Jack Layton wants more affordable housing - Ottawa is the reason we don't have affordable housing

Good old Jack, always looking out for the little guys... ya, right

http://thechronicleherald.ca/Metro/1154973.html

Let's take a look at why houses have become less afordable.


The price of a house in Canada has about doubled in the last 10 years. Have Canadians decided in the past 10 years that housing is now more important than ever before and therefore are willing to pay twice the price? Or have incomes doubled in the past 10 years? Or maybe the prices of other goods such as gasoline, food, cars gone down so significantly that Canadians can now spend more on housing?

Technology has greatly improved the process for building houses, and ceteris paribus, this should have caused prices to go down. But there are other factors at play, and they have had a much greater affect on housing than technology. And all of them involve goverment. The biggest one is the increase in demand. There are basically 3 reasons for this increase in demand.

1)The Canadian Mortgage and Housing Corporation is creating a HUGE subprime market in Canada. The cap for this CMHC has been raised to $600 billion. That's about 20,000for each man, woman and child in this country. Who uses the CMHC? Borrowers who are not the banks' prime borrowers (ie. Subprime). They put on average 5% down, and have an amortization rate of 35 years. This is fine as long as prices keep raising, debt remains cheap, and the economy keeps sputtering along. But we all saw what happened when prices stop raising south of the border. A side benefit of this rediculous policy is that rent prices have jumped because housing prices have jumped.

2) The Bank of Canada - There is no reason that interest rates in Canada should be as low as they are now. We have gone though recessions before, and never have interest rates gone this low before. Let's ask the question, if the Bank of Canada wasn't price fixing, what rate would interest rates be at? Would they be at below 1%? Of course not. Moody's AAA bonds are at about 5.5. When you have a fixed interest rate so much lower than what a natural rate would be given the risk in the economy, we have massive malinvestment, and that is what we are seeing in the housing market.

3) Increased Population Denisty. For whatever reason, the Government has decided that our major cities need a continuous massive influx of peope ever year. In fact, I've been told that if you want to move to Canada, and you don't put a major city as your desitation, you will likely be rejected. This policy is beyond my comprehension. If cities like Toronto had the same population as it had 20 years ago, land prices could never be what they are today. Even the MSM admits this.
http://www.thestar.com/article/696854

So there you have it, the three major reasons that housing is unaffordable are fixed interest rates, the CMHC, and Goverment policy. Of course, even if house prices were at the level they were 10 years ago, you'd still have socialists like Mr. Layton saying that prices are too high. This is all politics. If he really wanted more affordable housing, he would be encoruaging people NOT to move to big cities, would be cutting taxes to make prices more affordable, and eliminate enties like CMHC that create artifically high prices, and allow the market to set interest rates so that they don't go up and down like a roller-coaster.

The fact is that he doesn't know how to bring about affordable housing, and if he does, he simply won't. It's much better to make demands and ask for more money because it looks good on TV.

You want affordable housing? Just wait a few more years and let this goverment-created bubble pop.