The real estate market today is like a fable or parable about how money doesn’t make you happy.
Housing prices are soaring and almost everyone is angry about it in some way. Resentments are building that could have a lingering influence on politics, on civility between the generations and even mental health.
The national average resale house price was $502,812 for 2019 and $688,208 as of the end of May, a difference of 37 per cent. That’s close to a decade’s worth of price increases in normal times packed into a short period. It’s too much, too fast. We can’t handle it.
Anger about housing is multigenerational and multifaceted. Millennials and members of Gen Y are upset because they really want to own houses and see affordability permanently slipping away. Older generations are lashing out at mere musing about cooling housing with higher taxes of various types. There’s criticism of various levels of government, of the Bank of Canada, of real estate agents, developers and landlords.
Rising house prices have more or less been the norm since 2008 and, until recently, we were fine with this trend because it brought unheard of wealth-building opportunities to the masses. Young adults grew discouraged about declining affordability, but their desire to own was – if anything – stoked by the steady rise in prices.
The pandemic destroyed our equanimity about rising house prices. Among millennials and Gen Y, emotions about housing have gone from surprise to alarm to anger in recent months.
You see it in reactions on social media to any discussion of renting, which is what some millennials and members of Gen Z will have to do for longer than they may have expected before being able to buy a house. Some will be lifetime renters. There are certain financial advantages to renting, and ways to build wealth that stand up to comparisons with the homeowner’s rising equity.
But some young adults aren’t having it. They angrily reject renting as a second-rate solution foisted on them by older generations that scored massive wins in housing and who themselves would never have given renting even a second’s serious thought.
Earlier this month, a company called Core Development said it would spend $1-billion to buy detached single-family homes and then rent them out. Lack of rental opportunities for families is a big problem, so this announcement is significant.
But Core has been pounded since its announcement with criticism that it will profit at the expense of people in need of an affordable home to rent. “I really am shocked,” Faran Latafat, Core’s president of single-family development, told CBC.
Millennials and members of Gen Y are angry about plenty. Landlords who evict them, upgrade a property and then find new tenants who will pay more money. Politicians who they see as negligent in letting house prices rise to a point where affordability for the middle class is finished in some communities. The Bank of Canada, for cutting interest rates in the pandemic and keeping them low while housing prices streaked higher.
Boomers and older generations are angry about some of the ideas being tossed around for cooling the housing market. Removing or changing the capital gains tax exemption on a principal residence is a prime example. The Globe and Mail editorial board recently said the idea was worth looking at, as did Globe columnist Andrew Coyne almost a year ago.
I listed it among other possible measures governments could take to cool housing in a recent edition of the Carrick on Money newsletter and quickly received some livid replies. A similar response followed a column looking at the idea of using higher property taxes to break the cycle of soaring house prices.
Notice the common thread of victimization here. Young adults feel like the door is closing on owning the best investment ever and long-term owners see themselves as being unfairly asked to give up some of their rich gains.
The surge in house prices is starting to look like one of those old-school fairy tales that taught a harsh lesson. Once, there was a country that made home ownership one of its core values. Then, a great pandemic came and made people desperate to buy homes. Prices soared, but everyone seemed angry about it in one way or another. With this housing boom, we are a long way from living happily ever after.
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