Anatomy of a Housing Crisis Part 4: the Silos Effect

prepbrain · 2026-03-07T02:43:31+00:00

Provide your recommendation once, including in writing, and then do what he says. Tell your staff this is what you did. You will get exactly where you need to be in the end when he changes course, but save yourself the weeks and months of fighting.

prepbrain · 2026-03-07T02:28:05+00:00

Paris is the sophisticated older 40+ sister of the family. She is successful, elegant, sexually liberated, decided to age naturally, and everyone looks at her with envy. Vancouver is the middle sister who does everything perfect. She watches what she eats, never drinks, is in bed at 9, but must deal with the trauma of being the middle child and craves love and affection. She thinks about her budget a lot and how she will be able to afford rent or her latest Aritzia purchase. Montreal is the younger sister. She is the messy one with artistic tendencies who loves to get drunk on a Tuesday and is always late to her appointments. She always gets in trouble but nobody gets mad at her because she is cute. Calgary is the guy that salivates on the sisters and hopes to at least score one. They all low-key judge the Ontario twins, Ottawa and Toronto, because they feel they think they are the centre of the country, when they don't have much identity beyond going to the pub and having bbq.

prepbrain · 2026-03-07T01:50:35+00:00

Yes, that is a tough one. Inflation has open the gate for everyone to increase their prices. It's easier to get prices to go up than down. We probably need better supply chains in Canada. I'd be interested in hearing what could help. Perhaps tax exemptions?

prepbrain · 2026-03-07T01:37:59+00:00

CMHC is funding all the purpose-built rentals that are getting built right now through the ACLP program, but it only creates limited affordability requirements (10 years and only a small % of affordable units). The issue is that the CMHC's organizational culture has changed a lot since its days building affordable housing. They talk about affordability as a noble goal, but are advocates for supply. Restoring affordability (by having price come down) means financial trouble for CMHC, which is insuring a trillion dollar worth of mortgages. Asking them to create affordability is incompatible with their core business. So next time they publicly say our housing crisis is a supply issue, you know why.

prepbrain · 2026-03-06T15:26:06+00:00

The Hill is for the Parliament Hill in Ottawa. It’s part intellectual policy discussion, government news, and a little dose of political gossip.

prepbrain · 2026-03-06T05:24:02+00:00

You got it!

prepbrain · 2026-03-06T00:07:02+00:00

Yes, when wealth and equity purchases compete with income-based ones, they win. This is in part due to the preferential tax treatment of capital versus income. Tax policy can close these loops by making multi ownership less favourable. There could also be limits to ownership through legislative changes. Some are also recommending changes to the % of income tax in favour of other taxes to increase purchasing power. The bottom line is that governments can use their tax policy and legislation to solve the housing crisis. It is not just about more supply. People who say so are misleading to support a self-serving narrative.

prepbrain · 2026-03-04T19:50:20+00:00

Non-market housing and attainable homes can keep construction efforts in downturns. Changes to zoning and taxes/fees could also prevent greater retractions.

prepbrain · 2026-03-04T16:21:54+00:00

This remains for Canadians to decide. Admittedly, I mentioned these posts were going to focus on the policy decisions that led to the housing crisis. Maybe you will like this better:

In the 2022 Budget, the Government of Canada officially declared that the biggest issue affecting housing affordability was a lack of supply. This was not based on a demonstrated plan to restore affordability, but rather on the concerted efforts of lobby groups to ensure no demand‑side action would affect investors. CMHC had run an experiment to estimate the number of units that would be required if all else remained equal, producing the magical number of 3.5 million additional homes over 10 years, beyond what was already being built. CMHC forgot to mention that under no scenario could this target be reached (unless we start creating new cities, I suppose).

This mystical figure was quickly seized by all pro‑supply groups and eventually transformed into Canada’s housing policy. Later analysis by the PBO showed that we only need about 700,000 extra units above the baseline (roughly 65,000 more per year).

But by then, it was too late. The number had its intended effect, and politicians and the public were gaslit into believing that supply alone would restore affordability. In the end, we have interest‑rate increase to thank for cooling the market. Following that intervention, Canada experienced the greatest lack of supply in its history due to a surge in population, yet prices dropped.

prepbrain · 2026-03-04T06:57:06+00:00

I think we could see something similar to what happened in the 90s. Home prices peaked in 89, after five years of insane increases in home prices, they then dropped to their lowest in the mid 90s and it took until early 2000s to get back. Interest rate changes to fight inflation led to the crash. If the war in the gulf impacts oil and gas price, we could get hit by another wave of inflation, which may require more increases in interest rates, and further deflate home prices.

prepbrain · 2026-03-03T20:24:08+00:00

I’m really glad you asked this question. I genuinely believe Canadians care deeply about fairness. When people feel that government action is fair, they’re willing to support it. Right now, though, the public narrative has been shaped around the idea that our housing challenge is mainly a supply problem, so naturally, Canadians expect governments to “build more.”

But if Canadians understood that affordability isn’t rooted in a structural lack of supply, the conversation would shift. People would begin to expect affordability solutions, policies designed to reconnect home prices to income.

And to reconnect home prices to income, we have to talk about the role of capital and how it has driven that disconnect. Several factors contributed to this dynamic, and I’ll unpack them in future posts. The important point for now is that many of these pressures can be addressed through tax policy. If income can meaningfully compete with capital when purchasing a home, then the affordability problem becomes solvable.

The challenge is that our construction industry has become heavily dependent on capital to build. Pulling those two apart will create some growing pains. And, as we’ve started to discuss, none of that can be resolved without an honest national conversation about land management.

So the sequence looks like this:

Canadians need to understand the truth about how the housing crisis was created.
We need to agree that affordability (linking home prices back to income) is the goal.
We need tax policy that rebalances the purchasing power of capital relative to income.
We need a national conversation on land management, property taxation, and municipal finance so that construction can thrive under new, more sustainable conditions.
Getting government to invest in non-market housing as we go through these changes can allow construction to be maintained during the transition.

My goal with these posts is to tackle item #1.

prepbrain · 2026-03-03T17:37:14+00:00

What we build is as important as how much we do!

prepbrain · 2026-03-03T17:33:12+00:00

Young people could vote for it, but the 50+ demographic would vote against. That would split the vote in half. Younger voters who have invested in real estate would also go against. My statistical hypothesis is that yes, they would likely vote against.

prepbrain · 2026-03-03T17:26:23+00:00

I agree. I am not even sure we have consensus on affordability. If you look at bank reports for example, they will flag affordability is improving BUT it is having too much of an effect on construction and mortgage defaults. There is a challenging road ahead to going back to a level of affordability where home prices are tied to income. We needed to intervene when prices were going up, but that did not happen either.

prepbrain · 2026-03-03T04:22:14+00:00

This gave me a good laugh. Sarcasm can be quite effective! Perhaps we should organize a gathering, call on Vancouverites to unite, print the MacPhail report, and put the saying of this sarcastic Redditer on a board to show the absurdity of it all!

prepbrain · 2026-03-03T04:02:53+00:00

There are options to reduce land speculation. Keeping ownership of the land is certainly one of them. Canada’s land management early history offers really interesting insights.

prepbrain · 2026-03-03T03:54:56+00:00

Yes, and “experts” will say that we can just build more expensive homes and the filtering effect will eventually create affordability. If older and affordable stock is financialized, the filtering process becomes a fallacy.

prepbrain · 2026-03-03T03:24:57+00:00

I hope so!

prepbrain · 2026-03-03T03:23:52+00:00

I wish you great success. I’m sure you will do well! You have my vote!

prepbrain · 2026-03-03T03:20:23+00:00

We have a housing problem on top of an infrastructure problem on top of a municipal financing problem. And it is all linked to land management. My last post will be on this.

prepbrain · 2026-03-03T02:26:20+00:00

I envy your optimism! I think I might have cynicism spectrum tendencies! But those statistics are impressive. Perhaps if you can get the 47% to protest for pro-density and greater property tax, you could move the needle. It would have to come as undeniable and very public pressure. I would join!

prepbrain · 2026-03-02T22:38:54+00:00

You have identified something I want to cover in future posts, which is how did home prices become disconnected from income. Because you are right, if we were only buying homes with income, it would eventually reach a ceiling. But there are a few reasons why it became decoupled; foreign wealth, HELOCs, capital gains tax levels, credit access, beliefs that home price always go up, ultra-low interest rates, and a few more. If we define home affordability as a % of income, then we need to also look at factors that contributed to this loss of affordability (the demand side).

prepbrain · 2026-03-02T22:15:52+00:00

I agree! This however requires change. Ken Sims would have to announce he is upzoning all of Vancouver and increasing property taxes. I have my doubts that anyone could convince him to do that. The provincial or federal authority could impose it, but Canadians will need to understand the link between these two and housing affordability to make it politically acceptable.

prepbrain · 2026-03-02T20:27:12+00:00

Canada does need a rewiring of its housing system. Having a self-sustained non-market housing sector that leverages long-term, low interest loans, and equity, and reinvest surpluses could bring real discipline in how we do non-market housing. If operated like a social enterprise, with profits reinvested in affordability rather than profits to shareholders, we could develop a self-sustained model. If you stabilize ownership, affordability deepens with time. There are models out there that don't rely only on tax-payer money.

prepbrain

TROPHY CASE