Tag Archives: housing

A quick look at the Canadian housing bubble

We aren’t alone in having an inflated housing market.  Here is what it looks like in Canada

With real home price appreciation near 20%, Canada’s home price growth has been raising eyebrows. Bank of Canada governor Stephen Poloz doesn’t see a bubble, but others aren’t so sure. Climbing alongside housing prices have been levels of household debt, which surmounted 165% of income in the second quarter of 2013. (That’s not too far from where they were in the US before it suffered its housing crisis.) And the Bank of Canada itself has even warned about risks posed by frothy condo sectors in big cities like Toronto. A few hedge funds, such as San Francisco-based Hyphen Partners, have even made high-profile bets on a Canadian housing bust. They haven’t paid off, yet.

Saskatoon House Price increase vs. Income Increases


This chart says it all.  I have seen it in a series of City of Saskatoon presentations but you can read it in this report by the City of Saskatoon.  The bottom line is the key.  Incomes are flat.  House prices are soaring.  The boom isn’t being shared by all.  There is more context in the 2012 Saskatoon Housing Business Plan (and an updated chart)


 You can compare our household income growth to other cities here (we do quite well) but the problem is that relative to our housing costs, we are not doing well at all.   Take a look at the StatsCan 


Mike Holmes: Stop building junk on reserves

From the CBC

"Let’s look at the building technology," says Holmes, whose ideal First Nations home would be about 1,100 square feet and built with wood and other materials that won’t burn or be susceptible to mould.

"I don’t care if you want a box. I don’t care if you want it off the ground. I don’t care if you want a foundation. It’s using all the products that make sense, nothing but mould-free, nothing but zero VOCs [volatile organic compounds]. This is not hard."

Holmes, who is also an adviser on a 90-unit affordable housing project for seniors in Edmonton that is a partnership involving the city and the Métis Capital Housing Corporation, has no patience for any argument that his ideas will cost too much.

Sure, mould-free drywall might cost 50 cents or $1 more per sheet than standard drywall, Holmes concedes, but will pay off in the long term, especially considering the number of homes on First Nations reserves that need renovation only a few years after being built. More than 40 per cent of the existing homes on reserves need major repairs, compared with seven per cent off reserve, according to a government-commissioned assessment of First Nations housing.

"Look at the cost of taking it down and doing it again," Holmes said. "There’s no comparison."

For Holmes, helping First Nations improve their housing stock extends far beyond choosing the right wood and drywall or hammering nails.

"The smartest thing we can do is to teach the First Nations how to do it," says Holmes. "When they do it themselves, they have pride, and they care, and that’s what I think is the missing link, not to mention just using the wrong products and building foolishly."

Column: Rent Control is Bad Policy

My column in today’s The StarPhoenix

On a cold day in February, the NDP breached the topic of rent controls in Saskatchewan, with party Leader Dwain Lingenfelter calling for "next generation" rent controls that cap increases or only come into effect when vacancy rates are extremely low.

Justice Minister Don Morgan gave what has become a pretty standard response from everyone who opposes rent controls: "We think it’s a disincentive to having developers put more property on the market."

Despite a lot of opposition to the idea, the NDP has kept talking about the idea, partly because many across Saskatchewan are overwhelmed by the rent they pay.

The Canada Mortgage and Housing Corporation points out that rent in Saskatoon increased 10 per cent annually from 2006 to 2010. This brought up the average rent for a two-bedroom apartment to $950 a month in 2011 and will slightly increase to $975 in 2012. While a lot of apartments have come on the market, CMHC forecasts a net migration of more than 5,000 people to Saskatoon in each of the next two years, which means that rents will remain high, driven by strong demand for both new houses and apartments.

Higher rents are not always a bad thing. For a long time, Saskatoon had rent that was well below the national average. Increasing rental rates gave property owners a chance to make some needed improvements to their properties.

The quality of apartments has increased dramatically since the boom started and we started to see rental increases. Those improvements did come with a price for those living in the rental units. Apartments that rented for $650 five years ago are now more than $1,000. Even CMHC points out that Saskatoon has become a much more expensive place to live, which hurts our competitiveness as a city.

Rent control is the quickest way to solve the problem, and versions of it have been used in growing cities across North America.

To promote investment in new apartments, rent control often exempts new construction. New York City exempts apartments built after 1974 from rent control. The idea is that landlords can recoup their investment long before the rent is capped. For buildings constructed after 1974, landlords can opt into the program in exchange for tax breaks.

The problem with this is that, at the point where a building needs reinvestment as well as new revenue to pay for it, it loses that option and older buildings often deteriorate quickly.

Another approach is rent stabilization. Landlords are free to set prices of empty suites at whatever rent they can get. Once an apartment is rented, future increases are capped at a set rate. The idea is that it gives some security for both tenants and landlords.

This protects renters from unrealistic and unexpected rental increases, and it benefits landlords by providing tenants an incentive to stay and be responsible. Rate equalization also serves as an incentive for improvements in many cities. Landlords in many cities can apply for rental increases above the equalized amount if they make improvements to buildings. This can cut both ways, as tenants can apply for rent reductions if their apartments are not kept up to code.

Sadly, it never works that way in the real world.

As has been documented in San Francisco and other booming American cities, landlords were holding formal interviews or demanding credit reports (something we now see in Saskatoon) before choosing tenants because there are never enough rent-controlled units to meet the demand. Those who are most likely to benefit from a rent-controlled apartment are often the last to get it. Economist Paul Krugman put it this way: "In uncontrolled housing markets, landlords don’t want grovelling. They would rather have money."

Even if you are lucky enough to get a rent-controlled apartment, you also have some landlords looking for ingenious ways to evict clients so the apartment can be rented out at a higher price.

In Saskatchewan, rent control may solve a shortterm political problem, but it doesn’t solve longer term housing and economic problems. With rental increases predicted to rise incrementally in 2012, it may not even be needed.

What is needed is a continuation of the programs that address the supply issue. Existing programs such as the capital grants for affordable rental units, tax abatements for multi-unit housing, and forgivable loans for the creation of secondary suites have paid off. The rental supplement helps meet the gap between high rents and lower income families.

Rent control may be good politics, and in the middle of an election campaign that is important. However, it remains poor economic policy. There are better alternatives for both renters and our cities.


© Copyright (c) The StarPhoenix

10 Empties U.S. Cities

Anyone home?  Anyone at all?

One of the unfortunate results of a bad housing market is an increase in vacant homes, which has grown by 43.8 percent since 2000, according to the U.S. Census Bureau. Homes can be vacant for a number of reasons, but are defined as both rental inventory that are unoccupied and “for rent,” as well as homes that are unoccupied and up for sale. As of the 2010 Census, there were approximately 15 million vacant housing units in the country, with an 11.4 percent gross vacancy rate nationwide.

Related: Detroit is on the rise again and 100 Abandoned Houses

Contextless Links

I know what you are thinking, when did the Contextless Links return?  Well, right now.  I am going to be using them again as a place to empty out my notebook every day as a way to give some life to the site. If I post them here, I can also find them again when I need them.  Still undecided if I will use Windows Live Writer or have delicious dump them here once a day. 

When social housing was paradise

An interesting look at the Chicago housing projects during the 1950-70s by Joy Connelly

The communities created by the Chicago Housing Authority were all, by current wisdom, destined to fail. The new-built estates were large and isolated – Regent Park-style low-rises punctuated with high-rise towers. They were overwhelmingly black communities, drawn from the tenements on Chicago’s South Side and migrants from the southern US. They were not mixed-income communities either. The CHA selected families – one third of them women-led — exclusively from the bottom third of the income scale.

An incubator for leadership

Yet Fuerst credits public housing for creating Chicago’s black middle class, providing an “incubator for leadership” for African Americans. Account after account describes the children of stockyard workers and unemployed widows who are now lawyers, teachers, business leaders, police officers and senior public officials.

What made Chicago Housing Authority a launching pad to success?  The tenants’ stories are filled with praise for the clean, well-managed buildings and grounds, where prizes were given for the best gardens. They spoke about housing managers who knew everyone’s name, encouraged local initiatives, and found jobs for teenagers. They spoke about the schools, churches, clubs, sports teams, and womens’ associations that were integral to the community’s strength.  And they talked about the community itself, where everyone would look out for local children, and did not hesitate to pick up the phone if they spotted trouble.

Paradise lost

Today, public housing in Chicago and elsewhere is seen as anything but paradise. What went wrong?

The answers offered by the CHA’s former residents and staff will induce squirms in Toronto’s right- and left-wing readers alike.  Here they are:

Abandoning tenant screening.

In CHA’s early days, preference was given to applicants with the lowest incomes in the worst housing conditions. But only those prepared to pay their rent, keep their homes clean, and supervise their children were accepted.

Once in the housing, the management strictly enforced standards, and so did other tenants. As one tenant recalled, “We kids cleaned those halls. And if somebody messed up our hall, we were quick to tell them, ‘Get that paper off that floor. Don’t you do that on my stairs, cause I got to clean it Saturday.’”

By the 1970s, federal rules forced CHA to give preference to the poorest of the poor, with no other screening. Today, tenants and former tenants quoted in the book say that “destructive and dangerous” tenants – anywhere from 10 – 30 per cent of tenants – need to be evicted to allow a return to healthy community life. Draconian as this move is, they argue it would be less disruptive than Chicago’s current practice of evicting all tenants to demolish entire buildings.

Helping Homeless Save Pays Off

From the Toronto Star

…an innovative money management and savings program that rewards shelter residents with $3 for every $1 they save up to a maximum personal savings of $400. The money must be used to obtain rental housing.

How it works

The Independent Living Account program, which has helped about 300 people in eight Toronto shelters since 2007, was designed by SEDI (Social and Enterprise Development Innovations), a national charitable organization dedicated to helping poor, unemployed and underemployed people become self-sufficient.

It began as a pilot project in 2005 which found that 57 per cent of participants who opened bank accounts moved out of the shelter system. About 95 per cent were still renting their own place up to 15 months later, said Barbara Gosse of SEDI.

For every $1 spent on the program, taxpayers save $2.19 in shelter and welfare costs as participants move into stable housing and employment, said Gosse who wants to expand the program to help public housing tenants.

“Although this is a small program, it is enormously successful and cost effective,” she said.

The program’s $200,000 annual cost is funded through the federal Homelessness Partnership Initiative and is used to train about 16 hostel workers a year who help participants open bank accounts and manage their money. An additional $40,000 for the matched savings is raised through private donors, such as TD Bank. The Greenes’ contribution is the first family donation.

What does it mean to be “working poor”?

From an editorial in the Guelph Mercury

Consider the case of a Guelph-area single parent of two children, working a minimum wage job. If this parents works 40 hours a week, 52 weeks a year, their annual salary (before tax) works out to be $21,320. This falls below Canada’s low-income cut-off, the income threshold below which a family will likely devote a larger share of its income to the necessities of food, shelter and clothing than the average family.

Based on their salary, this family receives $1, 777 (before tax) a month. The average rental cost for a two-bedroom apartment in Guelph is $878 per month and a nutritious food basket for a family of three in this area is around $400 a month. If the parent takes the bus to and from work then they need to tack on another $72 for a monthly public transportation pass. This leaves the family just over $400 per month for taxes, clothing, recreation, childcare and other expenses.

Regardless of how hard this single parent works, $10.25 is clearly an inadequate wage. There is no flexibility in their budget for unexpected costs and they must make daily sacrifices that have long-term effects on their overall quality of life.

Of course, this family could try to get subsidized housing, but the current wait list in Guelph is 3.5 years. They could access the local food bank, as well as neighbourhood and church food pantries, to cut down on their food budget. They could apply for recreation subsidies and buy used clothing. They might even receive child-care subsidies and the GST/HST rebate. All of these supports are meant to help people who are struggling to get by, yet they have little impact on improving their overall quality of life.

Affordable Housing Initiatives in Saskatoon

This came from City Councilor’s Pat Lorje’s email on what’s happening at City Council

Affordable Housing Initiatives- Just two years ago, Council took $5 million from the Affordable Housing Reserve, and dedicated it to jump-starting purpose-built rental housing. The idea was to pay developers, who have hardly built any rental accommodation in this city for years and years, the princely sum of $5000 per new rental unit as long as the property remains rental housing for at least 15 years. This is one way to combat the unfortunate trend we saw in 2008 of almost every apartment block being bought up by investors and converted to condominiums and then put back on the rental market (which of course led to an increase in rental rates). The goal was to get 1000 new purpose-built rental units. This program has been very successful. In two short years, over 550 units have been built, and more are planned. By next fall, we should have reached almost 85% of our goal. This is an unprecedented rental housing development achievement in all of Canada, and supplements our other Affordable Housing Initiatives. You can read more about them in the file attached to this email or you can call me and we can talk about all the things the city is doing to ensure that people have decent and affordable shelter. We still need to do more, and there is always a concern about homelessness, but I am proud that Saskatoon has recognized in a very tangible way that substandard housing affects us all in one way or another.

Councilor Lorje also attached this PDF which outlines what the City of Saskatoon is doing in the area of affordable housing (which I can’t find on the City of Saskatoon website).

Affordable Housing Information Sheet 2010

It points out that there is also a 5 year property tax abatement which is significant as well.  According to CMHC, it looks like it did increase vacancy.

image Despite that, rent went up.  Again from the CMHC

The average rent for a two-bedroom apartment will rise to $925 in the October 2010 rental market survey, a $20 increase in the average monthly rent compared to the 2009 survey.  This is considerably lower than the rent increase recorded between 2008 and 2009, when average monthly rent increased by $64.  Rent increases have slowed to remove the incentive for tenants to move to homeownership. In 2009, rents increased while resale prices have lessened, causing the difference in monthly expenditures between renting and home ownership to become smaller. Hence, property owners will reduce the pace of rent increases compared to recent years in an effort to curb this trend.  Additionally, property owners will moderate the pace of rent increases in order to restrain costly tenant turnovers in the face of higher vacancy rates across metro.

The Saskatoon average rental rate for a one-bedroom apartment was $843 per month for April 2010 — a jump of $53 per month from 2009, according to the Saskatoon StarPhoenix.

So in the end, vacancy rates went up by a little over 1% which is good.  It sounds insignificant but in city the size of Saskatoon, that is a fair amount more apartments on the market.  The not so good part is that rent kept going up in Saskatoon.  Several friends talk about $100 increases for January 1st which isn’t fun but it is what it is.  Of course the question that needs to be asked is if the 550 rental units made a difference in keeping a $100 rental increase down from $150 or $200.  I think the answer is yes.  Unfortunately, According to SHIP, Saskatchewan’s average wage growth has not kept pace with increasing rents in Saskatoon. For example, while the rent for a two-bedroom suite has increased 33% (from $346.50 to $462.50 per person, based on 2 persons per unit), wage growth within the five lowest paid industry sectors in Saskatchewan only increased 3.5 percent.

Still 550 new rental units on the market makes a difference.

McNab Park

A couple of weekends ago I took these photos of McNab Park in Saskatoon.  It was initially military housing during World War II that later morphed into low income housing after the RCAF shut down the base in Saskatoon.  What started as low income housing later turned into slum housing by the time it was shut down.

I have always had a weird fascination with military housing, probably going back to how the Canadian Forces base in Calgary stood out from it’s surroundings.  McNab Park was nothing like CFB Calgary and was left isolated and surrounded by the John G. Diefenbaker airport on one side and light industrial and warehouse space on other sides.  There was no school, no businesses serving the community, and no bus service after 6:30 p.m. at night which means that if you are living there and working, you are walking home (it’s at least a mile walk from the closest bus stop), or are paying a cab.  If you are like a lot of retail workers, you are walking home a lot of evenings.  If you need something, the closest convenience store is the overpriced shop at the airport which makes your average 7-11 look like a Wal-Mart in terms of stock.

McNab Park was just left up there to deteriorate which is too bad.  The barracks are quite nice.  The three that I have been in over the years were well built despite not being that well maintained.  I remember them being cool but most houses (including ours) built during the war needed an insulation upgrade.  A conversation this week told me that they only have one thermostat for three units which would be an annoyance but not something that made those places uninhabitable.

As they were, they provided  affordable housing for low income families in the city and now they are gone.  Sure they were remade and many were moved to Fairhaven and sold as $250,000 affordable housing units although I doubt any of their former inhabitants were able to afford them.  There are other subsidized housing units in the city, such as those provided by the Saskatoon Housing Authority but with the SHA, you have waiting lists and when you have no where else to go, McNab Park was a decent option for a large family.

I have always wondered what McNab Park would have been like with a small store, decent landscaping, and some of amenities that we take for granted in Mayfair (like two large parks, playgrounds and late night transit service).  In other words the stuff that every other neighborhood has in Saskatoon.  Even growing up in Deer Ridge in Calgary as it was being built where community infrastructure is lacking compared to what it is today, we had a pocket park and great areas to play in.

For years the discussion about McNab Park is that it was a problem to be eliminated (and replaced) rather than a community that needed to be stabilized and invested in.  Not too many communities anywhere do well in that context.  The end result is that Saskatoon lost a part of it’s history and in the end gained some moderately affordable housing units that could have been built for that price anyways.  I think Saskatoon came out behind on this deal.

$7000 per home in Detroit

Abandoned housing in Saskatoon Wow, CBS News is saying that the average home price in Detroit is only $7000.

Detroit real estate broker Ian Mason currently has 200 listings, largely foreclosures banks are desperate to get off their books. And that desperation is making for some incredible deals.

Bowers asked him how much he sold one house for.

"One dollar," he said.

It’s a house he says that just a few years ago would have sold for $75,000.

Home values across the country have taken a tumble. Nationally, the median home price is $174,000. But in Detroit, the average is only $7,000 – which may help explain why home sales are soaring.

January sales are up 37 percent over last year with 1,000 homes sold last month alone.

Those are people like young single mom Sofia Hawkins who’s found her home sweet home.

She got a home for $1,100. Can she even believe it?

"No, not really," she said. "It was a good deal."

And now she now owns a three-bedroom house for just twice what she used to pay each month in rent.

It’s hard to believe that it is that bad in Detroit and it’s gotten that bad so quickly.  How many years until houses would reach average levels in Detroit?  Ten years?  Twenty years?  Fifty years?  Will Detroit ever recover?

The upside of down


This is a great photo by Bobby Yip/Reuters of unused shipping containers piled up at a storage depot in Hong Kong.   The Chinese government is looking for places to store hundreds of thousands of unused containers expected to flood Hong Kong in the coming months due to China’s slow exports.

As long time readers of my blog know, I have a fascination with shipping containers as architectural elements and I can’t help but wonder if these hundreds of thousands of shipping containers can be better used for things other than littering up the urban landscape for the next couple of years (or more realistically, for a couple of decades).  The U.S. military has used shipping containers for housing throughout the middle east and I don’t know why they could not be adapted on a large scale in suburban areas for high and as the photo shows below, low density housing at a much more affordable price than building from scratch.


While the idea of acres and acres of shipping containers is likely to make any city planner nervous, the Habitat 67 in Montreal is an example of what could be done on large scale.   Something that could integrate the variety and diversity of private homes with the economics and density of a modern apartment building.

As in all recessions, there is an upside of down.  Hopefully we can take advantage of it.

Then again with hundreds of empty skyscapers going up all over Dubai, maybe we can all move there.