Today, readers are responding to the debt problems that suburban households are facing across Canada. The Globe and Mail asked Environics Analytics to pinpoint the 100 most financially stressed neighbourhoods in the country. These areas used to be the haven of affordability for families. That’s no longer the case.
I have four comments:
(1) The Canadians profiled are very similar to Americans profiled in news articles around 2006 or 2007 prior to the U.S. housing meltdown.
2) As a person who has rented for decades, in part due to concerns about the risks of debt, I would prefer not to have to bail out over-extended fellow Canadians with my tax dollars, should housing prices collapse. I fear the joke will be on me once again.
3) There is a difficult-to-estimate price premium added to homes in Vancouver and Toronto due to the presence of foreign buyers. This price premium puts taxpaying Canadian citizens who have bought into those areas in recent years into borderline financial distress.
4) Over the past 20 years especially, there have been too many incentives to borrow and too few incentives to save. If the people profiled end up profiting handsomely on their houses due to more policy intervention (such as zero or negative interest rates), eventually there will be no financially responsible Canadians left. Everyone will borrow the max and expect a bailout.
Many of these heavily indebted home owners could turn their financial lives around by cashing out of their highly mortgaged homes to pay off their debts. Then they need to say good-bye to that distressed lifestyle by coming to a part of Canada that has affordable residential real estate, such as New Brunswick, where one can live a superior quality of life and buy a single family home in a good neighbourhood in the $200,000 range. NB needs all types of workers. We constantly hear that on any given day there are many, many jobs going unfilled, from the trades to the professions. House-poor Canadians need to stop and ask themselves what the the alternatives are, because there are almost always alternatives. Often it's about the choices we make. I am not in favour the government giving subsidies to help with such expensive house choices as these folks here have made, since that really just means using the hard earned tax dollars provided by other taxpayers. The solution to affordable housing is to go where the affordable housing is located. That means getting out of the GTA.
Decisions Canada has made for the last 75 years have come home to roost. Suburban sprawl densities are simply not as sustainable as cities with denser urban cores that grew naturally for 1000s of years until the advent of the car. It is a double whammy for these suburban areas since low density means lower tax bases (so higher individual property taxes), but also less efficient transit and more car usage ergo higher road infrastructure servicing requirements and car payments. The dream of a large suburban house for all was just that a fantasy. We all have decisions to make and there are always compromises. If you cannot afford the house don't buy it! Likewise suburban cities need to face the consequences of lower tax densities. Had we instead spent 75 years building dense satellite cities linked by rail and transit with mixed housing types, we could have avoided the low tax density as well as high sprawl/land usage issue traps... Canada and Canadians are reaping what they sow... Make better choices people!
Mandatory courses in financial literacy would help this situation over the long term.
Prolonged easy money monetary policy has distorted our worldview: we have conflated wealth with consumption. To consume ever more, we have followed the debt piper.
What kind of quality of life is that when you spend all you got just to keep a roof over your head? When I was very younger, I had a simple rule: one week of work must cover my monthly living costs. The circumstances have changed, but I've always made sure not to extend myself and to cover the necessities in as little effort as possible, in the shortest possible time. Life is simply too short to be a slave to bills.
The article indicates a number of financial pressures on the commuter lifestyle, especially in Ontario. There are two very obvious policies that could help, and neither involve moral hazard. The first is to improve GO train service, which still isn't up to a standard where many suburbanites can use it. The problem isn't just the service itself, but first mile and last mile reach in the total commute. The second would be to encourage greater industrial and office penetration into suburban areas through tax incentives. This was done with some success in the 1950s, and should be revisited, especially with the growing concern about CO2 emissions.
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