left. The right in Canada is also pretty neutral (neutered?) on social issues so issue #1 above is not that important – at least until abortion trots out during the election.
However, this has all be throat-clearing for my actual point. Canada now has a special issue which creates cross-cutting electoral incentives by age: housing. For decades one of Canada’s selling points has been that it’s a peaceful, moderate place that is cheap to live. That has been completely destroyed over the past decade under the leadership of the Liberal Party. The Liberals are the party of the status quo and don’t see it as a problem that prices are high. Just yesterday, Prime Minister Trudeau gave an interview where he said: “Housing needs to retain its value. It’s a huge part of people’s potential retirement and future and nest egg. So yes, we need to keep housing stable and valuable”. On the policy front and despite high interest rates, the government is letting people pull money out of RRSPs (equivalent of 401ks) for downpayments, instructing the Bank of Canada (equivalent of the Fed) to buy mortgage-backed securities to make borrowing cheaper, and creating new tax vehicles for home buyers. Despite promising to lower net migration, the stats show that a record 400,000 people arrived in the first three months of 2024.
In other words, the Canadian left (the lefty NDP party is in coalition with the Liberals) is spending more and more tax money to prop up home equity and price its young people out of homes on purpose. In Canada the institutional left sees its role as protecting middle class wealth. High house prices have existed in our big cities for decades and prompted a steady stream of Canadian outmigration to cheaper places. Cities kept growing because of replacement immigration. In 2020 however due to the pandemic and a surge of workers and student immigration to rural areas, unaffordability has spread nationwide and now literally nowhere is spared. Houses in small towns hours away from major cities generally cost over $400k. This has caused a deep well of anger and despair among the young. It shows up in polling to some extent, but anecdotally: one of my friends just moved to Colombia to become a remote worker … because of housing, another one abandoned trying to get pregnant … because of housing. A friend circle I’m near to is fracturing because half of it inherited homes and the other half will rent forever, and that fact is too corrosive to the friendships. Its just too hard to watch your kids grow up in an apartment you can barely afford while your friends live in a better neighbourhood and go on vacations.
In a normal society, housing is not a politically important issue. Its just a good like any other. But if house prices rise as they have here, your society has made a Faustian bargain. The older generation become millionaires despite barely saving, but it comes at an enormous cost. Social cohesion frays, more and more GDP gets paid to parasites realtors, high land costs mean new building also consumes more and more GDP, without the basics covered young people wont start businesses, cost of living soars for the poor and young, governments face pressure to both get new buyers into homes and preserve home values which means wasting money and mass immigration, etc. And the lucky ones who see their asset prices rise? They aren’t always better off either! Most will see their kids move far away or borrow against their homes to give their kids downpayments. Housing in a world like this is a special issue because it is truly zero-sum: one person's cost of living is another person's asset. Depending who you are, you want prices to be higher or lower. This is a nightmare for governments because there is no easy third option: your policies will inevitably hurt one group or another on the single most important factor for their financial health.
In short, it’s a disaster. Given how far its gone, there is no way for normalcy to return with economic growth (it would take decades for real incomes to rise sufficiently) so there are only three end games: (1) Canada becomes like Southern England or San Francisco, a dual society of property owners and proles, (2) inflation re-ignites and incomes rise enough in nominal terms to re-establish affordability, or (3) the crash and ensuing recession. I don't know which of the three is my prior or even which to root for. The new political consensus is for government to respond with overwhelming force to economic downturns and do what it takes to protect assets, especially housing assets. Political forces are arrayed in pursuit of outcome #1. Its possible that inflation is re-establishing a limiting principle for how much this will work in future, but it may not and we get scenario #2. There may also be a sui generis event or a conservative ideological policy mix after the next election that causes #3.
Housing is so utterly fucked, it's almost incomprehensible to me how to fix it. The degree to which it creates a class of haves and have nots boggles the mind.
Putting aside how turbo-fucked the current situation is with historic, never before charted levels of unaffordability, even in normal times, the struggle to save up a down payment faster than housing prices are rising is real. My whole 20's and 30's was spent in an effort to save 20% down for a property, scrimping, saving, budgeting, getting set back, while my goal moved further away from me faster than I could catch up. This as a single man, with no family, making a generous middle class salary, and being rather frugal.
And yet, as soon as I finally got close enough to make one last valiant push and leap across the finish line in 2021, thank god, things went and got so bad, if I hadn't, it's unlikely I ever would have bought a home. I'm not sure I'd want to become a first time home owner in my 50s!
But, thanks to the benefits of a 30y fixed rate mortgage, a true luxury that exist almost singly in the United States, my largest expense is now greatly shielded from inflation. My mortgage has crept up $200/month for taxes and insurance, but equivalent rent where I used to live has shot up closer to $1000! And that's money right back into my pocket I'm now investing, getting even further ahead. The degree to which this single decision secured not just my future, but my ability to contribute to the future of my children, cannot possibly be overstated.
The worst part is, almost every solution I hear about is worse than things currently are. The complete and total failures of rent control are well known. Subsidized housing annihilates cohesive pro-social communities faster than actual warfare. Building more housing seems like the most obvious solution, and yet economic incentives have basically gutted the economic viability of constructing starter homes. And unfucking that quagmire, where the cost of land, materials, permitting and labor strongly incentives only "luxury" homes to be built and sold seems as likely to run into the same perverse incentives that causes rent controls to always fail. It's like the only way out is for an apocalyptic reset, and to revert back to living in cheap, affordable mud huts on whatever land your tribe can secure through 3rd world brutal violence.
Tangent to all the point missing nit pickers who will chime in "You don't have to put 20% down!" I know. But the fees associated with all the other loan packages that allow you to not put 20% down seriously eat into the benefits of buying a house. Depending on the terms of your mortgage, the PMI may be something you are stuck with even after you've built up 20% equity in the home. It may require refinancing to rid yourself of, which in this rate environment is utterly retarded. To say nothing of how having that 20% down gives you a leg up in having your offer considered, probably second only to all cash offers. In a competitive environment it's a real asset.
Building housing is actually doable. Sure, starter homes will have to go for more than in previous generations, but you can still build them. Relaxing zoning restrictions also brings prices down.
Now that being said, there are places like New York which just don’t have much to be done, due to density.
Some of that is also due to changing standards of living: Manhattan has fewer residents now than a century ago.
Sure, but ‘let’s all be much poorer’ is a tough sell.
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There are a tons of programs that are 0% down or 3% down for first time home buyers that have low cap PMI/no PMI or get rid of it at some equity goal like 20% paid off etc.... The fees don't even factor in. The saving 20% thing hasn't been true for almost 40 years. It doesn't make your offer more attractive than a higher one at 3%. Not in any way that matters, cash sales are nice because you can wave all kinds of stuff and get it done fast, anything else is mostly the same with some caveats. I'm glad you were able to get in when you did, but clearly you wanted to buy earlier, and you easily could have, even faster if you had done it with a partner. I didn't scrimp and save, I bought my first property in foreclosure with 5% down that I put on a credit card and they handed me a 15k check at closing.
Most people in the USA own houses, around 2/3rds, so is 1/3 of the population renting really a crisis? It is historically average for modern times.
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Well, I suppose the government financing public housing projects again would at least alleviate the problem.
Then you're just paying through your taxes, and you're getting far less for your money.
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Not if they become highly affordable crime-ridden dysfunctional wrecks that no one wants to live in, which already exist. The chances of these being remotely safe in any kind of current-day city is virtually nonexistent at this point.
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I think it’s actually easy to fix housing. Voters don’t want to in blue states where I am guessing you are located.
You never directly build affordable housing. You build new high end housing. The old high end housing depreciates and in 20 years is affordable.
The only hard thing now is addiction to fiscal policy which drove up inflation and private investments (rates). Which curtails new construction where they let you build.
The other, non-governmental, issue is the Blue Tribe's desire to centralize everything in cities. As you concentrate more and more economic activity into a small space, the housing located near it naturally becomes more desirable and thus more expensive.
Even then you need significant geographical barriers limiting growth. Only a few places are Tokyo dense.
The thing that most surprised me about visiting Tokyo is that there are (tiny footprint) freestanding single family homes within walking distance of even the densest areas. It isn't all apartment blocks as far as the eye can see, although those are there.
Yes, Tokyo and Paris prove that you don't have to build 50-storey condos to reach the required density.
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