In Metro Vancouver ~25,000 housing units are currently built each year.
CMHC claims the figure needs to jump up to ~100,000 per year… more or less overnight.
And then stay at that level until at least 2030 for the word ‘affordability’ to enter the home (condo) buying conversation (for the median household).
CMHC spelled out these ambitious goals in a recent report HERE.
Said report, sadly, contains exactly zero actionable steps towards achieving this goal.
What is needed?
- Firm direction for, if not a takeover of, municipal government planning departments.
- Financing rules for resale developers that match those set out this year for rental housing developers.
- Assurances for first time homebuyers, specifically the return of 30, 35, and yes even 40 year amortizations.
- Modification to the stress test, or at the very least the +2% component.
Something needs to be done to return a degree of certainty to the process for developers & home buyers alike. You cannot have one without the other, and currently neither has any level of certainty. (yo BOC – please chat with OSFI)
Numbers
Let’s talk more about this proposed magical output/production increase of 400% from 25,000 to 100,000…
Could you increase your output by 400%… starting today?
No, not likely.
Not when your industry is already facing severe supply shortages of both materials and labour.
When you can’t hit 100% of your capacity how do you jump by 400%?
I’ll tell you how, either over a (very) long period of time or with massive disruption of either tech or policy.
Neither is likely to happen overnight though.
Let’s mix in the very necessary immigration numbers; 500,000 people per year which is good news re the labour shortages, but comes along with a corresponding need for the housing of said 500,000 humans… here to help build the housing… around and around we go!
Pressure is increasing everywhere.
What’s one thing you can do?
Buy land.
Because what CMHC (and I) are really saying is there’ll continue to be upward pressure on prices.
Much pressure.
But, would you want to develop that land you bought?
Probably not, as there’s perhaps more love for a criminal defence lawyer these days than for a property developer. Also… 7 years from start to finish… a long time to wait for a payday… maybe.
And the profit margins vary with the whims of the market, supply issues, labour issues, government policies, interest rates, and a host of other unpredictable pieces of the equation.
Who’ll continue to profit?
Who’ll continue to reap the largest slice of the new homebuyers wallet?
The government.
The governments collective slice of the price of a new home is 20% of the purchase price of a new unit.
Arguably closer to 25% when CMHC purchase financing is part of the equation.
In fact, the #1 reason CMHC will lift its 1M$ max cap is the loss of revenue from very well qualified buyers at 1M+ that don’t have the 20% down.
Count on that piece of policy seeing a revision, as for all the other pieces that truly need to happen…
Own Land!
Thanks
DW