- Rime
- Nov 2, 2011
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by Games Forum
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You're going to be a hunchback by 40.
It's actually helped to correct some issues I had which stemmed from sleeping on a lovely IKEA futon for years.
If you hang it properly and lay correctly, it's quite healthy and I always wake up ridiculously refreshed no matter how exhausted I was.
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Oct 6, 2014 20:44
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- Adbot
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ADBOT LOVES YOU
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May 16, 2024 10:46
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- Dr. Stab
- Sep 12, 2010
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👨🏻⚕️🩺🔪🙀😱🙀
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If you're going to have a micro house, at least do it all the way and make it like 50 square feet.
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Oct 6, 2014 20:45
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- Rutibex
- Sep 9, 2001
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by Fluffdaddy
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If you're going to have a micro house, at least do it all the way and make it like 50 square feet.
https://www.youtube.com/watch?v=EbJobFYjmvA&t=348s
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Oct 6, 2014 21:19
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- Lexicon
- Jul 29, 2003
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I had a beer with Stephen Harper once and now I like him.
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Especially developers who are just trying to inflate their margins.
This galls me also. I'd have no problem with it if it were commensurately cheaper.
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Oct 6, 2014 21:45
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- Rime
- Nov 2, 2011
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by Games Forum
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Agreed. The biggest issue with Laneway housing in Vancouver is that they cost a minimum of $250k to build and then rent for $2k+/month. The permitting process can take well over 18 months.
Totally defeats the purpose, unless you need a place to hide the inlaws you smuggled over from the mainland.
Rime fucked around with this message at 21:51 on Oct 6, 2014
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Oct 6, 2014 21:48
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- Lexicon
- Jul 29, 2003
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I had a beer with Stephen Harper once and now I like him.
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Agreed. The biggest issue with Laneway housing in Vancouver is that they cost a minimum of $250k to build and then rent for $2k+/month.
Totally defeats the purpose, unless you need a place to hide the inlaws you smuggled over from the mainland.
Yeah, WTF is with that $250k figure? Is this just standard-issue "things in Canada are a ripoff" or what? This seems inordinately expensive to me.
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Oct 6, 2014 21:52
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- ocrumsprug
- Sep 23, 2010
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by LITERALLY AN ADMIN
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When you are prepared to slap down 1-1.5 million for a middle of the road house, you have already demonstrated your inability to determine the value of something. When the nice man tells you it only will cost a quarter of a million dollars for your laneway house, which is way cheaper than a condo or something, it is only air friction slowing that wallet coming out.
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Oct 6, 2014 22:25
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- Baronjutter
- Dec 31, 2007
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"Tiny Trains"
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I assumed it was due to there only being a couple of outfits specializing in building them, so they are unashamedly price fixing on the minimum cost/sqft. 
I certainly can't think of any other reason, when you can build a full size house for half that cost outside the GVRD.
How is it at all specialized? It's just building a house that fronts onto a lane, any lovely contractor that has the skills to build a garage could manage it. Where the costs probably are is in hiring a builder who will take care of the legal aspects for you, that knows the absurdly complicated code and approval process which like you say can take over a god drat year.
I've seen poo poo like this often in my field. Perfectly well built buildings built by people who know their poo poo and know the code suddenly shut down due to some obscure bylaw or weird code interpretation. It's not lovely fly by night amateur builders, I've seen this happen to the most reputable pro's building commercial quality buildings. None of it protects anyone or results in better buildings, it just drives up the cost of construction because fewer and fewer builders have the skills to jump through all the hoops and manage the project efficiently. And that's when they finally get to start building, so many projects delayed by a year or more due to the same sort of poo poo.
The levels of red tape and professionals that have to be involved to simply build a house is insane, then when you get into commercial or industrial it gets 10x worse. All that paperwork and negotiation and coordination costs big money. I'm not saying we need to get rid of building codes or zoning bylaws and enter a brave new world of libertarian buyer beware reputation-based construction safety, but if you've ever worked in the business and seen the process from start to finish you'd see what a "kafka-esq" nightmare it all is. Most of it stems from absolutely paranoid liability concerns on the part of everyone involved, and NIMBY's being incharge of writing our zoning bylaws and designing approval processes for the last 40 years or so.
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Oct 6, 2014 22:37
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- Rime
- Nov 2, 2011
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by Games Forum
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I completely agree. When you are specifying that you must have a certain style of doorhandle in your house or it will not be approved for construction, it is past protecting people from fire hazards and well into being a mockery of itself to the detriment of everyone involved.
Laneways houses aren't specialized in of that there's anything super arcane about building them, I just meant that there's only one or two companies that build them specifically and have floorplans off the shelf and such. I mean, Smallworks is pre-fabbing several of their designs and they still cost an average of $290k according to their site.
Rime fucked around with this message at 23:08 on Oct 6, 2014
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Oct 6, 2014 23:05
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- namaste friends
- Sep 18, 2004
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by Smythe
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Yeah I love the loving prefab house industry. You want to know what's hilarious about their pricing? My parents looked into the cost and found out that a prefab will cost less if you but it in some poo poo rear end town in the middle of nowhere vs Vancouver. Cost per sqft is exactly the same.
Somewhere Henry Ford is spinning in his grave
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Oct 6, 2014 23:14
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- sauer kraut
- Oct 2, 2004
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I completely agree. When you are specifying that you must have a certain style of doorhandle in your house or it will not be approved for construction, it is past protecting people from fire hazards and well into being a mockery of itself to the detriment of everyone involved.
Laneways houses aren't specialized in of that there's anything super arcane about building them, I just meant that there's only one or two companies that build them specifically and have floorplans off the shelf and such. I mean, Smallworks is pre-fabbing several of their designs and they still cost an average of $290k according to their site.
Elegant Lane Cottage 400ft², we may be able to build it under 180.000$ if you forego the elegant part.
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Oct 6, 2014 23:44
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- Lexicon
- Jul 29, 2003
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I had a beer with Stephen Harper once and now I like him.
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I completely agree. When you are specifying that you must have a certain style of doorhandle in your house or it will not be approved for construction, it is past protecting people from fire hazards and well into being a mockery of itself to the detriment of everyone involved.
To be fair, this was widely lauded in certain circles as an accessibility thing.
It does seem to overlook the, ahem, accessibility to the sort of capital required to own a house in Vancouver. Anyone who truly does need the design from a physicality standpoint, and manages to own said house, can probably afford to have someone jaunt down to Home Depot and get it sorted. It seems niche enough of a requirement on private buildings that there probably does not need to be a mandated ruling.
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Oct 7, 2014 00:00
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- Lexicon
- Jul 29, 2003
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I had a beer with Stephen Harper once and now I like him.
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Yeah I love the loving prefab house industry. You want to know what's hilarious about their pricing? My parents looked into the cost and found out that a prefab will cost less if you but it in some poo poo rear end town in the middle of nowhere vs Vancouver. Cost per sqft is exactly the same.
Somewhere Henry Ford is spinning in his grave
Meaning, they charge more depending on where you have it delivered? That's hilarious (and totally unsurprising now that I think about it)
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Oct 7, 2014 00:01
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- Lain Iwakura
- Aug 5, 2004
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The body exists only to verify one's own existence.
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Taco Defender
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http://m.theglobeandmail.com/life/h...hboard/follows/
quote:Jeffrey Ho, owner of Blight’s Home Hardware, has noticed that several of the neighbours along his section of Dunbar Street have moved out, their storefronts remaining empty.
His business is long established, so he’s in good shape, but he does wonder what’s happening around him.
“The convenience store across the street shut down. We have a couple of empty stores on the next block that used to be furniture places and they’ve moved on,” he says. “I don’t know if it’s the landlords not giving a reasonable rent or the stores are not getting business. It’s a bit weird. But I can’t dwell on the past, or I’d be in trouble,” he adds, laughing.
Real estate agent John Gust sold a large commercial property up the block a year ago, but the building’s four retail spaces remain unrented. Even the large Starbucks across the street, at Dunbar and 18th Avenue, moved out, and its space remains empty.
“There’s just not a lot of flow through that section of Dunbar,” Mr. Gust says.
West side neighbourhoods such as Dunbar and Kerrisdale are feeling the effects of the massive housing transformation around them, says David Wachsmuth, an urban geographer who arrived in Vancouver a month ago. As houses are purchased to only stand empty, the spin-off problems are slowly making their way through communities. Empty houses are bad for neighbours, and they’re especially bad for business. Without foot traffic, how is a mom-and-pop shop to survive?
“It’s perverse for a big city like Vancouver to be sapping its own strength by allowing houses to be vacant,” he says.
Mr. Wachsmuth has worked with affordable housing groups in Toronto, and most recently he completed his PhD at New York University, where he studied cities such as Detroit, Baltimore and Philadelphia.
But those American cities are suffering from abandonment due to a depressed economy. In Vancouver, the vacancy problem is due to a major real estate boom, which has its own set of problems.
“Every house that’s vacant is one less customer, so there is no doubt that there’s a connection there,” says Mr. Wachsmuth, who is a post-doctoral researcher on issues such as house vacancy at the University of British Columbia. “Cities are vital and economically healthy because of density. When a lot of people are on the streets, and they interact with each other, buy things, sell things – that density is the strength. The more vacant housing you have, the more you are stopping that strength. A mom-and-pop shop fundamentally relies on having a customer base in the immediate area.”
Vancouver’s empty-house syndrome is caused by speculation, or treating houses as commodities, without regard for community livability.
“Speculation fuels vacancy,” he says. “Investment pulls housing off the market, and then the demand problem becomes worse. And that can be corrosive.”
The numbers of vacant houses are not yet known. But the anecdotal evidence is clear to see. Anybody who lives on Vancouver’s west side will know of a vacant house in their neighbourhood.
James Macdonald, an urban planner who works around the world, helped start theBeautiful Empty Homes blog to document the vacant Vancouver houses. The city’s vacancy rate is low – and yet perfectly livable houses are boarded up and empty. After a period of time, as the house falls derelict, it is ultimately demolished to make way for a bigger house, which often stands empty as well.
“On my street, there are houses built in the last 10 years, and they are definitely empty. A lot of them get sold every year or two. It’s an asset class, and people are moving money in and out,” says Mr. Macdonald, who rents a house in Dunbar. “Absentee landowners pay property tax, but that’s a fraction of the tax base and also all the community and business opportunities – all the things that matter for the economic vitality of the city.”
Mr. Gust puts it this way: “People who live here are going to restaurants and hockey games and everything else – they are contributing. But a lot of wealthy people are treating us as a resort town. Big money wants to go where it wants to, and Vancouver is on the list. And it’s a shame for people who live here. I think 10 years from now, we will regret it if we don’t do something.”
It’s not just empty houses that are bad for small business – the big new houses that replace them are bad, too. When a house gets torn down on the city’s west side, the house that replaces it is much larger. On average, it is 77 per cent larger, according to data provided by Landcor Data Corp. In Kerrisdale, the average new house built is 85 per cent bigger. Oftentimes, that huge house will sit empty, or only occasionally used.
And if it is used, even part of the year, the big house phenomenon alters the demographic that supports small business. Studies have shown there is a correlation between people who buy big houses and their tendency to travel by car to shopping malls and big box retailers, says Mr. Wachsmuth.
“If you look at the trend toward tearing down houses and making them bigger, that’s a trend that moves in the opposite direction of walkability of neighbourhoods,” he says. “Small retailers generally rely on foot traffic. In neighbourhoods where the houses are getting bigger, people do more driving. There is a strong correlation between people who have more money and people who drive more.”
As well, sparsification – his word for the opposite of densification – occurs when multifamily housing, such as a house with a basement suite, is converted to single-family housing. That trend also means less foot traffic.
“There are a whole host of factors that correlate with empty houses and demolitions.”
When the demographic no longer values the mom-and-pop shop, the big chain retailer moves in. Kerrisdale is seeing that trend get under way. Mr. Gust says rents have become unaffordable as a result – as high as a whopping $60 a square foot, including tax. That kind of rent makes it difficult for the mom-and-pop business to survive.
What can be done to help save small businesses, keep neighbourhoods livable, walkable and thriving? That is a matter for the city – and it’s not difficult, Mr. Wachsmuth says. They just need to address the problem, like so many other cities have.
The city could easily adopt a “use it or lose it” bylaw to deter homeowners from leaving their houses abandoned for years on end.
“The big, low-hanging fruit is a vacancy fee. Other cities have done this successfully and it’s not a crazy idea,” he says.
It’s standard now for cities with empty house issues to charge an escalating annual registration fee for vacant properties, Mr. Wachsmuth says.
So far, during this election time, only the Green Party and COPE have made a vacant home fee part of their campaign platforms. Neither the Non-Partisan Association nor Vision Vancouver has announced a plan to combat the problem.
“Developers are always very powerful in city politics,” he says. “For politicians to push back against them, they need to know there is support from the community.”
There are many other deterrents, he adds. San Diego imposes fines every 90 days for vacant properties that don’t have a rehabilitation plan registered with the city. Portland conducts quarterly inspections at the property owner’s expense. Winnipeg homeowners must keep a vacant property clean and in good shape, and if they apply for a vacancy permit, they pay a higher fee each time they re-apply. Los Angeles keeps an interactive database of vacant homes.
Vancouver could implement any of these ideas to offset a problem that will continue to grow and impact both community and small business.
“It doesn’t have to be hard to deal with,” Mr. Wachsmuth says. “If you switch things around so that keeping your building vacant takes some work, and some expense, you are making it a little less likely that absentee homeowners will want to do that. And in the meantime, the city generates revenue. It’s a win-win.”
Until the city tracks vacancies this poo poo will continue.
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Oct 7, 2014 00:24
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- Lexicon
- Jul 29, 2003
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I had a beer with Stephen Harper once and now I like him.
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I'm sure it could be deduced fairly easily from water/hydro usage data.
To be clear, the dominant force behind Vancouver's [un]affordability is loose credit and idiot Canadian speculators. But anyone who claims there's not an exogenous money component (at the top end, which drives every other tier downmarket) is a willful idiot.
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Oct 7, 2014 00:32
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- Bip Roberts
- Mar 29, 2005
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I don't think anyone in this thread is going to beat the time in the Australia thread when alternative living came up and one guy admitted he shits in a hole in the ground to be more environmental.
That was Tuyop and he's Canadian.
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Oct 7, 2014 00:35
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- HookShot
- Dec 26, 2005
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That was Tuyop and he's Canadian.
Pretty sure tuyop just plans on doing it at some point in the future.
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Oct 7, 2014 02:35
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- Lexicon
- Jul 29, 2003
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I had a beer with Stephen Harper once and now I like him.
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Yeah the evil Chinese buying out BC is just a handy deflection from how it's a homegrown problem.
Basically the government decided that a real estate bubble and easy credit would be good for the long term economy.
Yeah the evil Chinese buying out BC is just a handy deflection from how it's a homegrown problem.
Basically the government decided that a real estate bubble and easy credit would be good for the long term economy.
You clearly didn't read what I wrote
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Oct 7, 2014 03:23
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- I would blow Dane Cook
- Dec 26, 2008
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Australia is also a amusing example of even with laws to keep greedy asian foreigners from buying everything in sight, you can still get a pretty impressive credit bubble.
We have laws (theoretically) but they aren't enforced.
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Oct 7, 2014 09:57
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- namaste friends
- Sep 18, 2004
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by Smythe
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I can't tell if kings cube is satire.
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Oct 7, 2014 14:07
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- namaste friends
- Sep 18, 2004
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by Smythe
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http://mobile.bloomberg.com/news/2014-10-07/millennials-spurring-canadian-condo-boom-bet-on-rates.html
quote:
Qamar Qureshi is doubling down on Toronto’s condo boom.
Qureshi, a senior finance manager at Sun Life Financial Inc., took out amortgage this year for a C$360,000 ($323,000) one-bedroom unit plus den in downtown Toronto to live closer to work. Three years ago, he bought a C$320,000 luxury suite before construction started and will begin making payments when it’s finished next year.
“It was worth it because interest rates didn’t seem too bad -- you have to strike while the iron is hot, right?” Qureshi, 29, said from his car en route to his 12th-floor apartment overlooking Lake Ontario. “They won’t raise interest rates anytime soon. I know it. People have been saying rates will rise for years and it hasn’t happened.”
Qureshi is among the younger Canadians who, lured by record-low borrowing costs, are fueling a surge in Toronto condo sales. As the nation’s household debt nears an all-time high, these buyers may face a spike in mortgage payments and the possibility of default once rates begin to climb.
“The younger millennials don’t have any recollection of any interest rate rise or shock and what impact that would have on their day-to-day finances,” said Jason Daly, vice president of product and marketing at Waterloo, Ontario-based Manulife Bank, where residential mortgage loans make up about 80 percent of its C$23 billion in assets. Many millennials, born from 1980 to 2000, don’t realize that when rates jump their debt servicing costs will go up significantly, he said.
Condo Sales
Condo sales in Toronto, Canada’s largest city, jumped 20 percent to about 2,000 transactions in September from the year-earlier period. That compares with 6.5 percent the month before and 14 percent in July.
Developers, whose cranes crowd the Toronto skyline, have about 130 condo towers under construction. That’s the most in any North American city, according to industry researcher Emporis GmbH.
First-time homebuyers are the most active purchasers of condos, according to Benjamin Tal, deputy chief economist at Canadian Imperial Bank of Commerce in Toronto. They have been lured to the towers after mortgage restrictions in the last five years priced many first-time buyers out of the low-rise market. Today, half of those in Canada aged 25 to 35 are homeowners, according to data compiled by CIBC.
The “robust” condo sales activity “is driven largely by investors and first-time homebuyers who see condo ownership as a cheaper alternative to unaffordable low-rise units,” Tal said in a Sept. 17 note to clients.
Prices Climb
Sales of existing homes in Canada grew in August at the fastest pace in four years, led by Toronto and Vancouver. The 1.8 percent rise to 42,295 units was the seventh monthly national increase in a row, according to the Canadian Real Estate Association.
Vancouver sales rose 8 percent to 2,967 units in August and Toronto purchases climbed 2.1 percent to 8,259. The trade group boosted its 2014 sales forecast to 475,000 units from a June prediction of 463,400, citing a burst of activity fueled by a drop in mortgage rates after a “bleak” winter.
Condo owner Paul McGuire, 29, said the renewed strength in prices has made many of his friends anxious about missing the chance to buy a home.
“Some of them have been saying, ’I need to get in because prices are only going up,’” said McGuire, a treasury manager at a manufacturing company.
He owns a condo in downtown Toronto and lives in another two-story loft in the city’s west end that he bought last year. McGuire cautions friends against overbidding for units.
“You don’t want to be house poor,” he said.
Mortgage Rates
Borrowers have been attracted by mortgage rates that dropped to an average 4.8 percent for a conventional five-year term in April -- an all-time low -- and have stayed in that position since then, according toBank of Canada weekly data. That compares with 6.3 percent a decade ago and a record peak of 22 percent in 1981. Lenders are charging customers as little as 1.99 percent for some mortgage products.
Household debt rose to 163.6 percent of disposable income in the second quarter, approaching the record 164.1 percent last year, according to Statistics Canada. The rise has been fueled by a 1.4 percent rise in mortgage debt to C$1.17 trillion.
Buyers today are less concerned about a possible housing bust since the Bank of Canada toned down its statements about possible issues, according to Toronto-based Douglas Porter, chief economist at Bank of Montreal.
Fewer Warnings
“Some of this year’s surprising strength and resiliency in housing is due to the fact that we are hearing much fewer warnings out of Ottawa this year,” Porter said by e-mail.
Finance Minister Joe Oliver told reporters on Oct. 1 he didn’t see “a housing bubble, neither does the governor of the Bank of Canada,” referring to Stephen Poloz. Poloz has said the housing market is Canada’s main domestic risk.
Former Governor Mark Carney and the late Jim Flaherty, by contrast, spent a good part of their tenure issuing warnings about rising household debt. Manulife Financial Corp.’s Canadian bank in 2013 withdrew a promotional 2.89 percent five-year fixed rate under pressure from Flaherty, who said he didn’t want a “race to the bottom” onmortgage rates.
The Bank of Canada’s overnight interest rate is forecast to rise to 1.5 percent by the end of next year from 1 percent now, where it has stood for four years, according to a Bloomberg survey of economists.
The 26 percent of Canadian mortgage holders with adjustable rates will be impacted immediately by an increase in interest rates. The 66 percent with fixed rates may feel the pinch when they refinance.
Hefty Burden
When interest rates rise, “even though it’s going to be a gradual pace, it’s still going to be a hefty burden,” said Mazen Issa, senior Canada macro strategist at TD Securities in Toronto.
Debt payments would eat up 52 percent of income for people holding mortgages insured by the government if loan rates rise by 2 percentage points. That compares with 45 percent in the first quarter, according to calculations by DBRS Ltd.
The job market may not rescue younger Canadians having trouble paying their mortgages. Statistics Canada’s latest labor market report showed a surprise loss of 11,000 jobs in August, led by a record 111,800 in employees shed at private companies. The Bank of Canada in July said that the slack labor market has been tougher on young workers, leading to a bigger drop in their labor force participation rate.
Average home prices were about five times greater than incomes in the second quarter, a record high and up from about three times income a decade ago, according to the Bank of Canada.
Monthly Payments
If Qureshi’s mortgage payment increased by about 30 percent a month, he may not be able to afford his recently purchased 800-square-foot (74-square-meter) unit in Toronto’s City Place complex. Qureshi, who tracks his expenses in an Excel spreadsheet, now pays C$2,100 monthly and said he can afford up to C$2,800. That’s not taking into account the payments he’ll need to start making on his second unit next year.
Qureshi isn’t shaken about the possibility of higher rates.
“I’ve always been a positive person,” he said. “If I can’t afford paying off the mortgage then hopefully my income will go up.”
lol
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Oct 7, 2014 14:16
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- Baronjutter
- Dec 31, 2007
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"Tiny Trains"
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So a condo in my neighbourhood finally sold it's last unit after 5 years on the market.
The first numbers after the price are bed/bathroom then square feet.
$265,500 $260,000 1 1 2011 483 483 2014/08/08 33 2014/09/10
$329,900 $328,000 2 2 2011 702 702 2014/01/02 15 2014/01/17
$359,900 $350,000 2 2 2011 702 702 2012/10/25 239 2013/06/21
$299,900 $268,061 1 1 2011 483 483 2012/10/25 232 2013/06/14
$369,900 $327,947 2 2 2011 702 702 2012/10/25 193 2013/05/06
$479,900 $408,959 2 2 2011 856 856 2012/10/25 126 2013/02/28
$459,900 $422,109 2 2 2011 855 855 2012/10/25 13 2012/11/07
$399,900 $373,654 2 2 2011 710 710 2012/05/29 42 2012/07/10
$379,900 $346,958 2 2 2011 710 710 2012/05/29 38 2012/07/06
BUILDING EQUITY
I can't believe anyone paid these prices. The building is an ugly and cheap as gently caress looking hardiplank box with a massive blank wall.
http://goo.gl/maps/4Irnf
Look at this nasty piece of wood framed poo poo. When it was first built the cost per sqft they were selling was actually higher than a luxury concrete building downtown built around the same time. It's on a fairly busy road too. Also the developer promised to paint a mural on the huge blank wall facing the heritage property but never did.
Baronjutter fucked around with this message at 17:38 on Oct 7, 2014
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Oct 7, 2014 17:35
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- Lexicon
- Jul 29, 2003
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I had a beer with Stephen Harper once and now I like him.
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Is that listing price / selling price? And these are all new units?
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Oct 7, 2014 17:39
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- Lexicon
- Jul 29, 2003
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I had a beer with Stephen Harper once and now I like him.
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That is indeed a horrible building. I bet when the guy on the top floor farts you can hear it two floors below.
Those prices are insane though. That's the sort of money I'd expect to be paying for – as you say – the luxury buildings right at the harbour.
Goddamn Victoria. It's a nice place, but it's got its head so far up its own rear end sometimes.
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Oct 7, 2014 19:09
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- No Gravitas
- Jun 12, 2013
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by FactsAreUseless
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This is within a walking distance of a kimchi factory.
I'd like to live there.
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Oct 8, 2014 04:40
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- namaste friends
- Sep 18, 2004
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by Smythe
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http://www.huffingtonpost.ca/2014/10/07/cmhc-mortgage-insurance-canada_n_5945846.html
quote:
When business professor Ian Lee asked a taxpayer-funded, multibillion-dollar insurance scheme for information about the risks in its portfolio, his request was denied. The information was deemed “commercially sensitive,” he recalls being told.
But it wasn’t, Lee insists. The Canada Mortgage and Housing Corp. is a government-run institution, not a commercial competitor. He was not asking for names or personal information, but for aggregated data about the borrowers most likely to default on their mortgage.
“They used this as an excuse to cloak what they were doing,” he said. But Canadians deserve to know more, Lee believes, because every taxpayer has a stake in the high-risk mortgage game.
The Canada Mortgage and Housing Corporation’s insurance portfolio is currently worth $551 billion — equivalent to 30 per cent of Canada’s gross domestic product — and taxpayers ultimately bear the brunt of responsibility for covering any defaults.
As talk about a potential housing bubble and rising debt loads looms over the Canadian economy, there are growing calls for change at the CMHC — ranging from providing more transparency with its data on the Canadian housing market to reining in its mortgage insurance business, or even getting out of mortgage insurance altogether.
Federal laws require mortgage insurance for anyone who cannot scrape together 20 per cent of a house’s value for a down payment. That tacks another one to three per cent onto the cost of a mortgage. Using August’s national average selling price of $398,618, that amounts to an extra $12,556 for an owner with just five per cent down.
CMHC’s mortgage insurance business was founded in 1954 to provide cover for banks, which were reluctant to lend to riskier borrowers. Its existence means there is zero risk for banks on the insured mortgages they approve. By encouraging banks to lend more, it has helped millions of Canadians gain access to home ownership.
But as a result, CMHC has been accused of fuelling an overheated housing market with taxpayer money.
Some are concerned that the government’s explicit stake in the mortgage game could cause a real estate crash as bad as — or even worse than — the one the United States went through in 2008-2009, because taxpayers would be on the hook to pay for every loan that goes bad. In the U.S., most mortgage insurance is provided by private companies.
It’s not that anyone is accusing the government of wrongdoing – Canada’s safe-lending practices during the recession earned it international praise as a bastion of safety against the worst effects of the U.S. housing crisis.
Even so, the CMHC’s own policies before the crisis were too lax for many industry observers, including then-Bank of Canada governor David Dodge.
In 2006, for instance, CMHC agreed to back mortgages from homeowners with no down payment at all. That level has since been raised to five per cent, and the government has moved four times since the recession to tighten requirements.
The agency’s role has expanded from its initial 1946 mandate — to help foster home ownership during a post-war home shortage. It is now involved in everything from social housing projects to a green homes initiative.
Many feel the scope of the Crown corporation has become too large.
The International Monetary Fund took the unusual step last year to advise Canada to scale back its mortgage insurance business.
In one of his final speeches as finance minister, Jim Flaherty said “regrettably, CMHC became something rather more grand, I think, than it was intended to be.”
As of the end of June, about 45 per cent of all Canadian residential mortgages were covered by CMHC insurance. About one-third of all residential mortgages are now securitized (packaged and resold by banks to investors as bonds), up from 10 per cent in the early 2000s.
The government provides guarantees of principal and interest payments to investors in mortgage-backed securities, making them a safe and attractive investment, but also exposing the government to the very products behind the U.S. housing crash.
Ottawa also backs 90 per cent of another nearly $200 billion covered by two private insurers, Genworth Canada and Canada Guaranty. That means taxpayers are ultimately on the hook for more than half of the $1.1 trillion in outstanding mortgages.
There isn’t too much competition among the insurers. CMHC insures about 70 per cent of the market. All three raised their premiums at the same time. Canadians with less than five per cent equity in their home now pay 3.15 per cent of the value of their mortgage in insurance premiums.
Some vocal industry watchers, such as Carleton University professor Lee and the C.D. Howe Institute’s Finn Poschmann, want the CMHC’s insurance business to be privatized to protect taxpayers and foster more competitive pricing and products.
The business has been profitable so far and delinquency rates are very low, less than 0.5 per cent. That’s not the issue. The question is why the government is in the mortgage insurance business in the first place, when it doesn’t own life or auto insurance companies, Lee said.
“The government of Canada shouldn’t own the hockey teams that it’s refereeing,” he said.
Rob McLister, editor of CanadianMortgageTrends.com, points out that privatization would also mean more people would be rejected for mortgages. The CMHC was founded to help people who would normally be rejected, such as those who live in rural and smaller markets that may not be served by private insurers.
If the CMHC isn’t there to help those people, the private sector certainly isn’t going to, he said, since it has less incentive to help risky low-income borrowers buy a home. In addition, investors in securitized mortgages feel safer having the government than a private company as a partner in case of default.
Even the CMHC’s critics see privatization as an extreme scenario that would require years of deliberation.
But if privatization isn’t going to happen any time soon, should the corporation make reforms to protect taxpayers in the event of a crash? And should taxpayers have access to information about what it is they’re funding?
The CMHC’s new president and CEO, Evan Siddall, seems to think so. In the 10 months since he was appointed, the former Bank of Montreal and Goldman Sachs banker has worked toward changes.
Under his direction, CMHC has raised insurance premiums, stopped insuring second houses, undertaken a study of how many condos are investor-owned and stopped insuring new condo construction.
It may not sound revolutionary to the average Canadian, but Siddall said in a recent speech that the institution is “looking into risk-sharing with lenders to further confront moral hazard.”
The CMHC declined a request for an interview with Siddall but a spokesperson confirmed in an email that it is “re-examining our role in the Canadian housing and financial markets” and exploring ways to “further strengthen Canada's housing finance framework.”
Risk-sharing with the banks would mean lenders would pay a certain amount out of pocket before the insurer pays out the balance when a homeowner defaults. It’s a solution that’s being floated by top economists.
Some believe part of the Canadian market’s heat comes from lenient lending processes that might be a little more stringent if lenders had “skin in the game,” Ian Lee said.
“We know that people’s behaviour — both individuals and corporations — changes ... when they have some of their own skin or money or resources at risk.”
Although the CMHC says it is open to considering a new way to do business, it also cautions there are no immediate plans for an overhaul. Finance Minister Joe Oliver has said the government’s decision to study changes such as passing on more risk to lenders is more of a long-term issue that does not require immediate movement.
“Any changes being considered would require consultation with the industry and careful consideration by CMHC, the Department of Finance and other federal agencies,” the agency said in a statement to HuffPost.
But the agency is moving towards transparency. Just a few months ago, it started releasing a “supplement” along with its quarterly financial statements that includes more information about its insurance portfolio, including breakdowns of the type of insured borrowers by province, credit score and loan amount. That will help Lee and others conduct the sort of trend analysis he feels is needed to help shed light on the potential risks to taxpayers in the event of a crash.
“I think we are slowly, slowly going in the right direction,” Lee said.
“Good public policy needs good information. And when you’re talking about something as technical as mortgages and real estate values, you can’t work in a vacuum, just flying around without data. You need hard data to see the trends.”
 huffington post actually writes its own articles
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Oct 8, 2014 04:59
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- namaste friends
- Sep 18, 2004
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by Smythe
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This is within a walking distance of a kimchi factory.
I'd like to live there.
Jesus that part of Burnaby used to be no man's land when I was growing up in the early 90s. A great place to get beat up by east indian gangs of shitheads.
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Oct 8, 2014 05:01
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- French Canadian
- Feb 23, 2004
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Fluffy cat sensory experience
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Jesus that part of Burnaby used to be no man's land when I was growing up in the early 90s. A great place to get beat up by east indian gangs of shitheads.
East Indian isn't a thing unless you're an explorer, dude. But I can sure tell you don't like them!
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Oct 8, 2014 15:49
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- Adbot
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ADBOT LOVES YOU
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May 16, 2024 10:46
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- namaste friends
- Sep 18, 2004
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by Smythe
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Paul Krugman reviews Martin Wolf's new book on what caused the Great Recession.
http://www.nybooks.com/articles/archives/2014/oct/23/why-werent-alarm-bells-ringing/?insrc=hpma
quote:
Minsky was not, of course, the first to make this observation; during the Great Depression the great American economist Irving Fisher, in a paper that reads remarkably well to this day, argued that the economy was suffering from “debt deflation,” in which borrowers of all kinds were trying to pay down their debts at the same time, which led to plunging prices of assets and a severe economic slump, which made their debts even less supportable and led to further pullbacks.
What Minsky added, however, was the notion that deflation as a result of excessive debt is fated to happen every once in a while, that periodic financial crises are a more or less unavoidable feature of capitalism. According to his “financial instability hypothesis,” eras of economic stability carry within themselves the seeds of their own down- fall. If there hasn’t been a financial crisis for many years, both borrowers and lenders will become complacent, underestimating the risks of high levels of debt. Leverage will rise, year after year. Inevitably, however, there will come a point when something goes wrong—a financial bubble bursts, a major financial institution fails, whatever—and people will start worrying about debt again. This is the “Minsky moment” (a term coined by Pimco’s McCulley), and it is followed by a nasty case of debt deflation that is very hard for policymakers to fight.
Mapping this story onto the past few decades of US economic history is easy and persuasive. From the mid-1980s to 2007 the US economy did indeed experience an era of relative economic calm, and this in turn induced a very bad case of complacency, not least among policymakers. In 2004 Ben Bernanke gave an influential speech lauding the economy’s “great moderation,” which he argued was likely to be a lasting phenomenon, in part because it reflected the excellence of modern macroeconomic policy. “This now seems quaint,” remarks Wolf; I would have used a stronger word.
What we now know, and should have been obvious even at the time, was that the surface stability of the US economy rested on an unsustainable rise in debt. The graph below, which reproduces one of Wolf’s charts, tells the tale: private-sector debt grew and grew, making the economy ever more vulnerable to a Minsky moment. And the moment came.
n retrospect, the complacency of both policymakers and investors in the face of the trend visible in this chart is remarkable. Why weren’t alarm bells ringing?
One answer was a fallacy of misplaced concreteness: the economics establishment, to use Wolf’s term, identified financial crisis with old-fashioned bank runs by depositors—and such bank runs are a thing of the past thanks to deposit insurance. Yet by 2008 depository institutions were no longer the dominant form of banking. Instead, finance increasingly relied on “shadow banking” (another Paul McCulley coinage): institutions like money market funds and investment banks that are reliant on overnight loans had come to make up more than half the US banking system. And these institutions were both unsecured and unregulated, making them highly vulnerable to panic.
Another answer was vastly excessive faith in the wisdom of the financial industry. Major policymakers convinced themselves and the rest of the world that “financial innovation” was making the system more stable as well as more efficient. Far from opposing or seeking to limit the rapid growth of finance, they sought to promote it; the most important reason instability like that of the 1930s returned to markets, says Wolf, “was simply financial liberalization.”
Finally, policymakers convinced themselves that they could easily contain any major economic fallout from financial disruption, as Milton Friedman claimed the Fed could have done in the 1930s. Indeed, over the course of 2007–2008 official assurances that troubles in the mortgage market had been “contained” were made so frequently that they became a joke. As it turned out, containing the effects of financial crisis is very hard indeed.
It's a good thing there's no bubble in canada.
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Oct 8, 2014 16:57
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Oct 6, 2014 20:44
