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In this episode we'll be talking about affordability, mainly the housing affordability crisis in Canada. It’s been a growing issue over the last few years with a lot of moving parts contributing to the problem. This year, in particular, we’ve got a perfect storm of logistic, economic, and geo-political issues that have further amplified the situation. Given the size of the problem, we're turning this episode into a “mega-sode”, that means an extra twenty minutes for the Altus Insights team to talk this topic out. So strap in, because this one's going to be a bumpy ride!
Welcome to Altus Insights Podcast Series. This podcast brings together some of our leading brainiacs at Altus Group to discuss, debate, and on occasion complain about the evolving state of Canada's residential and commercial real estate. Join Ray Wong, Marlon Bray, and Avi Zelver for monthly podcasts covering the latest market and construction cost trends across major markets in Canada.
Welcome to the Altus insights podcast series with Ray and Marlon hosted by me, Avi. This podcast will cover monthly market updates and construction cost impacts across major markets in Canada. Welcome to episode four of Altus insights podcast. Today, we're going to talk about affordability, mainly affordability crisis in Canada, which has been a really big topic for the last few years and every year it seems to be a growing concern. So here with me, we have Ray Wang and Marlon bray, our two experts on the market and the industry. And I'll just jump into a few questions that I know a lot of you are looking for answers for. So the first question is, what are the main causes for the unaffordability crisis that we're seeing in some of the major markets in canada? Ray, maybe you can address the demand side of things and then Marlon, you can discuss more of the government side and costs. Great thanks, Avi. The thing is, with this housing affordability crisis, it's not just the past few years, but you know, this has been going on across Canada now for 20 or 30 years. And it's really with the pandemic has really exasperated that the problem's always been a problem in the major markets. But now we're starting to see a bit of an issue in some of the secondary and tertiary markets because of that push out with the change in demographics. And we're going to see this anyways looking for sort of more space or bigger bang for the buck. And from the inventory level, it's the developers and builders. They're having challenges with balancing the cost to build. And as well as to look at a proper return and as well as to build quality housing. So it's a combination of different things impacting the marketplace, but more recently, with the low interest rates. And as well as potential further increases in the next 12 to 18 months. And we're also going to see the resumption of immigration. So it's an issue that is not well, it's definitely not going away, but it's an issue that we've been dealing with for a number of years, not just the last few years, as contributing to the problem right now with affordable housing. But again, there's a lot more exasperated now just because of where we are with the market and overall pricing. Thanks, ray. So this is where I dragged my little soapbox over slowly but surely, I mean basically the way I look around housing affordability, place your head between your knees. Adopt the brace position. It's going to get worse in the short term, and it's not going to get significantly better, especially in the new construction side and affordability in general. I mean, if we want to do a real easy example, look at Toronto and condos. Current rate of cost escalation means the condo price has to go up 50 $70 per square foot just to accommodate escalation, throwing inclusionary zoning that's coming up soon. There's another $50 per square foot fairly in TSG ESG. All great ideas $10 to $20 per square foot for wind tanking plus delays and approvals. Plus plus plus plus plus plus it never ends. We have a significant housing, so though we have significant housing construction and starts, that's despite the bureaucratic hell that's been created, not because of the enabling policies that we actually need. So a major challenge on affordable housing. It tends to be an emotional topic, which is why a lot of people struggle to have the discussion on it. And most people actually care about it. So it's complex. There isn't a singular cause. There isn't a singular time. It started like reset. It's been going on for a while. There isn't a single answer or solution. I mean, the only person that does well have housing affordability is the NIMBY. I mean, they get to make sure that the rest of the regular mortals don't get on the housing ladder. They like inclusionary zoning because it's hey, kids, go eat cake, just don't do it in my neighborhood. And it's all about luck and timing on the housing side. I mean, if you spoke about this with us before trying to buy now versus 20 years ago, 10 years ago, it's a bit of a complete nightmare. So basically, everyone trying to buy a house now is already up the Creek without a paddle. What about my daughter, who's 15? It's even worse. And I think a lot of the problems on the supply side, they come from the partisanship, the obsessiveness. It's all one camp or another. There's no give or take. One side cries, I need more supply. The other side decries on the construction, a group that wants to blame foreigners and one that's just developers. People have a second home. Developers make too much money, and each side is manipulating stats to say what they want. And the problem with stats is the famous lie lies down lies, and statistics. So all of us, we have access to a lot of information, and I believe there's a supply side issue. I think Greg would agree that a supply side issue and there's a significant lack of affordable housing. And the solution to me is collaboration is collaboration with the private sector. It's trying to found some trust and belief on trying to get to the right place where everyone can get a house, even if rental or affordable. And this adversarial predominantly, I think, is fueled by the municipal level. It's just not working. There's an imbalance to the demand. And again, people always like the podcast because they said they like to listen to the stats. But BMO came out the other week and said part of the housing problem is the obsessiveness with increased house prices, even with people no intention to move. We all know how many people look at the MLS app or how sigma. I mean, it's like house porn. They're addicted checking every day. And we did the neighbors get for the house? What did the house around the corner sell for? We with Collin, we make fun of him trying to keep up with the Joneses and move to Bennington heights. That's his big dream. So and everyone gets caught up with it. So how much is housing and demand out of housing supply and demand balance? BMO recently said not overly. Task force in Ontario said 1.5 million in Ontario over 10 years, Scotiabank says 650,000 to get to the G7 average in Ontario 120,000 in Alberta. We know Canada is lagging behind everyone else. Cibc just said population growth is outstripping any projections by 45,000 to 50,000 per annum since the last census Smart Prosperity Institute came out a million people, so leading experts to somewhere between 0 and 1 and 1/2 million. So we just lack good data in Canada, verses of a country, which makes it harder to manage, especially with three levels of government basically doing the opposite each other, and blaming each other for equal measure. So when I go around to who's the problem? To a degree, it's the politicians, it's municipalities, it's the counselors. They're all partially responsible for where we are today. The time it takes for approval of a change in playing field, changing rules, levies, carbon taxes, whatever the is, the flavor of the day to get re-elected. New construction house prices increased relative to cost pressures. It's something that seems to get missed massively by the market. Developers do not Jack up prices to make more money. A condo today is generally making a fairly similar return to where it was in 2016 and that's for the developer. Even with those significant revenue increases we've seen, so costs are out of control. That's hard cost, soft cost, government levies, land and each increase basically ends up in the selling price. And the housing system in Canada is pretty much fundamentally broken. Does attempt to correct course, but it's like this endless hamster mill hamster wheel. Sorry so I don't know. Maybe the federal plan to reduce the carbon is let's all live in tents. Maybe this is the whole cunning plan. We just won't build enough houses and we can reduce our carbon footprint by not having houses to live in Marlin. We're talking about properties for sale, but we also have to look at the multifamily sector where we've also seen increase in rents just because of and that's moved. In conjunction with the higher home prices, sometimes people don't have a choice but to rent and they can afford to buy. But that's a bit of a challenge and we're dealing with in Canada as well that do we really? Does everyone really need to buy or own a property and can there be a shift to be a little bit more acceptable rather than rent than buy in again? We've seen most of the multifamily housing stock is in Montreal and whether or not we shift that area, but we're also having affordability issues there with one increase in rents and not enough for purpose built rentals, which is slowly changing, but not quick enough. So I think with this whole affordability thing that we have to look out the rental as well as the properties for sale. No, I agree completely. And then maybe will throw it back to you for the next question because I think we've derailed you a little. Yeah, you answered a couple of questions in that one question, but re going back to what you said, it actually really resonates with me and I did. I did speak to Ray and Marlon about this last week. I've been house hunting with my husband and we've put in offers now on probably seven different houses, all of which ended up going for half a million more than the asking price, which let me tell you, was already quite high. And it's really a crazy time. I remember when I was a kid and people had a million house, it was like this big deal. And now the average low rise home is 1.81 0.9 million in the GTA. So it seems like it's becoming increasingly difficult to get into the market. And if you are already in the market, you've probably made some good returns on your assets. But for those who have not yet gone into the market, it is a very challenging time. I know in the gta, houses went up by 30% February 20, 2002 compared to 2021. So there is this pressure in this rush to buy now because we're scared the prices are going to just keep going up. But it is a very challenging market and we see that Montreal and Vancouver are also becoming increasingly more unaffordable. So based on all these stocks that we're seeing and based on the major markets becoming so expensive, so fast and really having this supply issue, what do you guys think would be a simple solution to solve this crisis? I don't know if there is a simple solution, but what would you what would you recommend as a government policy? What kind of things do you think could help improve supply or help put some Downward pressure and stop this trend from increasing so rapidly? I'll go first. So I think for the government, basically they take the largest return on housing, and that sounds a little odd looking at government return on housing. But if you look between levies and HST, look at a new condo. It's between 20% and 25% of the cost. So that's way more than the developer's profit actually makes. And what we and the developer basically has to put the slow approvals, reduce density to try and keep the neighbor happy while the government takes a huge cut the pie. So think about that. You said a million a moment ago, say a condo, not even a house. Fees and levies are going to be $250,000 and if you're an average wage earner in Canada, a how do you afford a million home? B that's like 10 to 20 years of income tax in one hit that the government wants you to finance over 25 years with a bank. It seems like a completely illogical way of curing housing affordability, taxes to death from both ends, both on the income. And then we'll go buy something, I suppose, in a world where it's magically balanced themselves. Someone else always suffers to do that because I can tell you the average person's budget doesn't magically balance. And if I had a construction project that comes in 30, 40, 50% over budget, I can just shrug my shoulders, Glenn, the government, it's not my money and continue, and there's been discussions about different construction approaches. I was on the recent rescan conference that they had about housing, and they did touch on a couple of those. So different construction approaches. They're not going to save the day on a huge scale, on a smaller scale are definitely going to help. Prefabrication can help. It's a little more expensive right now, but it's fast. It's quick. It's good for remote areas, SEAL Team mass timber. I love that stuff. And we saw in the New sort of act that is being proposed in Ontario as part of that, with the 3 to four story homes as infill homes in the more homes for everyone. That's where CLT really fits in. But the problem we have is we're in the whole hundreds of thousands of homes. We're not in the whole Tens of thousands. Population growth can be 2 million over the next five years, which I think Ray touched on earlier. Over a million of those are coming to the GTA. It could be a million and a half over five years. They need someone to live in as much as I made the joke about the low carbon tent. I'm not really sure that's a great option for people. So we have major issues in housing as well, not just for newcomers, not just for people who already live here, but the Indigenous population. We've got seniors aging in place because there's a sheer lack of options for them to feel secure and get out of the four bedroom homes. We see these ridiculous studies where they count how many bedrooms are free. It's just ludicrous use of stats. The entire house system is in crisis. I made this joke earlier. Basically, right now it's like having to throw a forest fire and each one of the government levels is throwing bucket of water on it. So I think part of the solution back to my earlier point is partnership the private sector. What we've seen on the free side on the social infrastructure, look, it's not perfect. It's not necessarily always ideal, but it gets stuff done, not the city of Toronto's approach, which is either deliberately adversarial or plain stupid. I mean, if they're meeting klansville approach to inclusionary zoning, it's just ludicrous what they're trying to do. So if a development has two towers, once it goes condo, why can't they have a real, affordable housing? How can the private sector help do that? How can we look at taking property taxes off these affordable homes? How can we start taking tax off stuff to help people out? How about we get free buildings by removing the property tax? Give a DC break and then we get affordable rental. But affordable rental, a real human being can live in not some theoretical person that makes $100,000 a year, which which is great, but there's a lot of people that don't. And I think there's great examples of inclusionary zoning that have worked in the world. There are partnership there now, a baseball bat to the knees. And the issue with politics is the focus is on the next election. Systemic issues are bigger than a four year cycle. They're bigger than party lines, bigger than fundamental beliefs. We need people to step up and make change happen, not play possum, shoot out a platitude policy which helps no one. We've got an election coming up in Ontario. We saw the first fire, which is the outcome. Now we all know what's going to happen next. Each of political parties are going to throw out a large number of homes that are never actually going to get built, that they promise to get built and then just keep naming a number bigger than the next guy. So it sounds like they're doing more for the housing. It's starting to get fixed a little bit. It's just going way too slow and the problem's way worse than they're trying to deal with. Interest rates are going to go up. The problems are just going to exacerbate in the future. On that topic, just because the new bell went to nine more homes for everyone act was just released a couple of days ago on Wednesday, Steve Clark said that effective January 1st 2023 the government will commit to providing comments within 45 days to any applications for housing development across all ministries. I'm just curious, how do you think this will impact new supply or better yet, will it even impact housing supply? The problem with the approvals tends to be at the municipal level and those actions in the act, reductions in the fees they can receive if they don't respond in time. We saw, I think it was in one of the newspapers recently, one of the counselors complaining in the city of Toronto, specifically saying, look, we've not even give you our opinion on the project and you're already taking us to alpha. Yeah, because you took so long to give an opinion. And I think that is the challenge. It's time and we did see a commitment for the keys to keys. I think I've got that name right in Toronto as well, where they're going to try and hire more planners. And we've had this discussion with developers and I think this would apply across the whole of Canada. If a developer was told you give me an extra $100,000 on a project and I'll dedicate a planet to your project will get it through in and we'll get it for you in a year's time quicker than normal or two years. I think most developers on a decent sized project are going to jump at that and then that again, it's that partnership. Why the hell do we have to drop off a set a hard copy of drawings? I mean, we're in 2020 to hear this isn't the 1960s anymore. Like, it's time to move up. Everything should be electronic. We should all be in Revit. The world should be moving forward, not arguing about trying to justify why we're doing stuff the way we used to do it. It's time to move up into the new world and that's what's going to make a fundamental difference. And again, supply is not the only solution here. There's a bunch of other challenges we have in general with poor housing, quality of housing, stock areas that need improvement and, you know, the ability for people to actually access decent paying jobs. It's a massive, hugely interconnected problem, but we just deal with whatever sounds good in the election and the new bill. It's nice it's heading in the right direction, but it's not enough. So we'll have to see where things go in the future, depending on who gets elected in Ontario. And as much as we seem to be talking a lot about Toronto, this is a Canada wide issue, and willing to guarantee. If you spoke to someone in Halifax, Vancouver, Montreal, calgary, they would all tell you there's a lot of people who find housing and affordable right now. This isn't a made in Toronto issue. It just happens to be really, really nasty here. That doesn't mean it's any better, anywhere else, relative, because it's all relative. It's a perfect segue for the next question, which I know Ray will be able to speak to this quite a bit. And Marlon, please add anything. But what does the future of the housing market look like in the primary centers like Toronto, Vancouver and Montreal, compared to the secondary or tertiary markets? If things continue as is. Well, this idea to Marlon's comments and a lot of the housing policy and affordability issues, I agree that there's mostly Vancouver and Toronto. When you look at the condo prices, it's 340,000 and Edmonton, 370,000 in Montreal and Calgary is what half a million. So if you look at it, do you have to be in Toronto and whether or not there could be a shift from the work from home and with people working in other sort of secondary, tertiary markets, which we have seen over the past 24 months, especially with people that have decided to sell their Toronto home and move out to Halifax or cliona or Calgary again, more space, more of perhaps a balance and still be able to earn good income considering where the housing prices are. But the issue that we're running into is that these major markets were tough on affordability. But some of the shift that we're seeing in the secondary, tertiary market, especially outside of Toronto, southwestern Ontario in markets like Belleville and in Kingston, is that you have this movement of some of the Toronto owners that have relocated into those markets and they've really moved up the housing prices. So we had a big housing problem in Toronto now has been exacerbated in the secondary and tertiary markets with Toronto or urban buyers getting into those markets and pushing up prices for local people. So it was a bit of a challenge with the housing stock and affordability. But as I think you said earlier, prices have gone up by 30 50% or 60% in some of these markets. So whether or not we're just expanding the problem on affordability, but again, there's still choices that people can make where they can live and what they can afford. But then there's that trade off as well. With respect to uprooting your family. Are moving away from your sort of larger family to be in an area that can have cheaper housing. So I think those are the issues that we're dealing with. But it's no longer just a Toronto, Vancouver issue that this problem is being pushed right across Canada. Yeah, and I think as we see the push to hybrid hold, there's definitely been a case for affordability. How long this lasts in the tertiary market, that's probably the debate as the market's return. I saw a stat somewhere or I was at a conference and someone mentioned that Toronto, for example, had like 17,000 negative in terms of kids population change over the past few years, which is just an indication of people, you know, families getting up. All we probably dream of is a small backyard and trying to find somewhere affordable to live for the kids. And I know rail deck park Sounds fancy, but I suppose if you spend billions of dollars, you've got to do something with it. I think parents really would rather have a little bit of land, a small little garden. And we've seen a lot of areas across Canada Fraser valley, Hamilton, Waterloo, Niagara Barrie, Laval, places like that. We're very, very strong growth and either rent or condo. And it's a big push out. It's that case of affordability and the hybrid. You no longer have to put the hour, hour and a half commute. I live out in Milton, work in Toronto. I got an hour and a half commute. Now I only go in one two days a week. I kind of like it, so we'll carry on. And I think rates in Atlantic Canada, they had an amazing population growth last year. I think it was over 37,000. I mean, basically, that was the expensive part of Canada going, ooh, look, Canada has a golden gem we've ignored for all these years. That's the Atlantic provinces, lower cost housing, amazing people, great scenery and over them. Vancouver where else have you got in canada? Crack open a glass of wine, fire up a joint, sit by, watch the ocean. I mean, the Atlantic is fantastic. That's what we saw. But that doesn't mean the people in the Atlantic now can't afford to live there themselves. And this is a Western problem. You've seen a lot of countries. I mean, obviously with the accent from the u.k., we've seen this in places like Wales. We've seen this in places like Cornwall, where the locals just can't live there anymore. We got a watch. We don't make the same mistake here. We have to push out to Chase housing affordability. There are people of the genuine local people don't get pushed out. It's fair and everybody has an opportunity. And Marlon, I've always been a big fan of landcare and Halifax with balance of housing the universities as well as the commercial component. But what the other thing we're seeing and because right now we do have a shortage of workers and especially on the tech side, and to provide people with flexibility and employers the flexibility to hire in Atlantic Canada, where you know, some of their employees have already moved to. It just widens that cash for qualified or educated or skilled employees. So in one sense, it's a positive for the employers as well as the employees. But some of the other challenges where we're also dealing with is sort of that debate right now of some of the companies that want the employees to be back into the office. So this whole hybrid thing is going to shake out in the next probably 12 to 18 months. And what was reasonable for people to be able to work outside of their market. And it be interesting whether or not if there's a shift, whether or not those people that have moved out, they can afford to reverse the decision and move back into the Toronto, Vancouver. So I think we're going to see a big some of these questions answered probably in the next 12 to 18 months and see where companies are, what type of policies that are going to have, how we're going to interact and how these markets are going to position themselves. But the other thing that we're seeing and Marlon, you mentioned Hamilton, we saw that shift to the last 10, 15 years that with part of the population in Toronto moving in Hamilton. But now we're actually seeing the benefits with the growth of commercial and offices. People that do not want that want to have our commute and setting up the co-working space or some of that space in downtown Hamilton or is being retrofitted into that the brick and being that hip office space. So I think it's those municipalities are starting to benefit from increased investments from companies as well as some startups. So I think this whole affordability thing that it is a challenge but is opening up the doors for some possibilities and growth in the secondary and tertiary markets as well. Yeah, it's very interesting, and, you know, I just said interesting, and that's something I tend to say a lot because a lot of what Marlin and Ray always say is interesting, but it's. It's it says a lot that, you know, there's a speculator tax, they keep increasing it, they've increased it now to 20% and they we keep saying and I agree that adding supply is part of the issue. But when you look at a market like New York where they continue to add supply, they continue to build high rises and prices continue to skyrocket. So it seems to me that there isn't a clear solution, but it's inevitable that more and more people are going to keep moving to Canada. It's a very desirable country, and we spoke about how so many people want to go to the major markets because that's where the businesses are. And I actually read an article, I believe it was Google, and they said that they're going to have a hybrid model for about five years, but then eventually they want everyone back in the office. So the question is, is hybrid a long term solution? Is it short term or are people going to get stuck if they leave the city? I think that it creates a lot of psychological fear for home purchasers because they don't want to be too far from work because commutes are already long. Traffic's already tough public transit isn't always ideal, depending where you're coming from. Sometimes the trains are better than the subways, but there are just so many challenges around it, so it'll be interesting to see how it plays out. But hopefully at least if government, if the government and the municipalities make it a quicker process and provide approvals quicker. And we keep increasing supply and we keep increasing affordability, affordable housing and purposeful rental, hopefully we'll at least give people more options. I think a lot of people feel pressure to own, but it may be the situation where a lot of people are just going to have to rent forever, and that might be the easier solution. I'm not sure. What are your thoughts around that? I think the problem when you start talking about, do we have to own or do we just rent? And we saw a recent article in The us, well, an interview that didn't go fully well for someone that implied that people don't want to own a home. And I think it's a bit of an inflammatory question, especially in Canada, because of the nature of the different provinces. But it's also not the same answer for each person, even geographically retouch to meet with all of Quebec and Montreal much more higher propensity towards rental. All those people actually genuinely don't want the hassle of mortgage or house ownership. We have someone that works for us, so they don't want the hassle of owning a home, so that shouldn't be judged. I think it's more around the second part of the question, which was do people have a choice or the point that you're making? Do they have a choice and they think that's starting to get removed with the affordability challenges? And it's not should you have a right to own a home? I don't think everyone has a chance anymore. So having that less people, having the ability to choose the path to housing, so you have a right to a house of you had reasonable level of comfort, probably in keeping in safety with where you live. But I don't know. Do you have a right to ownership? I think that gets tricky, but to say someone doesn't have a right to ownership doesn't seem reasonable either, especially when I'm a homeowner. Why do I have a right to dictate have to rent your entire life? So I mean, it's key to know ownership. It's really expensive. And as very said, it's not just ownership, it's expensive rentals, expensive. I mean, if in downtown Toronto, do I pay 3 and 1/2 1,004 $1,000 a month for a condo? Or do I pay $1.2 million for the same unit? And how the hell is $1 million or all of a sudden, affordable? It's only affordable for people who bought houses 20 years ago, 10 years ago. Like you said, obviously they've made a ton of money, so. Do we have to own? I don't think you have to own, I think if you'd like to own, it would be nice that there's an option for you to try and get onto the market. And I think a lot of that is to be more articulate, said a lot of people fear of missing out that capital accumulation in price. It does cause a lot of challenge is in the market and it touches back on the solutions. You start to look at some other countries where they have a much larger scale of plan when it comes to housing, like in a national level, they tend to have more stable house prices. That's where the covered it. It's planned to head off the ballot in the markets kept in balance. You can own a home, you can rent a home. There's a choice there. We don't have that because houses have been turned into commodities and everybody's promoting, oh, look, if I bought a house in December, how much is it worth today? And that's literally the scale. I remember when I first bought a house, I was happy if it went up in a year. Now people are literally like, oh, did my house go up this week? It's a mental problem we've generated with this fear of missing out, like you said, and I think that is part of The challenge. Unless we can get either a federal level plan or a reasonable provincial level plan that can return us back to some level of normalcy and expectation where we can get everybody sorted out. And again, we're talking about rent alone. Some people have no choice. They're always going to rent because the nature of their economic situation. So they should have the ability to rent good housing, good quality housing that's actually maintained, which then starts to talk to community housing, Indigenous housing, where they just get left behind. How often do you hear? How far are each community area is down on the maintenance and stuff? So it's not just rent alone. Not everyone has a choice in which case, what the hell are we doing for them? And I think that's the bigger problem. We're obsessed about certain things, and as much as it's sad that someone can't afford to get a $2 million home, you know what? There's a lot of people that can't even remotely ever consider talking about $2 million home, so we have to think about them to. Exactly, and sorry, Marlon. Sorry the other point is when you talk about million homes or 1.2 and going up slightly, it's the average square feet per these units that are actually shrinking. So I think that the challenge is to keep at a certain price point, but you get less bang for the buck and the actual units for some of these condos are actually shrinking in the last few years, whereas prices have been increasing exponentially. So you're getting less and whether or not it's actually feasible to raise a family and, you know, 400 or 500 square feet. The other thing you said on pricing, we're tracking the market, we're tracking all commercial. But when we look at residential land or land in general, we're finding that it's similar to your cost charts, Marlin. Is that where we're having trouble tracking pricing that even the numbers that we released and the year for average pricing in Durham region, 500 to 600,000 acre is now closer to about 800 to a million acre. And that's a span of like six weeks. So it's a moving target. So when you're trying to figure out the growth and whether or not you can build houses and whether or not the numbers work, you're having a moving target not just on the cost side, but the cost to acquire sizable tracts of land. And that's becoming more of a problem. And especially if you're looking in the urban area, which is basically nothing unless you redevelop or demolished building and even prices are really getting pushed out outside that 9to5 or outside that or more into the greater Golden Horseshoe. And before someone suggests the solution is the government building housing, please don't go there. We've seen how they manage budgets, we've seen how they manage quality. Basically, if you think housing is expensive now, let the government build it, then see how expensive it can get. So it's not the solution, it's public private partnership together. And, you know, I am fortunate because I'm looking for. We're looking for our second home, we luckily got into the condo market when it was far less than we thought. Having a home in City of Toronto were in a great position. We want a growing family, we want a bigger space. And it's quite crazy. I live on how sigma. Like you said, I'm one of those people who's addicted to housing sigma. I look every day and the houses in the city of Toronto and the areas that are around some decent schools, you're looking at 2 and 1/2 to $3 million homes that don't even have a garage. And then you start thinking, OK, what if we move to the suburbs? What if we move there? There's so many trade offs, and I think it's also figuring out what are the most important things. And during the pandemic, it's really hard to prioritize what are the strongest points because again, you don't know if you're going to have that hybrid model if you don't have that flexibility or if you're going to always have to go into the office. And I think that puts people in this gray zone of being unsure. And I think what ends up happening is so many more people want to be in the city out of that fear. But hopefully if we do get some more flexible work models, it will start motivating people to start going to the other areas. So that the markets don't get challenged. When we talk about housing affordability, it tends to be a made in urban area predominant massive challenge like Toronto. You're talking about two $3 million homes. There's a lot of provinces where you wouldn't remotely pay that for the average house. It's much lower. But it's all relative because the earning potential tends to be lower in those areas as well. And I think what we have to be careful. When we do these things, we often sound like, oh, look, it's the guys in Toronto. Yeah, the million homes, because people are houses are still $150,000. That's relatively expensive when you live in that area, typically. So it's a relative. And that's also the challenge when you go chasing affordable areas, which was my point about the Atlantic is if too many people with too much money come in, they start to distort the local market and they don't make it a fair market anymore. And that's kind of Ray's point on the speculation on land. Sometimes the prices just get bumped up. There's just not enough supply and it's that same challenge. If there was hundreds of sites available for industrial land, industrial land prices would drop because anyone could buy it anywhere. And I think that's the problem, and I think I've said this in a previous podcast once said to me in a conference, we don't have a land supply issue in Canada. We have an approvals challenge and that tends to be where the thing is, but we do have to remember, not the whole of Canada is the same. Every every town and village is not got a million housing problem. It's the Made in Vancouver, made in Toronto, made in Montreal as a predominant areas where things are just absolutely insane. And then everywhere else, it's just degrees of nuts. 100 percent, so I have another question for younger people that are getting nervous, seeing the markets, seeing the market go up so much and some people have some savings. What would you recommend for them? I know sometimes a lot of people invest in preconstruction because they don't need to put down as much and they're able to wait a few years and run during that time. It's not an option for everyone, but for those that it is, would do you think a pre-construction investment makes more sense than purchasing a resale home or purchasing in the city? What would you do? You have a 15-year-old daughter if in a couple of years you were to push her in a direction? What would you? This is why all of us would need to put a big disclaimer on the screen, saying, we don't give investment advice. We're not liable for investment advice. It's like one of my market presentations or it says, do not listen to me, please. But pre-construction condos is a different view. You're basically buying something that's possibly going to take three to four years. In theory, you're going to get capital accumulation. It allows you to get in the market with a down payment. You hope by the end of that, you've got some capital accumulation, then you move in. So it's not a bad option if you need to move immediately. Pre-construction condo isn't really an option. You're in the resale market, and I think younger people, especially in the cities, are likely going to end up renting. And initially then they might get into a condo, then they might step up to a house. And I think that's going to be the natural progression. But to be honest, if I fast-forward 10 years for my daughter, I don't know if she could afford anything. I mean, I live on a mill and it used to be relatively affordable. Even this, even now, it's just absolutely insane how much a condo costs her. Never mind a townhome or a semi or a detached. You just get silly numbers. So I don't know if I'm going to able to afford a house right now, and I think that's probably even more scary. I honestly couldn't answer. If the going to be able to buy, she might have no choice but to run. The other thing I don't know what she's going to go for a University right now, she wants to go to McGill. Obviously, my mother-in-law is from Montreal, so she has the drawback to go to McGill. So at least montréal is a little bit more affordable than him, maybe. That's that's a good grade school, a great city now. Oh, that's a huge advantage. What are your thoughts and this last question, but what are your thoughts on Lanway housing? I'm seeing a lot of people using their garages or using their backyards to build small Lanway homes for their kids while they're either in University or while they're saving some money. Do you think Lanway housing provides a bit of a solution or. Do you think that housing, I think in general, anything that adds to housing supply can't hurt. I can safely say I would not want to live in a Lanway house with my parent or my dad living in that main house. I want to live as far away as possible. Sorry that if you ever listen to this, but I don't want to live in the house, but I think Lanway houses the infill. So looking out with these three or four story. I think that's a fantastic idea to add some relatively low cost, and I use the term again. It's all relative, but to add some relatively low cost density, probably fairly quickly. And again, if those laneways houses are rented, it still gives somebody a home to live in. And I suspect the Lanway homes are going to be fairly nice. I've seen a number of companies online offering like complete solutions. I'll get you through entitlement. They'll do the drawings they'll build for you. Those are great solutions if you don't want the hassle and you can find a good company. And again, it could even be rental income you could build. It could be for an elder person, such as a parent or an in-law, moving in the future again, the idea of freeing up the housing system. And I think there is fear, especially in older people, for them to move out of the house and do I go rent a condo? What if the owner throws me out? If I go into purposeful rental, the rental rates keep going up. I don't want to go into seniors. I'm too young at 70 to these days. It's it gives you another option where I got a house, I've got Lanway house. My mother-in-law or my parents can move in. They can sell their house. The house is not in the market. It starts to generate supply and it starts to generate interest in the market. So that was one of the things that was in the act in Toronto. I saw I liked and I think we're starting to see that evolve a little bit around the country. Obviously, it's more density related areas where there's high density, but I think that sort of stuff is going to be the way of the future, these smaller solutions with bigger ones around as well. Do you want to touch on that as well? Racer, I've done all the talking. I was just going to add to your other comment for the other solution. I think the bottom line for our kids or young people that are looking for home. You got to be nice to your parents and grandparents because you're going to need some help in getting these down payments in and to help with the finances, especially if you make that choice of trying to live in to move into some of these urban areas. But you need some sort of assistance and it's a challenge with even raising them down payment now based on the average prices. You either need a lot of help or if you're not in that situation, you need to find a way to become a strong TikTok or social media and find other streams of income. Because, yeah, it's a really tough market. I'm the youngest of 4 and I'm bitter because I remember my brother got his house in the annex for three or 400,010 12 years ago. Now those houses are two million. You can't get into those markets, so people are really lucky that got into the market. Like Marlon said 10 years ago, 20 years ago, it's going to just become increasingly difficult for younger folks. So just getting creative and being open to other markets and being open to renting for a while, those all seem like the inevitable options. But I moved to Houston or you said, you know, I keep seeing the houses in Texas that are like castles 300,000. I'm like much more reasonably priced in areas where the prices are growing very where the population is growing very, very rapidly. Supply is keeping up. Big shock house prices are fairly reasonable and Texas is a really fantastic place to live as well. think I take Atlantic Canada over it, but maybe Texas wouldn't be too bad. I don't like snakes. Yeah, so this was a great discussion, and I always enjoy getting your insights and your feedback. And I asked you some personal questions that also just helped me and helped guide me. Are there any additional thoughts, any other comments you guys want to make regarding the state of the market and the future of affordability? Or any thoughts in general? I think in general, the government's got to pull its finger out and start working at this, and I don't care what part you are playing games with people's livelihoods, it's just not acceptable anymore. We need to come together and start doing this, this ridiculousness that goes on right now with everyone not trusting each other. And I don't know if they don't care if it just comes across as they don't care. It's about time someone fixed housing supply together, not with the suspicion that everybody's always up to something because the only person suffering is the person without a house or the person that's going to be in the low carbon tax, the low carbon 10 in the future. And it's just I find it a mess, and I find it really sad when you look at the state of stuff and you look at the sad state of housing den now, and it's just it doesn't feel like it's getting better to me. And I find that very sad thing to say and myself and Ray work every day in building new developments. We get some really exciting, cool stuff and you see the fight to get these things built. You you'd think someone's building like an abattoir next to someone's house or something like it's a condo. There's going to be people living in it's a purpose built rental. It's community housing. Why is that bad? And I don't get why housing development is viewed as evil. The people living in there are just and me, the people who rent a condo unit. It's just the same as you and me. They're just people who want somewhere to live. And I don't understand why there's so much amnesty toward people wanting to have a house. Absolutely do you think that the speculator foreign tax of 20% will even make a difference? We spoke about how people who own homes, they're making so much money, they're just they're buying more and more, and it's continuing to create that huge gap. And so they keep increasing that tax. But do we think it's dissuading those foreign investors or those people with multiple homes? Or do you think they're still motivated to buy? Yeah, there's a two ways to look great. One on the foreign speculator tax when it was originally brought in by the liberal government at 15 percent, it made an impact. The change of 5% Not sure that will have an impact. You have to remember foreign buyers. I think maybe rail confirmed this. It's likely something like 3% of the market. In terms of Canada, it's not big. The second one, in terms of people owning a second unit, it seems to be viewed as bad. But if that second unit is owned by someone and that second unit is occupied by someone renting it, say a student, say, a young person just starting off in the professional world in downtown Toronto, it's contributing to the overall market. Why is that bad? Where would they live otherwise? The other thing is why if you bought that second unit and the intention is your kids, the family members are going to live in there in the future. Does that still make you bad? Who else was buying that unit? And if someone's willing to rent the unit, if we then took the I think Ray touched on this earlier. About 25% of all condo sales, basically second units reinvest units. So if we didn't build those and people didn't buy them. Where are those people live if we don't build those homes? I never quite get all foreigners being evil, investors being evil. Oh my god, a family of three got together. You know, the multigenerational get together to buy a unit to help themselves with retirement. So they're not a burden on society, those nasty, horrible people. And again, the student that can't afford to live somewhere. Him and his friend move in and rent the place. Why is that bad? I just don't get it. But again, it's what people want to do. They paint everything to suit their own, their own thought process. Maybe someone's going to say to me on painting that to present my own thought process? I don't know. It just seems to be. Everyone wants to paint everyone as bad. And it's this rush to you have to be on one side of the ABC in the US and the politics. It's come here now. I'm not going to get into whose fault I think it is here, but we're all being pushed apart rather than together. And quite frankly, it's just disgusting. And you suspect have been on the other side, sorry. Just a quick thought, and then I want to hear from you. I see that perspective, but I also think, you know, because there's such a small supply in so much demand, the more purchasers you have, the higher the prices go. And these owners are spiking up the rents. The rents are going up a lot each year. Understandably, their costs are going up. But by having fewer purchasers, it puts a bit of that Downward pressure. It does give more rental options for sure, but it does make it harder for those young people that want to buy who are competing with those owners that already have real estate that are able to offer more money because they just have more money to leverage. But I think you can see it from both perspectives, and I think it's fair to want to purchase a property for your child or to have a second income property if you're looking to retire or whatnot. So I definitely see it from your perspective. Sorry, right? Go ahead. I was just going to add that from an investor standpoint, I don't think it really it may slow down a few of the investors. But if you're buying a condo, even though with increasing prices and the market dictates the rent, so you cannot be looking for something to cover 100% of the mortgage and the operating costs? I mean, you may not get it, but if it covers the least 50% to 75% of the costs, then that still works and that you're getting somebody else to help pay for that premise. Same thing with buying a home and having a basement apartment and augmenting the cost that way. So I think people are looking at different ways to increase or offset some of those costs. So I don't really see this bit of any perhaps a flattening, but definitely not a slowdown in demand and the purchases by investors. And as well as users or people that actually want to live in these premises. Yeah, fair points, great points from both of you. Marie, did you have any additional thoughts or did you cover most of what you were hoping to cover? No, it's basically it's to be an ongoing issue. And again, we've been dealing with this for the last 30 years and hopefully Marlon's comments. We have that leadership in government and multiple levels of government to cooperate and come up with an integrated strategy in partnership with the private sector. That's the only way sort of out of this, because right now, these ad hoc policies and decisions with the different levels without some semblance of coordination or at least doesn't look like there's a lot of coordination that we're still going to have a challenge for this for years to come. Yeah, it's a tough reality, and hopefully the government and hopefully some creative minds come together and think of some other solutions that start working because we can't continue down this road for a long time, so we'll see what happens. But great discussion, as always. You both had so much to share, really good information. And I guess we'll put a disclaimer that some of this is our opinion. And I know I shared some of my opinions. Marlin shared some of his research, some of his. Some of these are facts. So hopefully our viewers can decipher between the two and can appreciate the different types of perspectives. We offer. But I thought it was a great discussion, and I appreciate both of you joining today. So, yeah, thank you for tuning in and. We hope everything goes smooth in 2023 and for the second half of 2022 at least, our next episode is going to be the new sciences life intended, which, to be honest, I don't know much about. So I'll leave it for the experts to talk more about it the next episode. But definitely don't forget to tune in and remember we're on spotify, apple, all the major podcast platforms, so please feel free to save these. Get these notifications. 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