COVID and the housing market

[klr_guy]

I thread-jacked this post, sorry.

 

[Mad Mike]

I was speaking to an economist when I worked in the bank several years ago. He told me that the introduction of the GST in 1991 had contributed to the deep recession in Canada for many years in the early 90s. I'm sure other factors also didn't help either.

Not a very knowledgeable economist, I’ve worked with plenty and never heard one dis the transition to GST.

GST is a transparent replacement of a hidden tax on goods called the 13.5% MST (manufacturers sales tax) that was applied on all imports and manufactured goods at wholesale. Mort or less revenue neutral.

It was introduced at the depth of a recession, people were grumpy, service businesses hated the fact that services would be taxed, manufacturers rejoiced as they were no longer subsidizing service industries.

 

[Evoex]

I'd hoped this would be my forever home, but will likely sell in the next few years. My wife sadly died recently, unexpectedly in her early 50s.
4 bedrooms, 3k+ sq feet is absurd for my son and I.
Thankfully once a cause of death is determined and lawyers do their thing, it'll be mortgage free.

what? damn.

condolences on your loss

 

[Mad Mike]

I'd hoped this would be my forever home, but will likely sell in the next few years. My wife sadly died recently, unexpectedly in her early 50s.
4 bedrooms, 3k+ sq feet is absurd for my son and I.
Thankfully once a cause of death is determined and lawyers do their thing, it'll be mortgage free.

Wow, it’s always saddening When I hear of these things - that’s a tough blow.

Condolences to you and your son, my thoughts are with you.

 

[klr_guy]

what? damn.

condolences on your loss

Thank you

 

[klr_guy]

Wow, it’s always saddening When I hear of these things - that’s a tough blow.

Condolences to you and your son, my thoughts are with you.

Thank you. The coroner delays are my brain worm.

 

[backmarkerducati]

I don’t really know the scale of what you’re describing, but I believe these things do happen. Part of these shenanigans are because the city doesn’t have a cohesive zoning standard. If they simply standardized zoning based on proximity to transportation and community infrastructure, builders would know exactly where a 4, 6,30 or 100 storey building could be built.

But that would clear a lot of minion jobs from city hall… which I guess council values more than building homes.

I’m pretty sure developers pay full tick property taxes + vacant home tax on boarded up houses… I’d guess that means they are paying what the city wants to keep them as is.

At the end of the day I’m guessing the number of homes being hoarded and boarded is not significant in the great scheme of things - there were only 11,000 unoccupied homes in Toronto in 2023 - if they all got converted to working homes they would provide 1/5 of the demand generated by immigration alone.

Rightsizing immigration is the single fastest part of the solution. Toronto absorbed 125,000 immigrants in 2023, that required 52,000 additional homes.

.

The developers know the zoning before they buy. It is not like they buy up some land and then realize, oh crap, I can only build four floors, Toronto rules are so crazy.... The city is also working on this: https://www.toronto.ca/wp-content/uploads/2017/09/9039-Avenues-Mid-Rise-Buildings-Study-Part-1.pdf Regardless the current zoning is actually very clear and easy to find throughout the city.

I used houses as an example. There is a crap tonne of empty lots or empty designated avenue mixed use, low rise apartments, many years and years on after the zoning changes were approved. Basically places where the development is fully approved, demo permits issued, nothing is getting built on those sites--years and years on, each developer has dozens of these no progress already approved sites in inventory, but is still putting in new applications for more... hoarding. And that is the better developers, not the super greasy ones...

As for taxes, they have their avoidance there. They put in the offer with a 1.5 to 2 year closing, the current owner owns the house or building and pays the taxes for that stretch, this covers the taxes for the initial application period as they don't actually own the land during the initial zoning applications. For houses they "let" the owner stay rent free (as long as they pay the taxes) for a year or more after the close (which may not be a bad deal for either party, depending). Then when it comes time to pay the vacant home taxes... it is around 12K PT and VT combined per lot (say high average). Even if they hold for 10 more years... that is only 120K on something they will sell for millions to a real developer. Vacant and property tax is a rounding error and is not working in this context.

What would work.... Once the application goes in a grace period to get approved and start building and then pay the taxes on either max zoning value or better yet IMO what they asked for, IF they play games and leave it in someone else's name, then they pay.... THEN limit new applications based on progress for open and approved ones.

Toronto is currently on pace for 10K new units in the next year, easily 10 times that is needed and that capacity has already approved zoning and them some. It is totally broken by bad behaviour.

Agree on resizing and closing loopholes on immigration to reduce demand until supply improves.

 

[nobbie48]

Not a very knowledgeable economist, I’ve worked with plenty and never heard one dis the transition to GST.

GST is a transparent replacement of a hidden tax on goods called the 13.5% MST (manufacturers sales tax) that was applied on all imports and manufactured goods at wholesale. Mort or less revenue neutral.

It was introduced at the depth of a recession, people were grumpy, service businesses hated the fact that services would be taxed, manufacturers rejoiced as they were no longer subsidizing service industries.

The ones that don't like HST are small contractors that double dip the HST system. Roofers seem to be #1 as it's a one day job. Pay cash and the owner saves a thousand dollars HST. EVERYONE wants to screw the government. The contractor is laughing because he didn't give away a cent of his money. His workers get cash, no tax.

The legit small contractor has to compete.

 

[Mad Mike]

The developers know the zoning before they buy. It is not like they buy up some land and then realize, oh crap, I can only build four floors, Toronto rules are so crazy.... The city is also working on this: https://www.toronto.ca/wp-content/uploads/2017/09/9039-Avenues-Mid-Rise-Buildings-Study-Part-1.pdf Regardless the current zoning is actually very clear and easy to find throughout the city.

It is and it isn't. There is lots of NIMBY in Toronto, so what can be built differs by neighborhood. Toronto should have harmonized zoning at the point of amalgamation, nailing down a standard that considered transit corridors (putting the 30 high buildings on the subway lines), rezoning all res lots to the same standard (so the same setbacks and lot dimensions for infill lots are consistent across the city).

This isn't new stuff, it's the city's unwillingness to clear the bureaucracy and bureaucrats!

I used houses as an example. There is a crap tonne of empty lots or empty designated avenue mixed use, low rise apartments, many years and years on after the zoning changes were approved. Basically places where the development is fully approved, demo permits issued, nothing is getting built on those sites--years and years on, each developer has dozens of these no progress already approved sites in inventory, but is still putting in new applications for more... hoarding. And that is the better developers, not the super greasy ones...

What's stopping building? Can't build profitably? Can't build at all because of trades availability? Are these landowners getting off watching the little guys squirm?

As for taxes, they have their avoidance there. They put in the offer with a 1.5 to 2 year closing, the current owner owns the house or building and pays the taxes for that stretch, this covers the taxes for the initial application period as they don't actually own the land during the initial zoning applications. For houses they "let" the owner stay rent free (as long as they pay the taxes) for a year or more after the close (which may not be a bad deal for either party, depending). Then when it comes time to pay the vacant home taxes... it is around 12K PT and VT combined per lot (say high average). Even if they hold for 10 more years... that is only 120K on something they will sell for millions to a real developer. Vacant and property tax is a rounding error and is not working in this context.

I'm don't see this as an issue. Land, like stocks and bonds can be a long term investment. Are we supposed to take land out of the free market altogether?

What would work.... Once the application goes in a grace period to get approved and start building and then pay the taxes on either max zoning value or better yet IMO what they asked for, IF they play games and leave it in someone else's name, then they pay.... THEN limit new applications based on progress for open and approved ones.

I think it's part way there. Landowners pay taxes based on the zoning and value of the property -- if it's kept vacant or boarded up, they also pay the vacant home tax. I'd say once an application is approved, the grace period should start.

Toronto is currently on pace for 10K new units in the next year, easily 10 times that is needed and that capacity has already approved zoning and them some. It is totally broken by bad behaviour.

The number is higher than that. Starts in Toronto CMA are at 35,000 units Jan to Aug, forecasted at 4300/mo for the rest of the year.

Toronto vacancy rates are 2.6% for rent-controlled units, that's up from the pre-pandemic rate of 1%. Free market vacancy is 3.5%, double the prepandemic average of 1.7%. While still quite low, rising vacancy rates don't excite builders.

What does this mean? Vacancy tax is working to bring stock online? Large numbers have become unhoused? People are moving out of Toronto to lower cost areas?