Monday Morning Quarterback: Home Ownership Sucks!

Toronto Politics | January 20, 2020


Do you remember Jennifer Keesmat?

There’s a name that, for quite some time, all Torontonians would have known.

Where is she now?  She seems to have faded away, and maybe that’s a benefit to she and her family.  After all, she did nothing but take sh!t from the City of Toronto and its residents for five years as Chief City Planner.

Although my political views might differ from Jennifer Keesmat’s, I have a tremendous amount of respect for her, for two reasons:

1) The role of “Chief City Planner” is a role that should probably be divided among an entire group of people, and she did it on her own.  It’s a role in which nobody will ever succeed, or recieve praise.

2) She ran for Mayor in 2018 against John Tory, even though she had no chance.  There’s no more tragic irony in a democratic society where a person runs, unopposed, in an election, whether it’s for President of a country, or captain of the grade nine girls’ volleyball team.  Somebody needed to run against John Tory, and Ms. Keesmat steppted up.  And before you chime in here, no, Faith Goldy didn’t count.

Our discussion on Friday about the former CEO of the CMHC, Evan Siddall, and his comments about the pitfalls of home ownership morphed into a conversation about the bigger picture: politics, planning, zoning, density, infrastructure, and then, as a by-product, how and where we live, and raise families.

Rather than moving on to a new subject today, I’d be remiss if I didn’t bring in another perspective on this subject.

Back in the summer of 2019, you might have missed this special feature that Jennifer Keesmat wrote for the Globe & Mail:

“To Create Affordable Housing, Let’s Banish The Hoary Myths Of Home Ownership”

I bookmarked this, but didn’t give it the platform it deserves.

The first half-dozen comments from Globe & Mail readers are all panning Ms. Keesmat, and I would probably disagree with much of what she’s written, but just because a perspective is different from mine doesn’t mean I’m going to suppress it.  Because, that would be like…………..oh…..I dunno……..college campuses in 2020?

(ahem)

What Ms. Keesmat wrote in her piece echoes some of the thoughts that Evan Siddall had on the topic of home ownership, except Ms. Keesmat put it far more eloquently, and backed it up with explanations.  Her ideas are also similar to what many of you TRB readers commented on Friday’s blog, so I figured today is the perfect time to share.

 


 

“To Create Affordable Housing, Let’s Banish The Hoary Myths Of Home Ownership”
Jennifer Keesmat
Special To The Globe & Mail
July 26, 2019

For years, Canadians have watched our cities climb the wrong kinds of global lists – the ones ranking the most expensive cities in the world to live in.  Our fears have only been fuelled by our daily experiences: people bounced from rental to rental because of landlords’ or investors’ bottom-line desires.  We’ve worried that even rental housing has grown out of the realm of affordable housing.

None of that is particularly new.  But last week, the Canadian Centre for Policy Alternatives provided evidence backing up those fears: in most major cities in Canada, there are no neighbourhoods where a minimum-wage worker could comfortably afford an average-priced one-bedroom apartment.

We need more housing in Canada, and we could easily have more high-quality, affordable rental homes – but the way our cities are planned strongly suggests we simply don’t want more.  We haven’t valued renting as a housing choice, and so governments have under-built rental housing in Canada through policy frameworks that both echo and reinforce our belief that housing ownership is better than rental housing.

But that is largely because of a series of pervasive, foundational myths underpinning our approach to housing.  Undoing them will be a critical first step toward fixing our housing system, and ensuring everyone has access to housing choice.

The first myth is that housing is a free-market system – that renting requires government intervention, but ownership is powered by individual efforts and bootstraps.

In actuality, our housing market is highly regulated, and the oft-overlooked reality is that the market only exists because of government regulation.  The foundation of home ownership for the majority of Canadians – access to lending – is controlled by governments.  Through tools such as interest rates to facilitate borrowing, the “stress test” for uninsured potential home buyers, and the First Time Home Buyer Incentive program, the government controls the levers of the housing market.

This myth is reinforced by criticisms of government policies that facilitate the rental market as undue interference in the market – and the connotations we’ve erected around rent control, which seeks to mitigate undue rent increases by limiting them, typically on an annual basis and by a specific percentage point, often linked to the rate of inflation.  Yet, it’s strange we never refer to the problems of “mortgage control.”

There’s another myth that infuses our policy and city-planning: that renting is transitional housing, or the poor cousin to home ownership.  That stems from the alluring but largely debunked idea that ownership is always a good way to accrue wealth. This might be true for a portion of the population that purchased a home at the right time, in the right neighbourhoods, at the right price, with favourable financing – that’s a lot of qualifiers. But an idyllic and well-timed life – no divorce, the ability to comfortably hold your house for decades, ideally since the middle of the last century, following the postwar boom when supply was abundant – is the exception. For the vast majority of Canadians, these circumstances did not, and will not, exist.

In fact, owning can have higher unrecoverable costs, such as taxes, maintenance and the cost of capital, than renting. And yet in the emotional process of purchasing a home, we often underplay those costs, and fail to undertake rigorous analysis that will verify the assumptions that underlie our thinking. Too frequently, the biggest purchase of our lifetime is undertaken on the strength of faith that wealth accumulation is likely and possible.

Finally, there’s another myth that drives people to strive for ownership, even if it creates a precarious financial situation for the household: the entirely understandable desire for stability.

But Germany offers a counterpoint.  For a variety of complex reasons, including the legacy of the Second World War, the country has one of the lowest home-ownership rates in the Western world at just more than 51 per cent in 2017.  But it also has one of the highest rates of satisfaction with housing, at 93 per cent.  That’s because of a significant part of the German experiment: Most people live in rental housing, and it has been purpose-built as rental housing: high-quality, well-designed and well-maintained housing in excellent neighbourhoods that you can rent for your lifetime, and without a huge impetus to move unless you choose to do so, including limits on unreasonable rent increases.  In the Canadian context, the lack of such purpose-built rental has allowed condos owned by investors to fill the rental-housing gap, which is fundamentally unstable.

Yes, there are good policies in Canada that offer solutions that look past these myths.  What if we saved the best sites in the best places in our cities for high-quality rental housing, and zoned them specifically for renting, as British Columbia has recently allowed?  What if we prioritized making rental a highly desirable first choice, by design, by providing more construction loan-financing for purpose-built rental, as Canada Mortgage and Housing Corp. has recently introduced?

But too often, the failures we see in our housing market are by design.  An absence of strong policy to ensure an accessible rental-housing market has felt like a policy in and of itself.  The oft-affirmed notion that home ownership is an excellent way to accrue wealth is at odds with our desire, as a society, to easily access stable, high-quality, affordable housing.  And with home ownership more and more unattainable for more and more people, policymakers and thought leaders need to stop promoting ownership to those who cannot afford it, and instead reorient our housing market toward high-quality rental homes.

We’ve made this mess through public policy. It’s only through policy that we can fix it. But first, we need to dispel the myths that have turned this mess into a tangled knot – because stories and faith alone don’t solve a crisis.

 


 

Ms. Keesmat, according to her Wikipedia page, “lives in a detached red-brick house near Yonge & Eglinton.”

Does that make her thoughts on affordable housing any less relevant?

If one’s lifestyle significantly contradicts their political convictions, can we still take their political views and favoured legislation at face value?

This is commonly referred to as “champagne socialism,” and while I’m not looking to label or fling mud, I do think hypocrisy has to be taken into consideration at least at some level.  I’m quite confident, given Evan Siddall’s previous employment in the investment banking industry, that he owns a lovely home, and perhaps several others.  So when he climbs up on his soap-box to talk down to the masses about housing, I will admit, I do discount what he says because of the absurd contradiction.

What then do we make of Ms. Keesmat’s piece above?

Well, I agree with some points, disagree with others, and yet remain intrigued by some.

Here are a few points of note:

“For years, Canadians have watched our cities climb the wrong kinds of global lists – the ones ranking the most expensive cities in the world to live in.”

This is the point she chooses for her introduction, which I think can go either way.

Some of the “most expensive cities to live in” are also some of the most popular, most famous, and home to exceptional job markets and business hubs.  If Toronto was not an expensive city in which to live, that would come with more negatives than positives.  It would likely mean that significant industries have failed, jobs have been transferred out, net migration is wildly negative as people the city in droves – and on that note, ask yourself, “What makes people flee a city?”  Nothing good, of course.

Detroit was an expensive city in which to live in the 1950’s when the automotive industry was booming, and times for residents were great, but that city has imploded, crime is rampant, and houses are essentially free in many areas.  Do we want Toronto to become Detroit?

“There’s another myth that infuses our policy and city-planning: that renting is transitional housing, or the poor cousin to home ownership.”

Bingo!

I agree with this point, as do many of the readers.

Not everybody is meant to own a home.  Whether it’s because of affordability, lifestyle, personal financial decisions, life cycle, et al, we can’t suggest that home ownership is the right vehicle for everybody.

“Rent shaming” is a new phenomenon that’s worth exploring in another post.

By and large, most renters in Toronto would prefer to own.  But there are cities across the world where people rent by choice.  Canada has become more obsessed with home ownership than most places on earth.

“In the Canadian context, the lack of such purpose-built rental has allowed condos owned by investors to fill the rental-housing gap, which is fundamentally unstable.”

Agreed, to some extent.

I agree that this is true – that condos owned by investors have filled the rental housing gap.  I also agree that it’s unsustainable.

But I don’t agree that the government is going to come to the rescue, simply because they can’t.  I also wouldn’t look back in hindsight and suggest that the government “should” have seen Toronto in 2020 coming, and that they should have started building rentals in the 1960’s.  I mean, that would have been great.  But governments aren’t forward-focused.  How can they be, when today’s policies are what motivates voters?  If elected terms for city councillors were for thirty years, then yes, I would have expected some foresight.  But alas, I’ve come to learn that politics is about self-interest and self-preservation.  Moving on…

“What if we saved the best sites in the best places in our cities for high-quality rental housing, and zoned them specifically for renting, as British Columbia has recently allowed?”

Sure!

And what if we didn’t age?  What if it never got cold outside?  What if our favourite sports team won ALL THE TIME?

This is fantasy.

And “as British Columbia has recently allowed” needs some follow-up, because I’m willing to bet the story she’s selling doesn’t match with whatever went down.

“The best places in our cities” are expensive.  Is the government going to expropriate every privately-owned site?

This point by Ms. Keesmat is so wildly fantastic that it undermines her entire story.

“What if we prioritized making rental a highly desirable first choice, by design, by providing more construction loan-financing for purpose-built rental, as Canada Mortgage and Housing Corp. has recently introduced?”

With all due respect to Ms. Keesmat, this is more fantasy and wishful thinking.  Starting a point with “what if” isn’t going to lead anywhere.

“What if………we had ice cream for dinner instead of vegetables?” asked the five-year-old child.

The bread crumbs don’t lead anywhere here, unfortunately.

From “what if” to “prioritized” to “making” and then to “desirable.”

Those dot’s don’t connect.  You can’t make something desirable in the way that she describes.

Can I make myself desirable to my wife?  Sure, maybe.  But can I make myself desirable to Megan Markle?  What would I have to do?

What would the CMHC have to do, from a construction loan financing standpoint, to make the construction of rental housing more desirable than the construction of condominium housing?  Maybe give out free loans?  Sure, but that’s just giving money to developers, which is coming from taxpayers, so you’re not really “making” anything here.  You’re just re-purposing tax dollars to rental housing, so if you want to do that, then say so.

I’m curious to hear your collective thoughts.

Maybe this is just an extension of our Friday conversation, or maybe Ms. Keesmat’s article brought some new insights into the fold.

But one thing’s for certain: the topic of affordable housing will never go away in this city, and that means by association, neither will the home-ownership debate…

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32 Comments

  1. Pingback: Monday Morning Quarterback: Home Ownership Sucks! | Real Estate News Group
  2. max

    at 8:06 am

    There is indeed a lot of hypocrisy going on in politics. In her mind, she probably knows that the less detached houses they build around her house, the more of a scarcity they become and the more equity she will have. Nobody openly admits that they will elect to sell their home and choose to rent because they think it’s the better choice because they know it’s a privilege only the ones with money can afford as a lifestyle. At the same time, I do think due to land restrictions, and its limited supply in various parts of the GTA, there really is no space to build except up. We live in a capitalist society, so there will be no utopia where everyone has a home. Someone will always have a bigger, better home that someone else will want and cry to the government about.

    1. Appraiser

      at 9:04 am

      Can someone please remind me when this mythical hate-on for renting started?

      Seems to me the one’s espousing this phony war are Real Estate Bears, Jennifer Keesmat and Evan Siddall et. al.

      There is no escape from the trend that Toronto is on. More and more people will be and have been renting:

      “From the 2016 Census “Toronto-area growth was predominantly in rental housing in the five years from 2011 to 2016. Of the net 146,000 households added, 85,000 or 58 percent were renting their home.”

      https://www.wellesleyinstitute.com/housing/6-toronto-rental-housing-highlights-in-the-2016-census/

  3. Mxyzptlk

    at 10:23 am

    Enough with this ridiculous hypocrisy/credibility excuse to disregard what someone says or writes. If what Siddall, Keesmaat or anyone else says is true/valid/worthwhile, why should some aspect of their lifestyle or personality negate that? David consistently misspells “Keesmaat” throughout his post. Should that undermine the validity of everything he says? After all, one could choose to conclude that his research was slapdash therefore his argument is flawed, which of course would be a nonsensical argument. His points should stand or fall on their own merits, not on how “honest” (or not) you believe him to be.

    1. Not Harold

      at 11:04 am

      When you make a moral crusade but your behaviour is different from that which you advocate for others, then hypocrisy comes in.

      If you stick to numbers then it doesn’t matter. If you’re the finance minister and decry tax shelters and tax avoidance, while having lots of money tied up in opaque structures, you’re a schmuck. If you say that the current system is badly designed but don’t bring character into it, that’s a policy argument. But emotive arguments are more compelling and resonate with people that don’t build financial models in their sleep. So everyone goes in on people questions rather than data.

      Also Keesmaat gets the math wrong when she says that owning is fraught because of deadweight loss to property taxes, maintenance, and cost of capital. Renters pay all of those costs (over the long term on an economy scale) as well as a profit to the landlords. While you can see some landlords rent below their hard or soft costs because of expected capital appreciation (Toronto condos right now…) institutional landlords can’t, since they are the hardest hit by rent regulation and can’t take advantage of owner/family move in and other strategies to remove tenants.

      So she’s pursuing specious arguments and is being completely fraudulent in her application of math. There’s also the issue that landlords regularly spend less money on maintenance than would be desired by residents or would be done by owner occupiers.

      1. Professional Shanker

        at 1:20 pm

        Impressive response….100% support your statements

      2. Kyle

        at 1:35 pm

        Excellent points Not Harold. It’s like there’s a competition by Evan and Jen to out-hypocricise the other….

        http://spacing.ca/toronto/2019/12/20/national-housing-innovation-event-tackles-torontos-housing-affordability-crisis/

        “One key barrier hampering the effectiveness of these strategies are the government’s own policies. President and CEO of CMHC, Evan Siddall, drew attention to the fact that there are “policies from all levels of government that worsen housing affordability, by restricting supply or stimulating demand, both of which only push prices higher.””

        This statement is bang on. But given that Jen and Evan each headed the governmental areas most responsible for creating the current crisis by “restricting supply” and “stimulating demand”, they’ve got a lot of nerve lecturing people on the subject.

        1. cyber

          at 4:01 pm

          I actually read it differently – they were both somewhat of outsiders stepping into organizations already responsible for “restricting supply” and “stimulating demand”, but did their best to try to change the system by both working from the inside as well as by being more outspoken publicly (presumably to generate more broad public/industry support).

          Yes, they have probably had some success in moving the needle and raising certain topics from ‘sacred cow’ status to being somewhat up for debate… their failure to effect change should not automatically earn the “hypocrite” and “champagne socialist” labels.

          See, for example, Jennifer Keesmaat’s perspective on realistic housing expectations for the next generation(s), and how she advises her own children to imagine apartment living instead of a ‘starter house’ idea (all the way back from 2017): https://www.thestar.com/business/2017/06/20/single-family-homes-a-non-starter-in-toronto-jennifer-keesmaat-says.html

          1. Kyle

            at 5:19 pm

            I give her credit for rolling out the TOCore Plan which lead to more density in the few blocks that make up the heart of Downtown, but otherwise I am not at all convinced that she actually did anything during her time to move the needle across the rest of the City.

            Toronto’s official plan is so quaint and outdated that the pictures on it are in black and white and feature a skyline from when Monica Deol hosted the Electric Circus. This is the problem. That plan needs to be thrown out the window and rewritten, which is well within the Chief Planners purview. In fact it was actually mandated by the Province to be updated in the Places to Grow Act. Something that was never done during her time.

            Due to this inactivity the Province, has once again had to step in and over-ride the City’s anti-development bias by passing a 2019 Growth Plan which forces Toronto’s Planning Department to bring their official plan into Conformity by July 1 2022.

            The Province pretty much has to step in and force Toronto’s Planning Department kicking and screaming into actually doing their job all the time, most recently there’s been talk about allowing Private practitioners to perform Building Inspections.

            It’s sad that it has to be that way. But it’s beyond past due. What other major metropolis only allows .60 lot coverage over the vast majority of its area? Why do they review every single application for zoning when there aren’t even variances? Why do they give angry Nimby’s a forum to block contextually appropriate development? None of this makes sense, and all of it was under her oversight.

          2. Not Harold

            at 5:46 pm

            To echo some of Kyle’s points – Toronto has landmarked the entire King West area and the Yonge Corridor. 2 areas where we should explicitly be concentrating development as they are high amenity areas that are walking distance to the best jobs in the country, need no infrastructure investment even for massive population growth, and any building >30 years old is ludicrously low density. Keesmaat played a part in that and didn’t stand up and decry it when it happened after she left.

            Yonge Street south of Belmont, Bay south of Davenport, University south of Davenport should be 75 storeys by right. Yonge between Belmont and Jackes should be 20 storeys by right, then 65 storeys between Jackes and Glen Elm.

            We do need intensification in the Yellow Belt, especially along Bloor/Danforth, but there are massive opportunities in the densest part of the city for massive intensification. Most of the parking lots have gone but there are still tons of 2 to 15 storey buildings that should be 15 to 75 storeys.

            Keesmaat did nothing to reduce councillor corrupt involvement, illegally low height and lot coverage restrictions, and an intentionally slow and arbitrary process that enables municipal corruption and ransoming of opportunity for young people looking for a place to live. She’s the villain she claims to fight, just as you are.

  4. Steve

    at 12:10 pm

    Something that is often ignored is that you can be both a hypocrite and be right at the same time. Putting aside her individual circumstances it’s not like Yonge-Eglinton is exactly a sea of detached houses where no development is occurring. Anyone living in that neighborhood even on the periphery is absolutely feeling the daily impact of densification (positive and negative).

    With or without the Keesmat’s and Siddall’s of the world the reality is that for many folks the dream of owning a detached or even semi-detached dwelling in Toronto is quickly becoming just that, a dream. With rare exceptions they aren’t making new land so your choices are get on board with condos and apartment buildings (and policies that support same), or leave the city for somewhere further afield.

  5. Alex

    at 2:00 pm

    Nobody needs to make renting more desirable at the moment simply because it is already is – from financial prospective. It does not make any sense to buy vs rent with current Toronto and even mostly GTA prices if your monthly mortgage payments, taxes and fees are way less than available monthly rental in the similar housing. Basically, landlords who bought recently are either are hardly making it even or in the red. And I honestly do not see why anyone would buy today if not for the future possible price appreciation. So who is buying then? People who wants to have a higher return than meager 1.5-2 % annual savings rate and who feel that buying a condo for rent is less riskier than trying to make money on stock market. Which is pretty much everybody without special access to market info and extra cash. Bingo.

    1. Max

      at 7:52 pm

      I’ve heard comments like this before years ago. It’s anyone’s guess.

  6. Geoffrey Kirwan

    at 5:52 pm

    wait – first even if you buy the argument that because she owns her home, her position is erronenous (and that’s big if) all you say is: “Ms. Keesmat, according to her Wikipedia page, “lives in a detached red-brick house near Yonge & Eglinton.”

    Can one not live in a *rented* detached home near Yonge & Eglinton?

    1. Izzy Bedibida

      at 8:45 pm

      Yes one can, but Ms. Keesmat and her ilk never will. They say a 500 sq ft condo is what the modern family should “adapt to”.

      1. Mxyzptlk

        at 10:13 pm

        When has she used the term “adapt to” (which you’ve put in quotation marks)? Not in the article David reprinted above. Or are you just making stuff up?

        1. Izzy Bedibida

          at 8:43 am

          I was referring to what Ms. Keesmat and her champagne socialists socialists friends say when this subject comes up.

      2. Mxyzptlk

        at 10:14 pm

        Oh, and the least you could do is spell her name correctly.

  7. Xirin

    at 9:09 am

    A better use of public funds might be to develop a proper rapid, affordable (or free), accessible public transit system that extends far beyond the expensive parts of the GTA so people can live wherever they can afford to and still get access to the job market in Toronto.

      1. Not Harold

        at 10:52 am

        Crush the public employee unions so that we get rid of ridiculous work rules and egregiously high pay for no skill jobs and then we have more than enough money!

        1. Professional Shanker

          at 1:28 pm

          Not sure we would have “more than enough money” but efficiency gains would be realized.

          Abolishing unions is not the answer to the sovereign debt crisis we are in, part of it for sure.

          1. Mxyzptlk

            at 1:43 pm

            People always feel other people are overpaid. Everyone but me should make minimum wage!

    1. condodweller

      at 11:16 am

      Unfortunately rapid and accessible/transit/affordable don’t mix well together. This would make total sense if they built a high speed rail between Toronto and Barrie a la Eurostar style which can do 300+hm/h. The problem is that at those speeds all the towns in between will want access and there would be intense political pressure to service those towns along the way. As soon as it starts making stops along the way you lose the rapid aspect. I mean the trip to Barrie would be what about 15-20 minutes at those speeds? A train like that wouldn’t reach maximum speed until it’s past Thornhill and I bet the people of Thornhill would want a stop. This would only work as an express train with perhaps one stop max in the middle.

      With regards to the cost it would probably be too expensive for such a small stop even though it would open up the area as a reasonable location with lots of housing supply for future growth. If we had a forward thinking planner the government could perhaps finance the project with long term bonds to keep fares cheap enough to incentivize people to use it en masse. Affordability enters its ugly head. Look at the Up. It was a badly needed connection and they planned it so poorly that it was so expensive that nobody took it until they lowered the price.

      But who am I kidding, they have been considering a high speed rail between Toronto and Montreal for decades and nothing has happened.

      1. condodweller

        at 11:24 am

        I really messed up that first sentence. I meant rapid/accessible/affordable transit.

        1. Izzy Bedibida

          at 11:50 am

          Good points. It would be awsome if it came to be.
          Before that gets put in place, transit has to get away from its fiefdoms ala TTC thinking that the world ends at Steeles Ave, YRT requiring a passport to cross over the “border”. and GO Transit essentially going to Union Stn and not connecting with any or very few subway stops.
          My brother live in the Woodbridge equivalent of the Greater Amsterdam metro area, and I have never experienced any of this type of silliness in their transit system on my visits.

      2. Appraiser

        at 12:26 pm

        You can have more than one train. If ridership is strong enough, one of those trains could be an express train.

        P.S. Via Rail has been considering / dreaming of a Quebec City to Windsor fast train for decades.

        If you build it – they will come. (apologies to Field of Dreams).

  8. condodweller

    at 11:56 am

    I never like the government telling me how to live my life, but perhaps there is an opportunity here to kill two birds with one stone which might make it more palatable(SP?) at this time.

    Perhaps we can tie together the problem of the environment with housing. With protecting the environment and reducing pollution being a priority now how about coming up with a plan incorporating the high speed rail idea from my other post to either build rail to low density areas far enough that traveling to work by car into the GTA is not feasible or build to larger areas like Barrie/London where RE is still affordable and remove cars from the 401/400. This would require fares to be cheap enough for it to be a no brainer for people to adopt it.

    Perhaps plans such as the one posted about Inisfil would become viable if such a location was connected to the GTA with high speed rail.

    I’m aware these project cost billions but if there is a will there might be a way. I hate it when I’m hit with a new tax for a specific reason yet I don’t see any impact of the extra revenue and it ends up going into general revenue rather than toward the reason it was collected in the first place.

    Perhaps some of this carbon tax revenue can be funneled into public transit to pay for high speed rail. Perhaps costs can be reduced by limiting the number of stations between end points as I’m sure stations don’t come cheap and this will also help with travel times to incentivize people to actually use the train.

    I’m just brainstorming here so don’t shoot me for dreaming but feel free to discuss.

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