How Not to Build a Country: Canada’s Late Soviet Pessimism(palladiummag.com)
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How Not to Build a Country: Canada’s Late Soviet Pessimism
https://palladiummag.com/2019/09/19/how-not-to-build-a-country-canadas-late-soviet-pessimism/
144 comments
Solution: push remote work as a housing crisis solution.
Remote work allows the people to place themselves in better, affordable places, while helping companies get the best from all over, rather than bound to a physical location.
This works unless the companies/investors are doing a dual strategy of having real estate that they collect on while having their companies located in them that they are investing in. So a big part of the investment never leaves the building. I suspect a large part of Silicon Valley has a scheme like this, investors are usually real estate investors as well, they like people concentrated in areas and supply/demand to benefit them.
The other bigger wage absorber right now is healthcare tied to a job. When healthcare goes up, wages are diverted into healthcare and healthcare and housing have teamed up to sap all wage growth in actual dollars in pockets of consumers,. 'Real compensation' or 'total compensation' doesn't go into cashflow/liquid assets at the individual level and means nothing to consumer spending power which needs to go to housing and life.
Remote work allows the people to place themselves in better, affordable places, while helping companies get the best from all over, rather than bound to a physical location.
This works unless the companies/investors are doing a dual strategy of having real estate that they collect on while having their companies located in them that they are investing in. So a big part of the investment never leaves the building. I suspect a large part of Silicon Valley has a scheme like this, investors are usually real estate investors as well, they like people concentrated in areas and supply/demand to benefit them.
The other bigger wage absorber right now is healthcare tied to a job. When healthcare goes up, wages are diverted into healthcare and healthcare and housing have teamed up to sap all wage growth in actual dollars in pockets of consumers,. 'Real compensation' or 'total compensation' doesn't go into cashflow/liquid assets at the individual level and means nothing to consumer spending power which needs to go to housing and life.
Remote work comes up against the harsh phenomena studied in economic geography. Even for knowledge work, there is a supply chain (in that case education, funding, knowledge sharing and adsorption of a certain type of culture).
Once there is a supply chain, an industrial hub with a concentrated supply chain will outperform a disparate network of workers. At that point, market forces will optimise to use the industrial hub for everything. Workers who live in the industrial hub will have an advantage over those that do not.
Once there is a supply chain, an industrial hub with a concentrated supply chain will outperform a disparate network of workers. At that point, market forces will optimise to use the industrial hub for everything. Workers who live in the industrial hub will have an advantage over those that do not.
That definitely plays a role.
However, large companies have remote offices in different cities that rely on virtual communication to one another. This just moves the remote/virtual aspect further down the system to the individuals/teams. This push would also make supply chain work more virtual, the long tail of industry.
It could work if they give massive tax breaks for remote workers, when it is a financial benefit and reward for pushing virtual workplaces, it will take hold.
Remote work pushes also have immense impact on carbon production / climate change and making sure local communities thrive from higher salaries in more remote locations. This would allow for infrastructure to also be better more widely dispersed.
There will always be hubs, but even large companies eventually get many hubs themselves and require virtual communication and remote capabilities. Company cities have been around forever, but remote working / virtual communication needs to be a priority and can help fix or improve many problems, not just housing costs.
The mobile device generation will most likely bring about these remote working changes more widely.
However, large companies have remote offices in different cities that rely on virtual communication to one another. This just moves the remote/virtual aspect further down the system to the individuals/teams. This push would also make supply chain work more virtual, the long tail of industry.
It could work if they give massive tax breaks for remote workers, when it is a financial benefit and reward for pushing virtual workplaces, it will take hold.
Remote work pushes also have immense impact on carbon production / climate change and making sure local communities thrive from higher salaries in more remote locations. This would allow for infrastructure to also be better more widely dispersed.
There will always be hubs, but even large companies eventually get many hubs themselves and require virtual communication and remote capabilities. Company cities have been around forever, but remote working / virtual communication needs to be a priority and can help fix or improve many problems, not just housing costs.
The mobile device generation will most likely bring about these remote working changes more widely.
> The mobile device generation will most likely bring about these remote working changes more widely.
That is a bold prediction. My money is on the precise opposite. The more talented and successful the employee is, in the main, the closer they are going to be to the heart of a geographically located industrial hub.
Reduced communication costs will make it easier to identify the hubs and increase the competition to move there until the cost of moving is similar to the benefit of being in the hub.
If mobile devices and better communication suddenly causes an on-average decentralisation of wealth generation that would be (1) welcome and (2) shockingly unusual.
> This would allow for infrastructure to also be better more widely dispersed.
Probably going to burn a lot more resources spreading the infrastructure out than is saved by letting everything centralised. There'd be wins cutting down on the daily commute, but would also be costs to decentralising. Similar benefits might be more easily found by designing dense cities to be easy to navigate by bike and foot; which would also let workers keep the advantages of centralisation. Lots of room for improvement there, no doubt.
That is a bold prediction. My money is on the precise opposite. The more talented and successful the employee is, in the main, the closer they are going to be to the heart of a geographically located industrial hub.
Reduced communication costs will make it easier to identify the hubs and increase the competition to move there until the cost of moving is similar to the benefit of being in the hub.
If mobile devices and better communication suddenly causes an on-average decentralisation of wealth generation that would be (1) welcome and (2) shockingly unusual.
> This would allow for infrastructure to also be better more widely dispersed.
Probably going to burn a lot more resources spreading the infrastructure out than is saved by letting everything centralised. There'd be wins cutting down on the daily commute, but would also be costs to decentralising. Similar benefits might be more easily found by designing dense cities to be easy to navigate by bike and foot; which would also let workers keep the advantages of centralisation. Lots of room for improvement there, no doubt.
The reason that industry hubs form and exist is because not all work can be remote, and there are economies of scale and efficiencies in grouping related and essential services and capabilities in one place. This is most pronounced, ironically, in the least material sectors: cinema, television, music, publishing, banking, and software are all activities in which the end result can literally be wired arond the world in an instant, but each has very strong primary locus hubs: Hollywood, New York, Nashville, and Silicon Valley, in these cases.
Yes, there are regional centres: regulation, language, and culture can create the necessity for localised services, so that film also has national traditions (Bollywood, China, Japan, small local productions in the UK and continental Europe, and a few smaller hubs), banking (London, Frankfurt, Tokyo, Shanghai), etc. But to the extant a single hub can dominate, it often does.
It's the support sectors especially which create anchors. For film, casting departments, carpenters, electricians, caterers, props, lighting, riggers, and a whole host of services and suppliers are best met within central hubs. Software operates similarly -- VC, training, presentations, networking services, and the like, tend to focus on major cities such as San Francisco-San Jose, Seattle, New York, and a number of also-rans. Trying to get highly-qualified services outside those areas is difficult at best.
And even if you do manage to allow software and design folks to work remotely, it's the other staff, often far less-well paid, who still have to show up at the office. And who pay the eye-bleeding rents.
Remote work isn't the solution.
Rents, as a claim to all consumer surplus, can be ameliorated through a land value tax. That's the solution which is badly needed.
Yes, there are regional centres: regulation, language, and culture can create the necessity for localised services, so that film also has national traditions (Bollywood, China, Japan, small local productions in the UK and continental Europe, and a few smaller hubs), banking (London, Frankfurt, Tokyo, Shanghai), etc. But to the extant a single hub can dominate, it often does.
It's the support sectors especially which create anchors. For film, casting departments, carpenters, electricians, caterers, props, lighting, riggers, and a whole host of services and suppliers are best met within central hubs. Software operates similarly -- VC, training, presentations, networking services, and the like, tend to focus on major cities such as San Francisco-San Jose, Seattle, New York, and a number of also-rans. Trying to get highly-qualified services outside those areas is difficult at best.
And even if you do manage to allow software and design folks to work remotely, it's the other staff, often far less-well paid, who still have to show up at the office. And who pay the eye-bleeding rents.
Remote work isn't the solution.
Rents, as a claim to all consumer surplus, can be ameliorated through a land value tax. That's the solution which is badly needed.
Remote work is a band-aid that throws its arms up and says we can't possibly hope to address these issues.
Its a loser mentality and it sucks.
The only thing that its going to ensure is the same forces take over basically every livable city, why don't we stand up and fight them?
Its a loser mentality and it sucks.
The only thing that its going to ensure is the same forces take over basically every livable city, why don't we stand up and fight them?
Public investment is surely one option. Another is appropriate taxation. Vancouver’s residential property taxes are amongst the world’s lowest in terms of total tax take vs properly value. Property taxes should be massively higher and income taxes substantially lower. Too much of the tax burden is on the middle income worker and far too little on the wealthy landowner.
Replacing existing taxes on real estate with a Land Value Tax is probably the best way, tax-wise, to address the situation:
https://en.wikipedia.org/wiki/Land_value_tax
https://en.wikipedia.org/wiki/Land_value_tax
In Austin, it's been an incredibly effective way to gentrify old neighborhoods.
You have people who have lived in their houses for a generation and may have even paid them off but when the land under their home - let alone their home itself - doubles in value every 8 years and the rate doubles in eight years, they have to sell to get out or lose their house anyway.
Then developers swoop in, tear down the houses, and build condos which are much more "economically efficient".
You have people who have lived in their houses for a generation and may have even paid them off but when the land under their home - let alone their home itself - doubles in value every 8 years and the rate doubles in eight years, they have to sell to get out or lose their house anyway.
Then developers swoop in, tear down the houses, and build condos which are much more "economically efficient".
I don't really want to be disagreeable because what is written is all obviously true and correct. However, there are 3 issues that deserve mention in this context:
1) It is a lot more economically efficient, the situation has gone from 1 family living in a desirable area to multiple families. If we ignore the fact that one family had to move that is a big step up.
2) The alternate scenario, where the family just sits in their rapidly appreciating house, is grossly unfair. They are reaping huge benefits without doing anything. It is ok in principle but it is unfair on the other normal folk who can't move in that area and get priced out because there isn't enough housing. This concept is the justification of the land value tax and it goes to a very important principle - benefits should come from either hard work or by taking risks with saved money.
3) Since the economic and social benefits of tearing down single houses and building apartments are so huge (ie, lots of people get to live where they want instead of few people) it would be well worth looking for ways to keep the land value tax and mitigating the effect on the family that has to move rather than doubling down on the idea of people having a right to land. Taxes represent the government taking something people worked to earn. Taxing someone on land and they have to move is not that different from taxing their income and they have to give up some pleasure in life. That is what taxes do.
1) It is a lot more economically efficient, the situation has gone from 1 family living in a desirable area to multiple families. If we ignore the fact that one family had to move that is a big step up.
2) The alternate scenario, where the family just sits in their rapidly appreciating house, is grossly unfair. They are reaping huge benefits without doing anything. It is ok in principle but it is unfair on the other normal folk who can't move in that area and get priced out because there isn't enough housing. This concept is the justification of the land value tax and it goes to a very important principle - benefits should come from either hard work or by taking risks with saved money.
3) Since the economic and social benefits of tearing down single houses and building apartments are so huge (ie, lots of people get to live where they want instead of few people) it would be well worth looking for ways to keep the land value tax and mitigating the effect on the family that has to move rather than doubling down on the idea of people having a right to land. Taxes represent the government taking something people worked to earn. Taxing someone on land and they have to move is not that different from taxing their income and they have to give up some pleasure in life. That is what taxes do.
The thing is people don't even have to move away necessarily. If the land is that valuable and it'll be upzoned, they could just trade in for a unit in the new building + some cash.
Forcing someone to sell because you find their life choices economically inefficient is gross morally.
Further, it creates a legal and financial risk in the entire system where property becomes subject to the whims of whatever governing authority therefore discouraging investment and real ownership.
The Kelo decision was despicable, let's not encourage it.
Further, it creates a legal and financial risk in the entire system where property becomes subject to the whims of whatever governing authority therefore discouraging investment and real ownership.
The Kelo decision was despicable, let's not encourage it.
You don't have to be forced to sell. You could live in it until you die at which point the sale is forced and the taxes are paid.
This can be done by borrowing against the house from a financial institution or we can have the government place just place liens on the property if you can't pay.
This can be done by borrowing against the house from a financial institution or we can have the government place just place liens on the property if you can't pay.
Welcome to taxes. You could have had something, then the government says you can't and you have to live a different lifestyle. All the options here are morally gross and it is easy to justify either side.
If land values have truly doubled in 8 years it isn't like the family involved is out of pocket. They've made a small fortune. The idea they can make a small fortune and prevent land from being used is also morally gross. The only justification is that a large hurt is diffuse where the small hurt would be concentrated. That is a defensible philosophy but it is also one where eventually everyone is worse off. And it isn't like this is an erosion of property rights; they are being taxed on benefits that they are not responsible for creating. 1.5% land tax so people have to re-buy the land once a generation is as good an idea in tax law as any I've seen.
I agree that having to change a lifestyle because of taxation is pretty awful and the system should strive not to do it. But I've visited places like Hong Kong and seen the density of living there. We're talking an order of magnitude more people. The number of people who come out ahead from that sort of property development is so overwhelming we can't process it using intuition and positive stories about individuals.
If land values have truly doubled in 8 years it isn't like the family involved is out of pocket. They've made a small fortune. The idea they can make a small fortune and prevent land from being used is also morally gross. The only justification is that a large hurt is diffuse where the small hurt would be concentrated. That is a defensible philosophy but it is also one where eventually everyone is worse off. And it isn't like this is an erosion of property rights; they are being taxed on benefits that they are not responsible for creating. 1.5% land tax so people have to re-buy the land once a generation is as good an idea in tax law as any I've seen.
I agree that having to change a lifestyle because of taxation is pretty awful and the system should strive not to do it. But I've visited places like Hong Kong and seen the density of living there. We're talking an order of magnitude more people. The number of people who come out ahead from that sort of property development is so overwhelming we can't process it using intuition and positive stories about individuals.
Rarely is there ever a policy proposal, even a good policy proposal, that is entirely without downsides. Pretty much any proposal that is so perfect that there isn't a single criticism that can be made of it has already been enacted. That there are negative consequences of a policy is not an argument against the policy.
> and build condos which are much more "economically efficient"
Why the scare quotes? They are.
> and build condos which are much more "economically efficient"
Why the scare quotes? They are.
You can solve this with an age-based property tax abatement. I’d personally aim to make it an abatement for the equivalent of a 1BR condo, though - 85 year olds really don’t need large houses with a bunch of stairs, whereas young families do, and often can’t find much supply on the market in cities, which drives up prices. If an old person wants to live alone in a huge house, I think it’s ok to tax them on that.
Or even better, which Texas already does, is just defer taxes until the home is sold.
If your house has gone from $200,000 to 700,000, having to pay $150k in deferred property taxes doesn’t seem over onerous.
If your house has gone from $200,000 to 700,000, having to pay $150k in deferred property taxes doesn’t seem over onerous.
Geez... it's their home, not some public utility. Let them be.
I mean, I'm not completely unsympathetic, but we charge property tax partly to make sure land is being used well, and not just being sat on while it appreciates. When people live in low density housing in the midst of cities, that has a very real cost to everyone else in that city. The housing crisis is partly a result of this phenomenon, and that hurts a huge number of people.
AdrianB1(2)
Wouldn't a better solution be to exempt a person's current residence up to X value?
The challenge is in the details. Who determines X, and how? Is X fixed or does it increase over time? If yes, is it indexed to inflation? In what way? CPI, local housing market, something else?
Capping property taxes is the same as rent control. It has the same challenges in its implementation, and the same downsides and costs.
Capping property taxes is the same as rent control. It has the same challenges in its implementation, and the same downsides and costs.
In austin, property taxes are "capped" but they keep accruing+ interest. They are taken out of the estate when the owner passes.
Capped in what way? My escrow goes up every year as City Council consistently increases rates to the legal maximum.
Price appreciation alone isn't enough to force people to sell - they can take out home equity loans, and the appreciation is more than enough to cover the increased taxes and interest payments. "Doubles in value every 8 years" means something like 9% appreciation, HELOC rates are 5% and property tax rates are below 2%. Starting with a paid off house, you can take out home equity loans to cover property taxes forever with that rate of price appreciation.
> but when the land under their home - let alone their home itself - doubles in value every 8 years and the rate doubles in eight years, they have to sell to get out or lose their house anyway.
I'm having trouble thinking of a realistic combination of numbers where the asset owner would exhaust the equity in their home under such a scenario, or is that "off limits" for some reason?
I'm having trouble thinking of a realistic combination of numbers where the asset owner would exhaust the equity in their home under such a scenario, or is that "off limits" for some reason?
There are other options than just "sell and move away". They could owe the taxes against the value of the land. They could sell to the condo developer in exchange for a new unit and some cash, so they don't have to move away. I'm sympathetic to people wanting to stay in the same place, but it doesn't have to be in the exact same house.
That just replaces serfdom to a landowner with serfdom (or sharecroppage) to another landowner, the government. Problematic with property taxes is you can not simply exist, you must be turning some profit.
If you're renting, you can't simply exist either. In fact, you have to make enough money to pay your rent and pay the income taxes on the income which is paying your rent.
Simple equity demands that property taxes should at a minimum be equal to income taxes on the rental cost of equivalent property.
Simple equity demands that property taxes should at a minimum be equal to income taxes on the rental cost of equivalent property.
I don't see your point. I can usually choose not to rent. Income taxes I think are perfectly acceptable: a limited nonrecurring percentage is taken, ostensibly as compensation for society's contribution to your ability to earn an income. Usually the way income is received means you are never able to not pay.
But there are niggles. Under most tax systems value you produce, even for own consumption, must be assessed and taxes paid on it. This is problematic if you take a crop for subsistence farming.
But there are niggles. Under most tax systems value you produce, even for own consumption, must be assessed and taxes paid on it. This is problematic if you take a crop for subsistence farming.
You using land has an opportunity cost for everyone else. You should pay compensation for this.
Income tax is not a good idea. You add value, why do we want to discourage you ?
Income tax is not a good idea. You add value, why do we want to discourage you ?
Property tax is inimical to the natural state of man. As in my original post, it keeps you from simply existing and forces you to participate in a system you had no business in creating.
Income tax is the best compromise I know of. If you want to participate in the economy-at-large then you pay it. If you don't want to, feel free to not participate. People who make more will pay more, but they will still make more.
Income tax is the best compromise I know of. If you want to participate in the economy-at-large then you pay it. If you don't want to, feel free to not participate. People who make more will pay more, but they will still make more.
“Exclusive access to resources, buttressed by a legal system” is not historically or anthropologically the “natural state of man.”
Which is fine; lots of great stuff aren’t “the natural state of man.” But don’t bullshit about it, yeah?
Which is fine; lots of great stuff aren’t “the natural state of man.” But don’t bullshit about it, yeah?
You inherently can’t not participate unless you live in the boonies, which isn’t the land that people are talking about taxing. Cities have to maintain infrastructure for every building - roads, sewers, power, mass transit, police, water, fire protection, courts, the list goes on. Even if you magically don’t use it (no shopping at the supermarket), sitting in the middle of it all lengthens the runs to the other buildings.
The boonies are taxed though. That is most of my complaint. If someone is destitute through circumstance they are punished for it.
The natural state of man not participating in an economy can be seen on the YouTube channel Primitive Technology.
The natural state of man does not involve ownership of property...
Well except for that which he can enforce himself through means of force.
No, because the value is socialised. And it would mean no tax on income, because you get to keep the value you create.
Wouldn't increased property taxes, combined with increased ability of renter's to pay, cause rents to increase?
No, that doesn't make any sense.
If workers are always only paying the amount that they are able to pay, no more and no less, then that means that any increase in salary, will cause rents to increase.
BUT, it also means that the opposite is true. If salaries decrease, such as because if a tax, then rents will also equally decrease.
Or in other words, the tax is purely borne by the landlord.
So it makes perfect sense to tax the landlord in that case.
If workers are always only paying the amount that they are able to pay, no more and no less, then that means that any increase in salary, will cause rents to increase.
BUT, it also means that the opposite is true. If salaries decrease, such as because if a tax, then rents will also equally decrease.
Or in other words, the tax is purely borne by the landlord.
So it makes perfect sense to tax the landlord in that case.
In practice there is actually some elasticity.
Except that the landlord recuperates (passes) the taxes via the rent, so the renter pays it all. It makes no sense to tax the landlord.
You can't have it both ways though, is my point.
Either the taxes are passed through to the renter, or the price of rent is determined by a renter's ability to pay.
These are conflicting statements that both can't be true.
If renters are already paying the most that they can, and increases in wages only causes rents to go up, then it is not possible for them to pay that extra tax.
Either the taxes are passed through to the renter, or the price of rent is determined by a renter's ability to pay.
These are conflicting statements that both can't be true.
If renters are already paying the most that they can, and increases in wages only causes rents to go up, then it is not possible for them to pay that extra tax.
In most cases both can be true; "renter's ability to pay" is usually not the limit of what they can pay, but what they are willing to pay. If you put a tax that would increase the rent 10%, some people will pay (cut on other expenses), some will move out and someone else will move in and pay. At the end of the day, any tax is passed to the consumer, so it is never helping the consumer.
No, it can't both be true.
In economics, if a consumer always pays as much as they are able to, IE, it is a constant willingness to pay, then this is called perfectly elastic demand.
The situation of taxes being passed in to consumers, would only happen if consumer demand is perfectly inelastic.
It is literally the opposite situation. Demand can't both be perfectly elastic and also perfectly inelastic at the same time. They are opposites!
In economics, if a consumer always pays as much as they are able to, IE, it is a constant willingness to pay, then this is called perfectly elastic demand.
The situation of taxes being passed in to consumers, would only happen if consumer demand is perfectly inelastic.
It is literally the opposite situation. Demand can't both be perfectly elastic and also perfectly inelastic at the same time. They are opposites!
From a pragmatic standpoint, property tax _is_ rent. I make this comparison because the consequences of not paying taxes is the same as not paying rent.
If there is property tax, only the government owns the property and rents it to citizens.
If there is property tax, only the government owns the property and rents it to citizens.
If you make your philosophy austere and instrumentalist enough, there is no ownership, only physical control. And under any Weberian government there is only one legitimate owner of anything.
Luckily most governments and societies today respect a sort of legal Platonism where the law as an ideal both constrains the government and the owners of property even though the government is tasked with implementing it. It might not be empiricist enough for some people but it seems to play nicely with human psychology’s inclination towards the mystical. And of all the cultural fantasies we might share, we could definitely do a lot worse than human rights and the rule of law.
Luckily most governments and societies today respect a sort of legal Platonism where the law as an ideal both constrains the government and the owners of property even though the government is tasked with implementing it. It might not be empiricist enough for some people but it seems to play nicely with human psychology’s inclination towards the mystical. And of all the cultural fantasies we might share, we could definitely do a lot worse than human rights and the rule of law.
Property tax "rent" in reinvested in the community. Real rent goes into a portfolio.
So the scope of the investment is the difference then?
We're mixing up the senses of 'investment'. Taxes are redistributed (they end up back in taxpayers' pockets), rents accumulate to property owners.
> Taxes are redistributed ...
No. Taxes are spent on goods an services, the same as any property owner spends rent income.
The outcomes of expenditures on each part is different (sometimes a plate tax is actually applied to road maintenance). But the concept of a slush-fund and no (or few) legal guardrails for expenditures means your tax dollars probably land in a pet project somewhere, or are consumed in the financial friction of government bureaucracy.
No. Taxes are spent on goods an services, the same as any property owner spends rent income.
The outcomes of expenditures on each part is different (sometimes a plate tax is actually applied to road maintenance). But the concept of a slush-fund and no (or few) legal guardrails for expenditures means your tax dollars probably land in a pet project somewhere, or are consumed in the financial friction of government bureaucracy.
Taxation is a passive measure and these never solved problems, just kept it under control for a while. I would like to read about solutions, not the catchall "tax them". Well, tax them and then what? New buildings will grow out of the trees? Lower prices will come by train?
> The housing affordability crisis is really a crisis of land owner cartels
If you consider the city counsel a land owner cartel, I guess I can agree.
Cities where land owners can build what they want on their land does not have this problem. WHat a central government can do is ban most zoning, and make sure cities have incentives to welcome new inhabitants.
In California Prop 13 make cities lose money when people live inside them, with predictable result.
If you consider the city counsel a land owner cartel, I guess I can agree.
Cities where land owners can build what they want on their land does not have this problem. WHat a central government can do is ban most zoning, and make sure cities have incentives to welcome new inhabitants.
In California Prop 13 make cities lose money when people live inside them, with predictable result.
Progress and Poverty. All as clear as day, over 100 years ago:
https://www.amazon.co.uk/Progress-Poverty-Henry-George/dp/09...
Any productivity gains flow into land. "Everybody works but the empty lot"
https://www.amazon.co.uk/Progress-Poverty-Henry-George/dp/09...
Any productivity gains flow into land. "Everybody works but the empty lot"
Is not landlords raising because of the decent profits, it is because more people want to live in one specific zone, increasing the demand, therefore, prices rises due por offer. It is not all landlords coordinately find out how the economy is going and acting in coordination to raise the prices.
The housing affordability crisis is a crisis that rich people who have money to invest in companies want to live next to those companies in nice places and nice houses and keep the rest of the people who work at those places living further away.
L.A is not a tech hub because the omnidirectional traffic kind of wrecks the whole thing, while the bridges in the bay area mean that the worker bees are rate limited in their ability to get in and out of the nice places in cars somewhat lessening the omnidirectional traffic nightmare for the rich people who invest in companies. Have you ever watched people trying to get to the east bay over the bay or peninsula bridges during rush hour? That's rate limiting for ya.
L.A is not a tech hub because the omnidirectional traffic kind of wrecks the whole thing, while the bridges in the bay area mean that the worker bees are rate limited in their ability to get in and out of the nice places in cars somewhat lessening the omnidirectional traffic nightmare for the rich people who invest in companies. Have you ever watched people trying to get to the east bay over the bay or peninsula bridges during rush hour? That's rate limiting for ya.
That’s not a cartel, that’s a free market. It’s not as if two or three landlords run the show.
If you bother to read the article, it makes heavy reference to Adam Smith’s opposition to landlords and their rent-seeking because of the heavy drag they place on markets. They capture and enclose too much capital that could otherwise be used for dynamic and productive investment. He was as right then as he is now.
That does not describe a cartel -- it describes predatory pricing.
The cartel comes from the fact of how much wealthy landlords control local governments, who then make it onerously difficult to build the amount of housing that is actually needed. I don't know if this is the case in Vancouver but it is absolutely the case in California, with its absurd cases of a run-down laundry mat being declared a "historical property" to block redevelopment.
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How is that predatory pricing? Landlords aren't driving alternative landlords out of business by dropping their prices too low for others with shallower pockets to compete.
You are correct, and I am incorrect.
Predatory pricing, also known as undercutting, is a pricing strategy in which a product or service is set at a very low price with the intention to achieve new customers (Loss leader), or driving competitors out of the market or to create barriers to entry for potential new competitors.
https://en.wikipedia.org/wiki/Predatory_pricing
I should have called it "price gouging" or perhaps "profiteering".
https://en.wikipedia.org/wiki/Price_gouging
There isn't really a great word for long-term exploitation of an easy structural advantage, though. Landlords don't have to form a cartel, since (a) everyone has to buy from them, (b) land is limited in supply and (c) the barrier to entry is high. Maybe it's a "natural cartel".
Predatory pricing, also known as undercutting, is a pricing strategy in which a product or service is set at a very low price with the intention to achieve new customers (Loss leader), or driving competitors out of the market or to create barriers to entry for potential new competitors.
https://en.wikipedia.org/wiki/Predatory_pricing
I should have called it "price gouging" or perhaps "profiteering".
https://en.wikipedia.org/wiki/Price_gouging
There isn't really a great word for long-term exploitation of an easy structural advantage, though. Landlords don't have to form a cartel, since (a) everyone has to buy from them, (b) land is limited in supply and (c) the barrier to entry is high. Maybe it's a "natural cartel".
Fair enough. I believe they call that behaviour "rent-seeking" (in the Adam Smith sense) https://en.m.wikipedia.org/wiki/Rent-seeking#Description Most of the value of the land is from work done not by the property owner, which is just an interesting situation.
In city centres, there often is a group of only a few landlords who own entire blocks, then a few housing/investment companies who own most of the development projects (apartments). They collude and conspire with each other and local government to lower their own taxes, have the city improve streets near their properties, restrict supply/development permits, etc...
But for a certain piece of land, its a complete monopoly. And unlike with goods or services, you can't go somewhere else to get that exact piece of land.
In my opinion there are two issues: #1: Land owners are not taxed for the un-earned value of their land. Making lots of money for just owning a piece of land is absurd. Normally this doesn't matter due to how large the USA is, but you can see its ugly result when land is very constricted like in major cities.
#2: Land owners are very limited by what they can build on their land by local laws and such, which prevents development of high density buildings, which would lower rents due to the increased number of units and efficiency at which these can be built. A land tax would even necessitate this sort of construction so that it would be profitable for the landlord to even keep the land.
In my opinion there are two issues: #1: Land owners are not taxed for the un-earned value of their land. Making lots of money for just owning a piece of land is absurd. Normally this doesn't matter due to how large the USA is, but you can see its ugly result when land is very constricted like in major cities.
#2: Land owners are very limited by what they can build on their land by local laws and such, which prevents development of high density buildings, which would lower rents due to the increased number of units and efficiency at which these can be built. A land tax would even necessitate this sort of construction so that it would be profitable for the landlord to even keep the land.
Let's review the definition of cartel: "a combination of independent commercial or industrial enterprises designed to limit competition or fix prices"
So a cartel doesn't have to be any particular size.
https://www.merriam-webster.com/dictionary/cartel
So a cartel doesn't have to be any particular size.
https://www.merriam-webster.com/dictionary/cartel
Exactly. And using your money and influence to control development in a way that limits competition and keeps prices/rents artificially high (as is the case in real estate across the North America) is textbook cartel behavior. While there are some subset of developers pushing for increased development, as was pointed out downthread, the largest real estate lobbying group in the US works tirelessly against higher density development.
It’s funny how people can observe cartels in other basic inputs into the economy, like energy, but miss them entirely for the equally basic input of land/housing.
It’s funny how people can observe cartels in other basic inputs into the economy, like energy, but miss them entirely for the equally basic input of land/housing.
"Free market" is supposed to mean "free from rentiers", i.e. exactly what this does not describe.
This piece is about so much more than the usual complaint against an increase in rent. It does not talk about public housing. Rather it points out the problem of bureaucracy that acts as a multiplier to the market power of landlords.
I want to see graphs that support this assertion. Yes, I expect that in an area with higher income housing becomes more expensive, but so does everything else. Unless you can show data to prove this I really doubt that an increase of median income of X% results in rent increasing X%, I rather suspect the rents increase to some smaller percentage of that together with increase in other things.
Rents are demand and offer, if the offer is perfectly static (no new housing/rental units are being made available) then if you have immigration in an area you should see rental pricing increasing according to that, rather than increase according to medium income.
EDIT: As for solving this with public housing, that'll simply make it that the market price is not reflecting the demand, but it doesn't change the underlying issue that there is more demand than offer. Which means that there will be other ways to "fight" for those limited units (instead of market price it will be "favors" or lottery or "first come first served" which tends to favor existing residents over newer ones).
Rents are demand and offer, if the offer is perfectly static (no new housing/rental units are being made available) then if you have immigration in an area you should see rental pricing increasing according to that, rather than increase according to medium income.
EDIT: As for solving this with public housing, that'll simply make it that the market price is not reflecting the demand, but it doesn't change the underlying issue that there is more demand than offer. Which means that there will be other ways to "fight" for those limited units (instead of market price it will be "favors" or lottery or "first come first served" which tends to favor existing residents over newer ones).
Land owners want to build higher density, increasing supply, lowering price. The government prevents high density, decreasing supply, increasing price.
Only some land owners. Other land owners join organizations like the National Association of Realtors (the second-largest U.S. lobbying spender only after the Chamber of Commerce itself) and try to influence the government to prevent high-density development.
One idea is to limit the percentage of the purchase price that can be borrowed. That would reduce a lot of the longet term problems but would upset some short term.
It's already happened a couple of years ago canada wide, through income requirements to mortgage a place with ratios that are small for the market.
To the point where a typical house requires $250k+ family incomes in a place where typical family incomes are one fourth to one half of that.
To the point where a typical house requires $250k+ family incomes in a place where typical family incomes are one fourth to one half of that.
Welcome to the everything bubble. It looks like it might deflate or burst soon.
In some places, it is, but in many places is an exaggerated demand that cannot be easily satisfied. There are some hot sports on the planet where everyone wants to be there, of course that is not really possible and this leads to unhealthy demand.
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That doesn’t make a lot of sense. Even if you’re talking about real wage stagnation, inflation (as measure to adjust for real wages) has been very low.
I hope the author's technical thinking is a lot more organized than what was represented in this mass of meandering confusion, that this represents the mind of a startup CTO would cause me as a potential investor to run the hell away.
The essay falls on its face with its central thesis that 2010's Canada = 1970's Soviet Union, which beyond being absurd on its face the author fails to make any case for other than observing, correctly, that bureaucracy exists in Canada and that individuals that are established in a social hierarchy take advantage of it. The underlying motivation for this screed seems to boil down to 1) rents are too high in Vancouver, and 2) firms don't want to pay techies enough in Vancouver. This is then extrapolated linearly to mean 'Canada'.
As for the observation on the housing situation, this is recognized generally as a problem in many markets, but his actual argument here is that these high rents thus smother "wealth creation". This may be true in Vancouver, but doesn't seem to be true in other areas like the Valley or NYC, which remain hotbeds of economic activity. Vancouver's specific problem seems to be that the Soviet leadership in British Columbia has been unable to curb the very capitalist problem of money laundering profits from the People's Republic of China into Canadian real estate.
The essay falls on its face with its central thesis that 2010's Canada = 1970's Soviet Union, which beyond being absurd on its face the author fails to make any case for other than observing, correctly, that bureaucracy exists in Canada and that individuals that are established in a social hierarchy take advantage of it. The underlying motivation for this screed seems to boil down to 1) rents are too high in Vancouver, and 2) firms don't want to pay techies enough in Vancouver. This is then extrapolated linearly to mean 'Canada'.
As for the observation on the housing situation, this is recognized generally as a problem in many markets, but his actual argument here is that these high rents thus smother "wealth creation". This may be true in Vancouver, but doesn't seem to be true in other areas like the Valley or NYC, which remain hotbeds of economic activity. Vancouver's specific problem seems to be that the Soviet leadership in British Columbia has been unable to curb the very capitalist problem of money laundering profits from the People's Republic of China into Canadian real estate.
I believe what he's referring to is this:
> The word hypernormalisation was coined by Alexei Yurchak, a professor of anthropology who was born in Leningrad and later went to teach in the United States. He introduced the word in his book Everything Was Forever, Until It Was No More: The Last Soviet Generation (2006), which describes paradoxes of Soviet life during the 1970s and 1980s.[3][4] He says that everyone in the Soviet Union knew the system was failing, but no one could imagine an alternative to the status quo, and politicians and citizens alike were resigned to maintaining the pretense of a functioning society.[5] Over time, this delusion became a self-fulfilling prophecy and the fakeness was accepted by everyone as real, an effect that Yurchak termed hypernormalisation.[6]
https://en.wikipedia.org/wiki/HyperNormalisation
> The word hypernormalisation was coined by Alexei Yurchak, a professor of anthropology who was born in Leningrad and later went to teach in the United States. He introduced the word in his book Everything Was Forever, Until It Was No More: The Last Soviet Generation (2006), which describes paradoxes of Soviet life during the 1970s and 1980s.[3][4] He says that everyone in the Soviet Union knew the system was failing, but no one could imagine an alternative to the status quo, and politicians and citizens alike were resigned to maintaining the pretense of a functioning society.[5] Over time, this delusion became a self-fulfilling prophecy and the fakeness was accepted by everyone as real, an effect that Yurchak termed hypernormalisation.[6]
https://en.wikipedia.org/wiki/HyperNormalisation
A lot of these issues describe Calgary (where I'm from), but we have the advantage of near limitless land to develop (everything north, east and south of the city is basically flat farmland, not even particularly productive farmland at that) and the local oil industry's near collapse has caused rents in the city centre to plummet. 20 years ago this article could have described our city nearly perfectly but even today is pertinent. The biggest obstacles to development are still bureaucracy and cartels, but thankfully at least some of their power is reduced by the relatively poor economy and tons of space.
Is this similarly true of Edmonton/rest of AB?
Not sure the exact dynamic in downtown Edmonton WRT landowners and whatnot, in most of my visits there it seems like most businesses are slightly more spread across town than in Calgary (probably because their city is split up by a massive river valley), and like Calgary they do have a lot of space to develop as well (most of Alberta east of the mountains is relatively flat). Their economy is a little more diverse in the sense that they have a lot of government officials. It's a nice city but they have bitterly cold winters (even though as I write this there's snow on the ground in Calgary and a snowfall warning for all of southern Alberta) and less tourism than Calgary.
The rest of AB is basically smaller agricultural towns, with a few oil towns that are basically glorified work-camps (Grande Prairie and Fort McMurray) and then a few mountain towns that have their own crazy dynamic due to national park regulations.
The rest of AB is basically smaller agricultural towns, with a few oil towns that are basically glorified work-camps (Grande Prairie and Fort McMurray) and then a few mountain towns that have their own crazy dynamic due to national park regulations.
> Vancouver's specific problem seems to be that the Soviet leadership in British Columbia has been unable to curb the very capitalist problem of money laundering profits from the People's Republic of China into Canadian real estate.
It's not just money laundering, but an entire "industry" of investment and tax fraud schemes:
https://www.theglobeandmail.com/real-estate/vancouver/out-of...
It's not just money laundering, but an entire "industry" of investment and tax fraud schemes:
https://www.theglobeandmail.com/real-estate/vancouver/out-of...
[deleted]
Thank you for persevering, extracting the nugget, and also validating my notion that this was a pretty bad opening sentence and paragraph.
""" But Canada is, and has always been, an oligarchy where the ruling families—the Saputos, Demarais, Reichmans, etc.—have relied on their own Brezhnevites to preserve their wealth by shielding them not just from competition, but from any kind of change.
The key to acquiring wealth in this country is creating bottlenecks by saturating public and private institutions with members of this class. """
So true. The general feeling that incompetence at these big companies has no consequence.
The depresssing and true: """This is how much a developer should make. We’re not paying a penny more."
Sorry to say, but tech is not valued in Canada by Canadian companies. American companies operating in Canada have a better mindset.
The key to acquiring wealth in this country is creating bottlenecks by saturating public and private institutions with members of this class. """
So true. The general feeling that incompetence at these big companies has no consequence.
The depresssing and true: """This is how much a developer should make. We’re not paying a penny more."
Sorry to say, but tech is not valued in Canada by Canadian companies. American companies operating in Canada have a better mindset.
> This is how much a developer should make. We’re not paying a penny more.
This almost reads as if there is a cast system, where there is place for everyone to be comfortable with and shut up demanding more...
This almost reads as if there is a cast system, where there is place for everyone to be comfortable with and shut up demanding more...
Yes, your best bet as a Canadian software eng is to get a job working for an American company. It's good for them because of the currency differential and the high quality of the talent here.
The downside is that often these jobs end up with a pattern of 'branch plant' or 'nearshore' perceptions; I've had several jobs where the relationship between the Canadian office and the U.S. one was strained due to an assumption of command and control from the American office.
The downside is that often these jobs end up with a pattern of 'branch plant' or 'nearshore' perceptions; I've had several jobs where the relationship between the Canadian office and the U.S. one was strained due to an assumption of command and control from the American office.
Reading this as someone who has moved from New Zealand to San Francisco, the parallels are depressing.
In New Zealand the price of housing has skyrocketed, and exists in a similar plane to Canada's housing market. We have the same issues of low productivity and relatively low wages as well.
There's a toxic cycle that's created. Boomers made all of their money in housing appreciation, and heavily encourage millennials to continue the cycle (which, taking the most optimistic view of it all, makes sense). But a house doesn't cost 2.5x your income now - it costs 8-10x. So you're married to a mortgage (which unlike America has its interest rate fixed for <5 years), have probably got a lot of your parents money invested as well (because you aren't earning enough to come up with a $200k down payment on your own).
Because real estate has 'proven' results, and the media make a lot of money advertising houses for sale, that's a lot of what you get told to do. As an individual you're so heavily indebted you can't afford to take risks, but at the same time, companies aren't trying to improve their productivity - because the best ROI has been in the property market. So wages suck too.
New Zealand is a bad place to be a young person. That's why I don't live there anymore. And I don't think I'll move back anytime soon unfortunately.
In New Zealand the price of housing has skyrocketed, and exists in a similar plane to Canada's housing market. We have the same issues of low productivity and relatively low wages as well.
There's a toxic cycle that's created. Boomers made all of their money in housing appreciation, and heavily encourage millennials to continue the cycle (which, taking the most optimistic view of it all, makes sense). But a house doesn't cost 2.5x your income now - it costs 8-10x. So you're married to a mortgage (which unlike America has its interest rate fixed for <5 years), have probably got a lot of your parents money invested as well (because you aren't earning enough to come up with a $200k down payment on your own).
Because real estate has 'proven' results, and the media make a lot of money advertising houses for sale, that's a lot of what you get told to do. As an individual you're so heavily indebted you can't afford to take risks, but at the same time, companies aren't trying to improve their productivity - because the best ROI has been in the property market. So wages suck too.
New Zealand is a bad place to be a young person. That's why I don't live there anymore. And I don't think I'll move back anytime soon unfortunately.
This generational change in house price to income ratios is also apparent in Britain and supply constrained US cities. It can be largely explained by the fall in mortgage interest rates from the 12-15% in the 80's to the 3-5% we see in the 2010's.
This windfall provided a massive generational wealth transfer from young to old, and with interest rates near the zero lower bound cannot be replicated. This makes housing a far worse bet for our generation, even for those of us earning sufficiently more than our parents to be able to take a shot at home ownership.
This windfall provided a massive generational wealth transfer from young to old, and with interest rates near the zero lower bound cannot be replicated. This makes housing a far worse bet for our generation, even for those of us earning sufficiently more than our parents to be able to take a shot at home ownership.
100% agreed. It won't end well, and politicians being politicians (and voters being voters), we're going to continue this mad show as long as possible, ensuing we get the worst possible outcome here.
The weird bit is that San Francisco prices make more sense than where I grew up (suburban New Zealand). Sure a house in SF might cost $1.2m but two people working in tech can expect to make $250-300k all in by their early thirties. That's only $200k more than a house in New Zealand, but you're working with an income that's easily 2x the size.
The weird bit is that San Francisco prices make more sense than where I grew up (suburban New Zealand). Sure a house in SF might cost $1.2m but two people working in tech can expect to make $250-300k all in by their early thirties. That's only $200k more than a house in New Zealand, but you're working with an income that's easily 2x the size.
A $250K household income is on the 96 percentile for San Francisco. Working in tech gives us a slightly warped perspective.
Moving from Britain to the US I've seen the income of my profession as a software engineer move from the 75th to 90th percentile and the variance of the income distribution widen so an income of the 90th percentile earns 2.6x rather than 2.0x the median. We're far richer here than we were at home.
Moving from Britain to the US I've seen the income of my profession as a software engineer move from the 75th to 90th percentile and the variance of the income distribution widen so an income of the 90th percentile earns 2.6x rather than 2.0x the median. We're far richer here than we were at home.
In Britain the concentration of wealth and opportunity in London and the SE is a fundamental driver. If Government were to focus on creating alternative centres of wealth generation the vast stock of infrastructure that surround some of the urban centres in England could be unlocked. For example within 40km of Manchester there is Bolton, Preston, Blackburn, St Helens, Wigan, Halifax, Warrington, Macclesfield. All of these are substantial urban centres in their own right with working infrastructures including schools, hospitals, parks, leisure centres, shopping, residential districts and so on. None of them are economically exploited at this time. Similar pictures exist for the northeast.
> because the best ROI has been in the property market.
That is not true. It seems like it is true because we can look at our parents and grandparents and see that the house they bought in 1980 for $300,000 is worth a million dollars now, but that's not a great return. It seems like it because they are millionaires, but you'd have been better off in bonds with a better return and a whole lot less risk.
That is not true. It seems like it is true because we can look at our parents and grandparents and see that the house they bought in 1980 for $300,000 is worth a million dollars now, but that's not a great return. It seems like it because they are millionaires, but you'd have been better off in bonds with a better return and a whole lot less risk.
While you are technically correct, the common man on the street so to say would say that property is where the returns would be (even if the returns have technically been 0% once property taxes, mortgage interest, insurance and repairs are taken into account).
Perhaps I should have been more precise: the perception is that the best ROI has been in the property market.
Perhaps I should have been more precise: the perception is that the best ROI has been in the property market.
Landlordism in cities is (correctly) blamed for a worsening of income inequality.
While I agree that landlordism tends to increase income inequality -- especially in the form Vancouver suffers, where protests convince the city to reject the construction of new housing even when the land is already appropriately zoned and the proposed building complies with the approved local development plan -- but it's wrong to refer to a worsening of income inequality.
Income inequality in Canada increased substantially through the 1980s and 1990s, but it peaked around 2004-2007 (depending on exactly which measure you use) and has been steadily declining since then.
While I agree that landlordism tends to increase income inequality -- especially in the form Vancouver suffers, where protests convince the city to reject the construction of new housing even when the land is already appropriately zoned and the proposed building complies with the approved local development plan -- but it's wrong to refer to a worsening of income inequality.
Income inequality in Canada increased substantially through the 1980s and 1990s, but it peaked around 2004-2007 (depending on exactly which measure you use) and has been steadily declining since then.
Wealth equality on the other hand...
Right, that's a completely different issue. (And much harder to measure, never mind address. Even defining it is hard; do you count the NPV of pensions, for example?)
I don't see why you wouldn't. An easy way to see if something is valuable (wealth), take it away from someone and observe their reaction.
This is pretty accurate. Rent seeking in Canada is at an extreme, monopolies are maintained through excessive government regulation, cartels in real estate as well as many industries are definitely a thing and almost the whole country is under-employed.
Don't have a ton of time ATM but we're in dire need of deregulating a lot of industries and breaking up cartels.
Don't have a ton of time ATM but we're in dire need of deregulating a lot of industries and breaking up cartels.
Could not agree more! There is a general malaise and slowness in companies/industries I have had to interact with (Telco, Banking).
I'm not convinced that regulation is the problem. There are certainly places (wine industry in Ontario for example) where the regulations encourage monopoly. But honestly, I think it's cultural: the investment climate, the fear of risk, but above all ... the easy easy money to be made just drilling oil out of the ground and selling it, or investing in the people who do so. Before that it was trees. Before that, furs.
According to wikipedia, mining, oil and gas make up 8.1% of GDP. Below manufacturing (which we're told is dead in Canada) and real estate.
And yet if you look at the TSX, and the make-up of most mutual funds people are invested in, it's heavily heavily biased towards the oil and gas sector.
Not to mention the CAD being basically a petro dollar at this point.
Not exactly set up to win in a post-carbon world, are we?
According to wikipedia, mining, oil and gas make up 8.1% of GDP. Below manufacturing (which we're told is dead in Canada) and real estate.
And yet if you look at the TSX, and the make-up of most mutual funds people are invested in, it's heavily heavily biased towards the oil and gas sector.
Not to mention the CAD being basically a petro dollar at this point.
Not exactly set up to win in a post-carbon world, are we?
Having lived through a Soviet inspired bureaucracy where the wait times to get a phone line was years, getting a car could take up to 5 years; this article is spot on. Eerily familiar. That same tingling of dread from decades ago washed over me haha.
Everything was mandated by a bureaucrat, how many factories there could be, how many goods they could produce. There was no concept of supply and demand, instead there was five year plan from the central government and that was what would be implemented regardless of the ground reality.
When people got a phone line installed in their house, the neighbours would come over to marvel as if visiting a new born baby.
When my uncle got his allotment for a scooter after two years, he distributed sweets to his co-workers. It was a great occasion.
Everything was mandated by a bureaucrat, how many factories there could be, how many goods they could produce. There was no concept of supply and demand, instead there was five year plan from the central government and that was what would be implemented regardless of the ground reality.
When people got a phone line installed in their house, the neighbours would come over to marvel as if visiting a new born baby.
When my uncle got his allotment for a scooter after two years, he distributed sweets to his co-workers. It was a great occasion.
This part of the article was a bit silly -- Canada is nothing like this. I feel like he tied his own experiences with late-soviet bureaucracy to his frustrations with conservative Canadian business climate; but the two are not analogous really.
Canada is a market economy with very low corporate taxes and when compared to European economies regulation is actually very light. Our business norms and regulations are tied in most part very closely to the United States.
But the investment culture is very conservative and the economy is tied excessively to resource extraction.
And yes, there is a long history of a few families having strong dominance over everything, and of businesses/companies gaining monopolistic positions through regulation. An example of this is the wine industry in Ontario -- I could go on a long rant about that... but I'll restrain myself.
Canada is a market economy with very low corporate taxes and when compared to European economies regulation is actually very light. Our business norms and regulations are tied in most part very closely to the United States.
But the investment culture is very conservative and the economy is tied excessively to resource extraction.
And yes, there is a long history of a few families having strong dominance over everything, and of businesses/companies gaining monopolistic positions through regulation. An example of this is the wine industry in Ontario -- I could go on a long rant about that... but I'll restrain myself.
I just remembered an incident; My grandfather had to call his sister who lived in a different country.
The middle class and the poor did not have access to International Direct Dialling because the central telecom commission had not accepted the demand for more international connectivity. There were no private telecom companies only state owned because we were good socialists. And International Direct Dialling was a luxury reserved for the political elites and the rich industrialists.
No what we had to do was book a "person-to-person" call. They would give you a 2-3 hour time slot in which the call might be connected and you would have to wait by the phone. And when it was connected the operator could hear everything.
This is mid-1980's I am talking about haha
The middle class and the poor did not have access to International Direct Dialling because the central telecom commission had not accepted the demand for more international connectivity. There were no private telecom companies only state owned because we were good socialists. And International Direct Dialling was a luxury reserved for the political elites and the rich industrialists.
No what we had to do was book a "person-to-person" call. They would give you a 2-3 hour time slot in which the call might be connected and you would have to wait by the phone. And when it was connected the operator could hear everything.
This is mid-1980's I am talking about haha
Unfortunately it's deep in the Canadian business community DNA; the family compact, the Hudson's Bay Company, whatever... Exempted from population density, rapid growth, and revolutionary fervor of our neighbours to the south, we were a place where colonial money could just sit and go stale.
It was the fur industry and logging then, now it's crappy oil from the tar sands that sells for little more than it costs to dig it up; but nobody in Calgary has the balls to admit it.
I have American friends who talk about Canada in glowing terms as a place without the same corruption as the US. It's just a different kind of corruption, that this article aludes to throughout.
And yes, nothing ever gets done. Everything goes over budget. Not a problem confined to B.C. by any means.
It was the fur industry and logging then, now it's crappy oil from the tar sands that sells for little more than it costs to dig it up; but nobody in Calgary has the balls to admit it.
I have American friends who talk about Canada in glowing terms as a place without the same corruption as the US. It's just a different kind of corruption, that this article aludes to throughout.
And yes, nothing ever gets done. Everything goes over budget. Not a problem confined to B.C. by any means.
I am reading an interesting book now: Why nations fail https://en.m.wikipedia.org/wiki/Why_Nations_Fail
The author discusses that for a country to be successful there must be institutions that encourage working hard and entrepreneurship. More, the political system should be organised in a way that stimulates creation and support of such institutions. The negative consequences for politicians supporting oligarchy must be worse than for ones who introduces changes that can improve lives of regular people.
My guess the problem is not in real estate speculations - it is just consequences of underlying system inefficiencies.
I see Canada has good educational system, right? But as they say in the article, there is not a lot of motivation and places for smart engineers to do their best.
There are barriers to make changes in many areas like medicine, real estate (based on the article).
The government seems to be in a situation where due to corruption and lobbies it does not do appropriate changes. They know what to do, but they do not find it good for them personally. Oligarchy wants to keep their positions unchallenged.
It is just my guess and pure speculation, I do not know much about Canada.
EDIT: added more on concequences
The author discusses that for a country to be successful there must be institutions that encourage working hard and entrepreneurship. More, the political system should be organised in a way that stimulates creation and support of such institutions. The negative consequences for politicians supporting oligarchy must be worse than for ones who introduces changes that can improve lives of regular people.
My guess the problem is not in real estate speculations - it is just consequences of underlying system inefficiencies.
I see Canada has good educational system, right? But as they say in the article, there is not a lot of motivation and places for smart engineers to do their best.
There are barriers to make changes in many areas like medicine, real estate (based on the article).
The government seems to be in a situation where due to corruption and lobbies it does not do appropriate changes. They know what to do, but they do not find it good for them personally. Oligarchy wants to keep their positions unchallenged.
It is just my guess and pure speculation, I do not know much about Canada.
EDIT: added more on concequences
The success of a cities and nations has always dependent on a couple of variables:
1. Human capital (increasing size and quality)
2. Cheap real estate (ever decreasing share of real estate costs as an input of value creation machinery)
3. Cheap energy costs
In the U.S. and in most developed countries, we've had (1), in some cases (3) but (2) is become scarce.
In my opinion, there are very few modern cities that are able to provide cheap housing these days. It requires an activist government fighting two very powerful forces: existing home owners and corporate landlords. Truth is that the lobby of those interest groups are way more powerful than low income renters.
The other problem is that expanding the housing stock is not sufficient, governments have to provide basic services: water, public transportation access, sewage, etc.
Who is going to pay for them? In most cases, the cost is paid via property taxes (existing homeowners and corporate landlords)
The truth is that we have disincentivized the creation of new housing stock and until we fix the underlying issues of bringing more supply to the market, this issue will continue to worsen.
https://www.zillow.com/research/new-construction-shortgage-2...
In the U.S. and in most developed countries, we've had (1), in some cases (3) but (2) is become scarce.
In my opinion, there are very few modern cities that are able to provide cheap housing these days. It requires an activist government fighting two very powerful forces: existing home owners and corporate landlords. Truth is that the lobby of those interest groups are way more powerful than low income renters.
The other problem is that expanding the housing stock is not sufficient, governments have to provide basic services: water, public transportation access, sewage, etc.
Who is going to pay for them? In most cases, the cost is paid via property taxes (existing homeowners and corporate landlords)
The truth is that we have disincentivized the creation of new housing stock and until we fix the underlying issues of bringing more supply to the market, this issue will continue to worsen.
https://www.zillow.com/research/new-construction-shortgage-2...
I don't agree. Coming from NZ to America, I am amazed at how cheap housing is (outside of a few select areas - California, New York and a few major urban metros), and the fact that you can fix your interest rates for the length of the entire loan. America has many problems - and California definitely has a housing crisis, but that's not true for the country at large.
Does this mean that the use of TIF/TAD funding should be expanded? With TIF, bonds for infrastructure needed to support new housing are paid off by property taxes on the new housing. While this should keep the rest of the community from shouldering the burden of new infrastructure, opposition often comes from activists who claim it's another way for the rich to exclude themselves from the rest of the community by keeping their taxes to themselves. Typically the bonds last 30 years, after which the taxes that went to pay them off are directed back to the community's general fund.
I feel like Kevin O'Leary's boat crash (with fatality) on the Georgian Bay last month is a metaphor for the entire country's economy:
Arrogant baby boomers driving around in luxury in the pitch black night, with the lights out, running into each other on the lake -- and then shirking all responsibility.
Arrogant baby boomers driving around in luxury in the pitch black night, with the lights out, running into each other on the lake -- and then shirking all responsibility.
For a moment I thought the witch is dead, turns out O'Leary wasn't one of the victims.
A pretty accurate but damning portrayal of the economy in Canada. I wonder how smaller but more successful economies like Sweden or Israel manage to consistently build great companies?
Usually it is not because of, but in spite of their governments. With the mention that Israel has some great companies, but Sweden is on a strong descending trend.
If supply proves too difficult to increase, why not try reducing demand? Or course that would be unpopular with the infinite GDP growth folks but sooner or later will have to be confronted. Seems like the entire political spectrum supports infinite growth even if it manifests in different ways in different political parties.
A good way to reduce demand is to both vastly increase the amount of identity reported in real estate (especially for out of country buyers) as well as to have foreign ownership taxes.
it would crash the BC economy hard though. There's very little left there that isn't driven by foreign purchases. (quite a lot of it illegal in their home countries, eg the USA)
it would crash the BC economy hard though. There's very little left there that isn't driven by foreign purchases. (quite a lot of it illegal in their home countries, eg the USA)
I thought money from China (legal and illegal), not America, was driving BC real estate.
Proposing reporting on the amount of foreign cash in the real estate market gets into the racism category, and that can spell a quick end to a successful career in politics.
De-growth movement and accelerationism don't. I guess anarcho-primitivism doesn't either but they are not really active in mainstream politics.
Because in a global economy, countries are competing against each other. If Canada slows down, other countries will catch up and eclipse them.
How is that? Canada got an army and if they slow down they will keep their maple trees just fine. There is no need to play a economy arms race just becouse.
One interesting solution to home ownership and rent seeking might be to spread the rent increase revenue around. In BC at least its common to disallow sublets. Whereas in NY its more or less allowed by law. This means as the rent goes up, land owners are the only ones who have the ability to make money.
We're in the middle of an election right now and housing is an important issue. However, most promises will make things worse rather than better. For example, the Conservatives' plan to allow thirty year mortgages will do more to increase prices and indebtedness then to lower payments.
I'm honestly not sure which is worse, the Conservative plan to allow 30 year mortgages or the Liberal plan to have the government loan people money for their downpayments...
Both plans seem geared to draw the votes of current homeowners, also more likely to vote in elections.
I agree. And it makes me sad that parties are deliberately adopting policies which they know are bad policy (they hire economists who tell them this!) because they prioritize electoral success over doing what's good for the country.
The better solution is to get more people involved in politics, then we will realize that if everyone votes, no one benefits therefore government should be limited.
I can dream....
I can dream....
What is the standard today in Canada? Less than 30 years?
Typical is 25 years. We had 30 year mortgages before and they were eliminated to try to cool the housing market.
25 years, but the rate is fixed in 5 year terms (ie after 5 years you renegotiate the rate).
Housing sure is an election issue it's pretty much 0% vacancy here (acutual is 0.2%) on PEI in Charlottetown. Airbnb causing "renovictions" and it's impossible to find a place to live if you do you're soon forced out. There are quite a few college students that study here too they arrive looking for a place.
Of the total population here 50% of people live in the capital city. It's getting to the point where everyone will have to move 30 minutes to an hour away.
There was a story in the local paper about a front porch being offered for rent. Living in someone's front porch! I think someone actually took the offer.
The 30 year mortgage reminds me of a former co-worker who got a brand new truck. His salary was half what I made and he worked four days per week. The dealership had a seven year payment plan. My co-worker friend thought that was a great deal. I just shook my head.
Of the total population here 50% of people live in the capital city. It's getting to the point where everyone will have to move 30 minutes to an hour away.
There was a story in the local paper about a front porch being offered for rent. Living in someone's front porch! I think someone actually took the offer.
The 30 year mortgage reminds me of a former co-worker who got a brand new truck. His salary was half what I made and he worked four days per week. The dealership had a seven year payment plan. My co-worker friend thought that was a great deal. I just shook my head.
Absolutely. It feels like the Canadian Real Estate Association is writing these policies.
Baby boomers have a death grip on everything.
Baby boomers have a death grip on everything.
Y'all don't know the meaning of cartel. It's being thrown around here like beads at mardis gras. I'm just sure I don't want to see most of you without shirts on.
A cartel is an agreement between organizations/people throughout a supply chain. Landowners twisting their mustaches and rubbing their hands together do not make a cartel. Rule of thumb, at least 3 steps in a supply chain. What they would be, is a trust. They're at the same level of the supply chain working together. If you're going to cry "late stage capitalism", for fuck's sake actually know how capitalism works and how to cheat the system properly. There are rules on how to cheat in capitalism. A 10 minute youtube video won't do that for you or the rantings of a crazy frenchman.
A cartel is an agreement between organizations/people throughout a supply chain. Landowners twisting their mustaches and rubbing their hands together do not make a cartel. Rule of thumb, at least 3 steps in a supply chain. What they would be, is a trust. They're at the same level of the supply chain working together. If you're going to cry "late stage capitalism", for fuck's sake actually know how capitalism works and how to cheat the system properly. There are rules on how to cheat in capitalism. A 10 minute youtube video won't do that for you or the rantings of a crazy frenchman.
Citation requested.
Counterpoint, definition 2:
https://www.merriam-webster.com/dictionary/cartel
Counterpoint, definition 2:
https://www.merriam-webster.com/dictionary/cartel
“When innovative companies begin making decent profits, landlords raise the rents to adjust for the new ability to pay. As a result, these additional wages are neither reinvested, nor reflected in the disposable income of employees. This is the dynamic behind the mystery of stagnant wages. When workers in a particularly well-paid sector begin pouring into a city, landlords likewise raise the rent to absorb these incomes. It isn’t gentrification, but absorption through monopoly power.”
The housing affordability crisis is really a crisis of land owner cartels, especially in major urban centers. Short of some massive investment in public housing, there’s not much that can be done to course correct.