What the Heck Happened to Housing?
Things That Matter, By Dennis Rizzo
Part One of Three
About a month ago I read an article on Toronto.com (a blog) about Queensway Park. According to the article, there are about 200 homes surrounding a large park with the same name. As a newcomer to Canada I was unaware of this particular community – though there are many like it in New Jersey and elsewhere.
To quote the article, “…they were all originally small residences, many painted white, built in 1945-46 from federal government-provided floor plans. Overall, 46,000 similar homes were built across Canada, during and after the Second World War, by the Wartime Housing Corporation (which became the Central Mortgage and Housing Corporation in 1946.)”
Argyle Street Wartime Victory Homes
The homes in Queensway Park are typical of those built for returning soldiers: one-and-a-half stories, steeply pitched roofs, clapboard walls, small sash windows, and small metal chimney stacks. Inside, the main floor often had a living room, kitchen with dining area, bathroom and one bedroom, while the upstairs had two more bedrooms. This architectural style has been referred to as Simplified Cape Cod or Strawberry Box.
The first remarkable post-war effort was the Levitt Homes development on Long Island. $7,000 [US] was the cost to buy a Levitt home in 1945-48 which translates to $125,000 today. Combined with targeted financing (in the US the GI Bill with VA Mortgages at 0% down) people could afford a home on one income.
What would it take to build this type of housing now? Why is it so darn difficult to get these types of housing to market? When did housing become so unaffordable that we find ourselves in the crisis now? There are lots of proposed solutions floating around out there and I guess I’ll add to the maelstrom in this first (of three parts) opine.
As that article stated, “Post-war homes were built in cookie-cutter fashion, using readily available materials, and pre-fabrication where possible. The basic two-bedroom, kitchen, living area home sustained many families in the 1950s-70s.”
As the world progressed from post-war reconstruction to a global economy the manufacturing jobs that sustained the middle class in North America declined. Expectations Boomers were access to education and white-collar jobs. The economy still allowed for a good life with one income.
Then came the oil embargo and prices skyrocketed in just a few years. The mid 1970s saw inflation at rates unheard of even in the direst of times. By the 1980s the economics were upside down. Businesses failed or were sent overseas, and most paychecks failed to keep up. Two incomes were now the norm.
Then there was the horror the 2008 financial meltdown. Governments looked for any circumstance to blame for the economic meltdown other than the true causes. Government became the fall guy since it seemed impossible to blame the tried and true capitalist system. So privatizing became the byword.
The laissez faire policies of Mulroney, Thatcher and Reagan allowed financial shell games to flourish – until they collapsed. Unlike a true free market, when the banks fell flat, instead of shareholders feeling the pain of their casino-style investments, taxpayers bailed them out. And housing went by the roadside as public funding of housing efforts was cut to save money.
The premise at the time was that giving more money to the well-off, in the form of tax cuts, would boost economic investment and open more well-paying jobs for the average person. Instead, the well-off mostly sent their money to the Cayman Islands, invested in producing overseas in cheap labour markets, and then sold those goods to now under-employed workers at marked up rates.
There is also the premise that private industry can do things better than government. That’s the topic of another dialogue. Suffice it to say that shifting the responsibility for housing development and manufacture from publicly funded incentive programs to privately driven markets has resulted in a surplus of McMansions and a dearth of attainable dwelling space.
The introduction of Real Estate Investment Trusts (REITs) as tax havens opened the market to bulk purchases by large conglomerates. These units are profitable whether occupied or unoccupied. Rents are set by the conglomerate, and this has allowed the scooping of condo rental units and closed the market top the public. Result – higher sales and rent prices as the availability shrinks.
What are Real Estate Investment Trusts?
REITs allow people to invest in real estate without needing to manage a property.
- Investors receive the rental income as a dividend.
- There are different categories, such as residential, commercial, industrial, and more.
- They are normally publicly traded on the Toronto Stock Exchange but can be private investments.
The emphasis in the news has been on curbing foreign investors from buying up large swaths of available housing units. This skirts the fact that many of those purchases are made possible by REITs based right here in Canada.
We can all agree, housing is the number one issue for us after health care. The mess we’re in is one of our own making through ineffective economic theory, politically driven policy, and grasping capitalist practice.
But, instead of blaming and looking backward, what can be done?
First, as with anything requiring concerted public effort, there must be a consensus that we have to act. A simple perusal of the rent ads and want ads can tell us there needs to be action. A look at the real estate listings is clear that affordability has been tossed out like last week’s bath water. We can all admit there is a problem, but the solution has been left to the marketplace for too long.
Realty firms and builders argue that unrelated costs drive them to avoid affordable housing construction. This perspective underscores the financial strain developers experience, which can deter them from investing in affordable housing projects. The construction industry grapples with labour shortages, high development charges, and a complex approval process, further complicating efforts to build affordable homes (Realty City Group)
A construction industry magazine, Storeys, said MURB allowed for greater investment in multi-use housing versus single family. A Multiple-Unit Residential Building, or MURB, is a building with five or more units rented out to tenants. These buildings can include apartment complexes, townhouses, and other types of multi-family dwellings. MURBs are a common type of housing in urban areas like Toronto and Ontario, where the demand for affordable rental housing is high.
“The MURB incentives allow investors to deduct capital costs like depreciation from other income,” says Oran Turkienicz of Pinemount Developments in Toronto. The reapplication of MURB could be significant enough to inspire investors to build income properties rather than buy them.
The industry is also clamouring for significant changes in how development is approved and financed. It claims MURB would be an incentive to move to rental housing, particularly if paired with supportive measures like zoning reform, pre-approved templates, or modular incentives.
MURBs are not a solution for the construction of badly needed large-scale residential developments. Adds Michael Tsourounis of Hazelview Investments, “Without tackling structural challenges like land availability, infrastructure, or streamlined public-private collaboration, it’s only a partial solution to the housing shortages we’re experiencing right now.”
Clarity, consistency, and simplicity were buzzwords in the 1970s, as they were during the mass construction period following World War II. At those junctures the country was faced with the immediate need similar to the present. Streamlining and consolidating the process, combined with innovative financing and government backing allowed for rapid construction of homes that are still standing today.
Dennis Rizzo joins SUNonline/Orillia as a columnist writing on big issues affecting ordinary Orillians. He is an ex-pat Yank from New Jersey. Orillia, Ontario. Canada is his adopted home, but he has brought along a degree of puckishness and hubris. Dennis spent more than 30 years working in the field of disabilities, with some side trips to marketing and management. He presented and keynoted for many conferences and served on a President’s advisory committee. Dennis is the author of several journal articles and booklets in the field of disabilities and work and five non-fiction books, including “A Brief History of Orillia – Ontario’s Sunshine City.” He recently republished a novel set in 1776 and a mystery set in 1860. He also enjoys sitting in on music sessions around town when he can.
(Photos by Swartz – SUNonline/Orillia; Image Supplied)
CORRECTION: Attribution of quotes by Oran Turkienicz and Michael Tsourounis in the paragraphs relating to Storeys magazine were inadvertently reversed in the original. This has been corrected.