How investors get around “affordability”
Investors are sashaying through a massive loophole in the requirement for “affordable” condos in new projects: they’re buying as many as half a dozen condos then renting them out at sky‑high rates, thus putting them well beyond the reach of the people for whom they were intended.
The city has just widened the area in which “affordable” units must be included in new projects. They should also rewrite the laws about how many of these units a person can buy, or simply forbid renting them out once owned.
Ephraim 10:36 on 2021-08-13 Permalink
It’s just so much easier to TAX, than to get them to pony up spots.Let the developers pay a tax on the permit, or if they decide not to, a TAX of double the rate on the occupancy certificate. See if they want to pay it, or pass it on..
Kevin 14:22 on 2021-08-13 Permalink
New rule: if you’re going to make new edicts/laws/bylaws about affordability of whatever, you have to hand it off to a bunch of gamers who have the task of discovering how your rule is broken and will have the opposite effect of what you intend.
Kate 16:42 on 2021-08-13 Permalink
Ephraim, the thing about your plan is that it only works in retrospect, and if it’s reported and followed up. It still sees the “affordable” living spaces taken away from the intended market.
After Revenu Quebec went easy on Airbnb for so long, I doubt their will to undermine what they probably all feel is fair business game.
Joey 17:57 on 2021-08-13 Permalink
Don’t think you need gamers to spot the loophole here. Trying to “micro-intervene” in the housing market to make it more accessible/affordable doesn’t work. It makes our Projet friends feel like they’re doing something good, but the results just aren’t there. Promoting new construction and development might, though.
Ephraim 07:22 on 2021-08-14 Permalink
Kate – I’ve been saying the same thing for a LONG time. And we have seen a few “broken” buildings because of too much diversity in size within the buildings. A condo building (or even an apartment building) is a little like a microcosm, especially considering that voting is by square footage. If you put too much diversity, you end up with some owners have 4 to 5 times the sway as others and the wants of the rich making it hell on those of lesser means. So you really can’t have too much diversity in size within a building.
Taking the cash and using it to subsidize rents or build is a lot more effective than the rules that never get enforced. You build, you pay, now go away. Also, the what you get per square foot in one neighbourhood might mean more housing by simply spending the money.
The same as I have said about the city running buildings… it’s not equipped for the job and it’s expensive for them to do it. They have let buildings go derelicts and they have trouble with maintenance. Apartment REITs employ maintenance people, regularly have to report to the stock market, etc. It’s easier to subsidize and let them handle it (like a black box) than it is to build the entire subsystem to run buildings. It’s their job.
You don’t ask a welder to run a restaurant with no experience. You don’t ask a gardener to teach computer programming. You hire the best people you can to do the job that you have. And in Canada, the best people to run apartment buildings are… REITs. CAPREIT for example has quite a few buildings in town. https://www.caprent.com/apartments-for-rent/montreal-qc/
We need a lot of microapartments and we need rooming houses. Everything larger than that, we should look at either subsidy or charities like habitat for humanity to help stretch our money. But we also need more condos. It’s supply and demand… if they don’t build, rents go up. Cities need to plan for expansion.
Kate 10:57 on 2021-08-14 Permalink
Ephraim, my problem here is that there’s no linkage between a punitive tax and the creation of more new housing. You can write new laws for a new building and try to ensure that the units are sold to people who actually need them – I realize this isn’t easy – or you can put up a new building with modest pricing, see all the units go into the pockets of speculators, and then punish them with a tax (and I don’t see how framing the law for that tax will be any easier than framing a law to block this from happening in the first place).
OK. How long does it take for that tax to be collected and to percolate through the government’s coffers so it can afford to put up a second building with modest pricing, and what stops speculators from doing the same thing again? The speculators will have worked out some loopholes to avoid paying the tax or to minimize its impact, and by now will have come to regard it as the cost of doing business – and passed most of it on to their tenants anyway. You haven’t solved the problem, and you’ve created a mechanism where the government is locked into creating living spaces to sell cheaply to speculators.
Also: there isn’t unlimited space in town for new buildings.
Ephraim 14:58 on 2021-08-14 Permalink
@Kate – That the city has to plan. But the other problem is… you get more value in some parts of town than in others. Even if you are getting 10% of the condos in the Golden Square mile (let’s say 30 condos in total, so you get 3 condos), that money might pay for 6 condos or more in the village. Or 10 condos in St-Laurent, not far from the Cote-Vertu metro station. But also, the size. For single people, what we need are literally the size of a container. The minimum size in Montreal is 17 sqm. But we need to equip them with furniture for small home living.
As I said, attach the tax to the permit. Or to the occupancy certificate. It’s harder to wiggle out of a tax than it is out of supplying condo space. And double the amount if it has to be paid at the occupancy certificate. Minimize the laws, make trying to wiggle out of it more expensive.