Housing Bust 2017

Leveraging, renting vs owning, making an investment or buying a home?
gobsmack
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Re: Housing Bust 2017

Post by gobsmack »

AltaRed wrote: 21 Mar 2017 13:06 Canmore (at one time and perhaps still) had a municipal bylaw against more than X% of their new housing being for weekenders (mostly Calgary types).
I don't know about the by-law but they do have the PAH program. Under this program, houses are sold below market price to qualifying individuals. When it is time to sell the house, you must use the price they calculate thus ensuring that the house is sold below market price again to the next qualifying individual. The idea is to maintain a pool of houses that trade below market value so that people like fire fighters and teachers can afford to live there. From the little I've heard, my understanding is that it has been a successful program.
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Re: Housing Bust 2017

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gobsmack wrote: 21 Mar 2017 13:43 I don't know about the by-law but they do have the PAH program. Under this program, houses are sold below market price to qualifying individuals. When it is time to sell the house, you must use the price they calculate thus ensuring that the house is sold below market price again to the next qualifying individual. The idea is to maintain a pool of houses that trade below market value so that people like fire fighters and teachers can afford to live there. From the little I've heard, my understanding is that it has been a successful program.
There is (was?) a program in Calgary for Affordable Housing that I was associated with some years back which did a similar thing but it provided upfront money to qualifying individuals and that money was paid back in some fashion at a later time.
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AltaRed
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Re: Housing Bust 2017

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adrian2 wrote: 21 Mar 2017 13:20
AltaRed wrote: 21 Mar 2017 13:06 I prefer to see this as trying to focus housing for shelter purposes, not for speculation, flipping, safe haven for foreigners, etc. We don't need the greedy in the housing market causing pain for those needing shelter. So I generally support programs to punish these people.
What would be the rationale of punishing early retirees living frugally vs. those past age 65 (or whatever the threshold for being a "senior"?
The devil is in the details, so regulations could (should?) have accommodations for key situations, though quite frankly, in your example, I have little sympathy for early retirees living frugally in a $1 million house (as an example). What is the sense in that? Get out, live in downsized housing and have more money to spend on day to day living. Spouse and I definitely plan to downsize when we tire of the cost and effort to maintain what we currently have.
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Re: Housing Bust 2017

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AltaRed wrote: 21 Mar 2017 13:55I have little sympathy for early retirees living frugally in a $1 million house
Why would someone who retired at a more "acceptable" age be more deserving of sympathy? Just because they're older, and have "earned" it by reaching an arbitrary age? How is that not age discrimination?
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Re: Housing Bust 2017

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kombat wrote: 21 Mar 2017 14:28
AltaRed wrote: 21 Mar 2017 13:55I have little sympathy for early retirees living frugally in a $1 million house
Why would someone who retired at a more "acceptable" age be more deserving of sympathy? Just because they're older, and have "earned" it by reaching an arbitrary age? How is that not age discrimination?
To me, there is little sympathy at any age of someone living in a $1million home and having to live frugally. I was mostly just using Adrian's age point as an example of when perhaps no one can work to earn substantive income any more. Seniors are way too coddled to begin with in a variety of ways (and I am one of them). I have a choice. If I don't like property tax surtaxes, I can downsize.
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Re: Housing Bust 2017

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AltaRed wrote: 21 Mar 2017 14:57
kombat wrote: 21 Mar 2017 14:28
AltaRed wrote: 21 Mar 2017 13:55I have little sympathy for early retirees living frugally in a $1 million house
Why would someone who retired at a more "acceptable" age be more deserving of sympathy? Just because they're older, and have "earned" it by reaching an arbitrary age? How is that not age discrimination?
To me, there is little sympathy at any age of someone living in a $1million home and having to live frugally. I was mostly just using Adrian's age point as an example of when perhaps no one can work to earn substantive income any more. Seniors are way too coddled to begin with in a variety of ways (and I am one of them). I have a choice. If I don't like property tax surtaxes, I can downsize.
I agree with kombat. The GTA housing market is now at such a level that prices have quintupled since 2000 or so. What used to be a starter home then is a million dollar now, what used to be a nice one is now a million and a half, what used to be a "nice to upper" home is 2 millions or more.

And today's factor of five may soon become higher (it was around 3 just three years ago).

Why would a not-yet-senior retiree be punished for living in his home he bought at the turn of the millennium?
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Re: Housing Bust 2017

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The early retiree has to be living on something, which means they are going to have taxable income which would offset the property surtax. Haven't people on this forum recommended that early retirees draw down their RRSPs before getting CPP? :wink:
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Re: Housing Bust 2017

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I agree with patriot. What difference does it make? Retiree, early or otherwise?

The lucky few million people in Vancouver or Toronto that suddenly have million dollar homes should be cashing them in and downsizing IF they cannot affort property surtaxes. It is perverse to be whining about good fortune.

Not one person I know in Vancouver that has been lucky enough to be a homeowner through the obscene increase in prices is complaining.

Added: My complaint is about affordability. Housing should be priced for shelter only. Maybe heavy duty controls like in some parts of Europe (I think) would be in order.
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Re: Housing Bust 2017

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patriot1 wrote: 21 Mar 2017 17:04 The early retiree has to be living on something, which means they are going to have taxable income which would offset the property surtax. Haven't people on this forum recommended that early retirees draw down their RRSPs before getting CPP? :wink:
Believe it or not, there would be more than a few early retirees who will have an annual tax bill of (much) less than $18k, just ask around the forum members.

Once again, what's the rationale of a heavy punishment for an early retiree vs. a senior? If for the latter it's good enough they have paid enough into CPP along their career, how can the same criterion not be equally applicable for a late 50's / early 60's person?
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Re: Housing Bust 2017

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Adrian, then I'd suggest you recommend to the powers to be to whackamole everyone regardless of age. Someone needs to do something to arrest the stupidity of what is happening.
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Re: Housing Bust 2017

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I would be OK with removing government incentives for home ownership and borrowing, of which there are many.... but controls? Really? Do we need nanny state to hold our hand for everything? Is that because the government always gets it right?

In reality ups and downs are going to happen; people will get too greedy and then they will get too fearful and nothing will stop it; nor should we try. People should be permitted to make their own decisions.
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Re: Housing Bust 2017

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kcowan wrote: 21 Mar 2017 12:57 How does this solve the rampant problem of foreign dad buying the property and installing wife and grandma with the kids collecting welfare? This has been going on for 30 years!
Parachute families that evade taxes *are* the primary target of the proposed property surtax. The tax would hopefully discourage them from buying. That would be the ideal outcome: less demand in the market, more homes available for Canadians to live in.

The surtax may end up being an ineffective deterrent. In that case, at least these families would be forced to pay a tax that is hard to evade.

Either outcome is better than the status-quo.
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Re: Housing Bust 2017

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adrian2 wrote: 21 Mar 2017 13:20 What would be the rationale of punishing early retirees living frugally vs. those past age 65 (or whatever the threshold for being a "senior"?
This is a unicorn scenario:

- early retiree
- frugal lifestyle
- expensive house is subject to surtax
- income tax is too low to offset the surtax

Surely it's possible to tweak the rules to exempt a case like this. For example, anyone who contributed to CPP for 15+ years is exempt regardless of age.
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Re: Housing Bust 2017

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Mordko wrote: 21 Mar 2017 19:32 I would be OK with removing government incentives for home ownership and borrowing, of which there are many.... but controls? Really? Do we need nanny state to hold our hand for everything? Is that because the government always gets it right?

In reality ups and downs are going to happen; people will get too greedy and then they will get too fearful and nothing will stop it; nor should we try. People should be permitted to make their own decisions.
If one is truly a believer in housing being for shelter, and thus affordability, then whatever it takes (in my mind) to make that happen. Take the incentive/ability for greed out of the equation.
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Re: Housing Bust 2017

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ig17 wrote: 21 Mar 2017 19:37
kcowan wrote: 21 Mar 2017 12:57How does this solve the rampant problem of foreign dad buying the property and installing wife and grandma with the kids collecting welfare? This has been going on for 30 years!
Parachute families that evade taxes *are* the primary target of the proposed property surtax. The tax would hopefully discourage them from buying. That would be the ideal outcome: less demand in the market, more homes available for Canadians to live in.

The surtax may end up being an ineffective deterrent. In that case, at least these families would be forced to pay a tax that is hard to evade.

Either outcome is better than the status-quo.
Agreed and the situation I described could have been fixed by including the value of property in a means test. It is another idea that is fraught with problems but the only way to avoid abuse.
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Re: Housing Bust 2017

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What about this scenario?

Elderly couple, bought their original home for a reasonable amount as they were blue collar workers. House happens to be in a desirable area in Vancouver. Now is worth multi-millions, but is probably their only asset. If they sell, they need to move away as everything around them is priced similarly. Being blue collar, their retirement supports are minimal.

Should they be forced to sell and move provinces? Is it their fault that they won the lottery (it certainly wasn't planning that made them rich)? By any means calculation, they are 1%ers probably but only have one asset which they struggle to maintain because of the taxes.

There are many elderly retirees in this very situation in Vancouver. Family members are probably circling, waiting to cash in...
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Re: Housing Bust 2017

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Just a Guy wrote: 22 Mar 2017 09:24 What about this scenario?

Elderly couple, bought their original home for a reasonable amount as they were blue collar workers. House happens to be in a desirable area in Vancouver. Now is worth multi-millions, but is probably their only asset. If they sell, they need to move away as everything around them is priced similarly. Being blue collar, their retirement supports are minimal.

Should they be forced to sell and move provinces? Is it their fault that they won the lottery (it certainly wasn't planning that made them rich)? By any means calculation, they are 1%ers probably but only have one asset which they struggle to maintain because of the taxes.

There are many elderly retirees in this very situation in Vancouver. Family members are probably circling, waiting to cash in...
This couple would be exempt from the surtax based on their age and the history of their CPP contributions.

http://www.ryerson.ca/content/dam/cityb ... h20171.pdf
The basic idea is to have a progressive property surtax that can be offset by income taxes paid. It would be levied annually on properties above a certain threshold in value (say $800,000), and only apply to the value of the property above that threshold. Seniors who had paid into the Canada Pension Plan at a high rate for 5-10 years would be exempt from the tax. The rate could start at 1 per cent for the first $1 million above the threshold (to $1.8 million, say) and rise to 2 or 3 per cent thereafter. So a house worth $2 million might have an annual surtax of $14,000.
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Re: Housing Bust 2017

Post by Peculiar_Investor »

I've done a quick read of the linked document that describes the proposal and I'm sure the devil is in the details, but there is also a generational factor that I don't believe is addressed in the surtax proposal. Many senior couples are of the generation where only one worked and paid into CPP, while the other was a homemaker who likely has little or no CPP contribution history.

What happens in the case where spouse drawing CPP passes away but the other spouse wants to remain in the house. From my read of the proposal, that case isn't considered and on the face of the proposal since there is no long history of CPP contributions they'd suddenly find themselves subject to a surtax. My parents fit that situation and would be hard hit by this proposal.

A second concern, why only exempt seniors who have a CPP history, why not anyone that qualifies on that basis? Don't seniors get enough special tax breaks and special pricing discounts?
Just a Guy wrote: 21 Mar 2017 09:34 Funny how people who can't control themselves always call for the government to try and control them...
I concur. If people want controls in place to limit prices, then focus on the source(s) of the problem, not the downstream effects. My $.02.
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Re: Housing Bust 2017

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ig17 wrote: 21 Mar 2017 19:45
adrian2 wrote: 21 Mar 2017 13:20 What would be the rationale of punishing early retirees living frugally vs. those past age 65 (or whatever the threshold for being a "senior"?
This is a unicorn scenario:

- early retiree
- frugal lifestyle
- expensive house is subject to surtax
- income tax is too low to offset the surtax
I was planning to be such a unicorn in the next few years.
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Re: Housing Bust 2017

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ig17 wrote: 22 Mar 2017 09:45This couple would be exempt from the surtax based on their age and the history of their CPP contributions.
What about when the wife outlives the husband? JaG said "blue collar," so let's assume the wife stayed home to raise the kids while Dad punched a clock. Now she's a widow with no history of CPP payments. Does the tax apply to her, or do we add more fine print to this net?

This is getting awfully complicated. The scenario Just a Guy outlined is exactly the type of scenario that worries me. I don't think people should be forced out of their house just because other people really, really want it (which is the definition of how house prices get so stratospheric).
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Re: Housing Bust 2017

Post by patriot1 »

But they (or their estates) get a tax-free windfall when they eventually sell, something which investors in no other asset get. Would it be unfair for the government to get just a little back in some extreme cases?

Note that this and other scenarios noted above would be exempted by the BC NDP's proposal. When you are a politician, rather than an academic, you have to make compromises.

https://www.leg.bc.ca/parliamentary-bus ... ing/m209-1
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Re: Housing Bust 2017

Post by AltaRed »

Just a Guy wrote: 22 Mar 2017 09:24 What about this scenario?

Elderly couple, bought their original home for a reasonable amount as they were blue collar workers. House happens to be in a desirable area in Vancouver. Now is worth multi-millions, but is probably their only asset. If they sell, they need to move away as everything around them is priced similarly. Being blue collar, their retirement supports are minimal.

Should they be forced to sell and move provinces? Is it their fault that they won the lottery (it certainly wasn't planning that made them rich)? By any means calculation, they are 1%ers probably but only have one asset which they struggle to maintain because of the taxes.

There are many elderly retirees in this very situation in Vancouver. Family members are probably circling, waiting to cash in...
How about they downsize to something in their general area?

How about moving to a nearby suburb (no need to exageratte about moving provinces)? Lots of opportunities in the GVA to do just that (for example).

Anyone with almost 100% of their net worth tied up in a principal residence is not very diversified.
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Re: Housing Bust 2017

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First off, the house is probably worthless relative to the land, so downsizing isn't really an option. These aren't mansions, these are small bungalows and blue collar houses. The land would probably sell for more if they burnt down.

Second, have you ever had to deal with elderly people? Most are not the moving type. There is a certain comfort in things being consistent for them. It can cause mental distress to change routines, residences etc. For them.

These properties weren't bought as investments, their owners aren't investors, they were people who bought a place to live and won the real estate lottery...but the winnings came with a catch.

Many of these people are not even benefiting from their paper wealth, they aren't living like millionaires, they are still living the blue collar lifestyle. Real estate wealth isn't liquid nor easily accessed without consequences.
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Re: Housing Bust 2017

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I understand about seniors having roots as deep as an oak tree but they still have options like everyone else. Everyone makes adjustments in their lives when they need to do so. Seniors don't need any special privileges beyond any other group.

What matters just as importantly, or more so, is affordability of housing for our young families. It is they that make our economy tick and their offspring who need to be well adjusted and who will eventually be carrying the burden to support us. Whatever it takes to take greed out of the RE market will get my support.
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Re: Housing Bust 2017

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Why do young people deserve anything? At least the seniors worked for what they have but, because they had success, you now want to take it from them and give it to the young? What if they inherit, isn't that a way they'd get it?

Personally I wasn't given anything, never expected anything. Life wasn't easy for me, I've probably had more challenges than most. The difference is, instead of sitting around complaining about how unfair life was, I used my brains and found a solution. I didn't get overnight success, it was a slow and painful process but is also wasn't rocket science.

Anyone could make money the way I did, but few choose to do so. Our society punishes those who succeed and rewards those who don't try. Then we complain that everyone is lazy. It's just silly.

Why not have the young move to "middle of nowhere" Saskatchewan...houses are cheap there, it would stimulate the local economy. Maybe they could create some jobs as there would be an influx of people...

Better idea than we should uproot seniors and sell their houses at a discount because the young want to live in Vancouver...the young have their whole lives ahead of them to earn something better if they want.

(Yes, this was designed to provoke a reaction).
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