Housing Policy

Justin Trudeau's Plan To Ban Foreigners From Buying Canadian Homes Won't Make Housing Affordable

Foreign buyers are a small percentage of new home purchases. Excluding them from the housing market does little to reduce housing costs.

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The Liberal government of Canadian Prime Minister Justin Trudeau is proposing a ban on foreigners purchasing homes in the country in an effort to combat high housing prices. If the small number of existing foreign homebuyers and other countries' experience are anything to go on, it won't do much good.

"We will prevent foreign buyers from parking their money in Canada by buying up homes. We will make sure that houses are being used as homes, rather than as commodities to be traded," said Chrystia Freeland, Canada's finance minister, in a forward to the government's proposed 2022 budget.

The plan would ban foreign commercial enterprises and people who are neither Canadian citizens nor permanent residents from purchasing "nonrecreational, residential property" for a period of two years.

Running foreign buyers out of the housing market might strike some as xenophobic. But even in welcoming Canada, it's a political winner.

During last year's elections, both Trudeau and Erin O'Toole, leader of the rival Conservative Party, proposed a ban on foreign buyers, reports Bloomberg. The left-wing New Democratic Party proposed a 20 percent tax on homes bought by non-Canadians.

There's a certain logic to a ban on foreign home purchases. Reducing demand should, in the short run, reduces prices. Those benefits would all go to the remaining Canadian homebuyers.

The problem is that foreign buyers are a small percentage of overall buyers in the housing market. Excluding them does little to dampen demand. Soon enough, it's overwhelmed by rising demand from native Canadians.

The record of policies aimed at reducing foreign buyers in housing markets shows fleeting effects on affordability.

Starting in 2016, the British Columbia provincial government levied an additional 15 percent property transfer tax on homes bought by foreigners in the Vancouver Metro area. In 2018, that tax was raised to 20 percent and expanded to other areas of the province. Provincial property transfer data does show a pretty steep decline in foreign-involved purchases after the implementation of the tax, from about 10 percent of all property transfers to between 1 and 2 percent.

The effect on housing affordability was minimal, however. One study on the tax found that it reduced house price growth by 1 percent, with that benefit fading away after just 7 months. Foreign home purchases continue to be about 1 percent of total home purchases in British Columbia. And it's still the most expensive province in the country to buy a home.

In 2018, New Zealand also largely banned foreign nationals from purchasing homes—estimated to be about 3 to 4 percent of home sales. Since, home prices increased by 12 percent in 2019, 18 percent in 2020, and 23 percent this past year.

Getting rid of restrictions on supply would do much more to reduce housing costs than marginally reducing demand in the short run.

Canada has many of the same price-increasing restrictions on new housing that U.S. cities and states do. Its local and provincial governments restrict new dense housing within the urban core and suburban development on city fringes. Several cities have rent control, which discourages investment even more.

"Rather than chasing villains, we should seek solutions," writes Steve Lafleur of the Fraser Institute, a free market Canadian think tank. "If policymakers want to increase housing affordability for young people, families, and newcomers, they should reduce barriers to housing construction."

Not only would reducing home construction barriers improve affordability, but it would probably make scapegoating foreigners for Canada's domestically sourced high housing costs less politically profitable.

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  1. "nonrecreational, residential property"

    *** scratches head ***

    Houses without bedrooms?

  2. So, taking a little time out on the Ukraine situation, repelling the Red Army and the success of sanctions, here's the situation on the ground, and Time magazine wants to assure you that the sanctions are working fine:

    The agriculture official noted that these numbers are completely independent from military needs. WOG and its top rival in retail fuel supply, OKKO, report they will run out of diesel completely in the next couple of weeks and have already stopped supplying to agriculture except on prepaid contracts.

    To be clear, Ukraine’s current diesel shortage is not due to sanctions on Russian oil and gas, nor will it be exacerbated by stricter sanctions. The global economic reawakening since COVID-19 receded had already disrupted supply chains, such that even Saudi Arabia is reportedly looking for diesel to import. Meanwhile, China, which has carefully not hindered Putin’s invasion, has ordered its state-owned petroleum companies to cease exports since the invasion.

    1. Getting Ukraine diesel for its agricultural sector should be a priority over other uses and other countries. Food prices across the world are already at record highs, and wheat in particular is smashing records. Russia and Ukraine combined produce about 32% of global wheat, together constituting 12% of all global calories traded. With neither country exporting—Ukraine under siege and Russia under sanctions—the U.N. calculated a likely 20% increase in prices just from the invasion’s supply chain disruptions. If Ukraine’s farmers miss this planting season, too, already sky high prices for food will rise enough globally to trigger hunger in vulnerable populations all over the world and even more than the 8% inflation U.S. consumers are already facing.

      So I ask again, who's sanctioning whom here?

      1. Looks like Bill Gates and the WEF have their depopulation means in place. You don't even have to worry about using a pandemic to put in your "Great Reset" if a bunch of people around the world starve to death.

        1. At the next Davos summit, someone should flatten it.

  3. Who cares if it doesn't make housing affordable? Nobody wants Egyptian millionaires buying up lots they'll never use like the world is a Monopoly board.

    1. The important thing is, Trudeau has re-re-rediscovered his borders.

    2. This whole proposal of his is hilarious considering that Vancouver is practically a Chinese colonial outpost at this point.

      1. And, if progressives were consistent, deeply racist.

        1. ^

          1. Since Asians are now white, then sure.

  4. We will make sure that houses are being used as homes, rather than as commodities to be traded

    He thinks they sit empty while being traded? He thinks no one rents them in the meantime?

    1. Honestly, it kind of depends. A lot of the reason rents are going through the roof in Colorado mountain towns, for example, is because second-home owners have been using them as Air BnBs, rather than renting them out to the wage-worker townies who do a lot of the service and tourist jobs that keep these places' economies from collapsing, along with the typical local government types like teachers, medical workers, law enforcement, infrastructure maintenance, etc. So places like Crested Butte are taking desperate measures like limiting short-term licenses, while ski towns are evolving towards a "company town" model where the resorts buy up housing for their workers to live in.

      Same shit's happening in Jackson, Wyoming and the areas around Bozeman, Montana, and the sky-high cost of housing is why the California coast has so many fucking homeless tent and RV encampments. I guess this is nice for people who bought a house at the bottom of the market in 2009-2010, but it sure sucks for those who are staring in the face of $500K or higher mortgages.

      1. Are you telling us there were no homeless 10 years ago?

        1. Not to the extent we're seeing now, no.

      2. Yeah, the resort town dilemma. After chasing away the original economic base (mining, ranching, etc.) we now have the Jekyll and Hyde economy. Get lots of wealthier visitors and residents, including part-timers, to support amenities (and hire lots of people working at the bottom of wage scales), or chase out the new carpet baggers and depress housing prices--and jobs. CB, like lots of mountain towns, sold its hippie-funky soul, and now hippies can't afford to live there.

      3. The worker-housing model is fine. It's used in many places where lots of workers are needed for a short season. They put up the young workers in what are essentially dorms and the post-hours partying and hookups are, effectively, part of the pay package.

        So places like Crested Butte are taking desperate measures like limiting short-term licenses

        Well, resort areas that ban vacation rentals are unlikely to get our business. Once you've been staying in rental houses with all peace, quiet, and amenities, it's pretty hard to stomach going back to hotels and motels.

        1. Hardly needs pointing out *how* the government regulations will fuck up the housing economy, all you need to know is that when a third party sticks its nose in a free transaction between two parties, one or possibly both of them will suffer.

        2. The worker-housing model is fine. It's used in many places where lots of workers are needed for a short season. They put up the young workers in what are essentially dorms and the post-hours partying and hookups are, effectively, part of the pay package.

          Except it's not just Zoomers working these jobs. There's a sizable immigrant workforce that often has to commute an hour or more by buses to get to work as well. This isn't the 1970s or 1980s where the workforce was largely ski bums during the ski season and high school students during the summer.

          Well, resort areas that ban vacation rentals are unlikely to get our business. Once you've been staying in rental houses with all peace, quiet, and amenities, it's pretty hard to stomach going back to hotels and motels.

          I understand, but any town that relies on tourists to survive is going to do the math and know that tax revenue from 200 paid rooms in a hotel > 1 paid room in a mountain home. It's simple economic sense to put their industry and local workforce above the relative few who don't want to deal with the noise of staying in a hotel.

    2. This probably does work, because foreigners buying properties usually buy at the top end of the market - just where Trudeau lives. Not much impact on the sales of average homes, but a measurable one on the 5,000 square foot ones.

      1. Not entirely the case.

        During the 2012ish timeframe here in California, there were lots of houses going to Chinese buyers in the suburbs. Like nearly 1/3 of houses in one community (I recall Irvine) one year, when regular American buyers couldn't get a loan in a reasonable time frame because of Dodd Frank.

        The issue here was that Chinese money wasn't traded on the world market in a fair way, the Yuan being tightly controlled to trade only within a range. So Chinese moneyed people were buying overseas for various reasons, and doing so with money that was probably way overvalued considering the substantial expansion in the Chinese economy every single year since the 90s.

        That was just as REITs started happening, as well, and air BnB, so cash buyers were kings. It totally upended a housing market for regular single family buyers, and not just in Southern California. Other cities, too, like Vancouver, were getting priced out. So the CHinese money, even if it's a drop in the bucket overall, is a very easy and visible target.

        All that said, Trudeau is closing the barn door after all the horses have run away, the barn has fallen over, and the farmhouse has been turned into timeshares. Ever since Xi has started cracking down hard, the Chinese investors looking to stash money in the West are almost gone. Xi doesn't like that. It's not 10 years ago anymore.

  5. He thinks no one rents them in the meantime?

    Why would those greedy capitalists want to make money when they can simply deprive people of something for no reason?

    1. Sometimes because the rental rules are such a pain that it's not worth renting out a second home when you're not using it. Especially in a place that restricts or bans short-term rentals (which is the only way anyone is going to want to rent a second home when they're not there).

    2. "Why would those greedy capitalists want to make money when they can simply deprive people of something for no reason?"

      Because some government assholes passed regulations making that the preferred alternative.

  6. Just a little reminder that finance minister Chrystia Freeland, mentioned above for introducing the bill, is also currently Canada's Deputy Prime Minister, as well as a sitting member of the World Economic Forum's board of directors.

    She has also been minister of international trade, minister of foreign affairs and minister of intergovernmental affairs.

    She was a Harvard graduate and then, like Bill Clinton, attended Oxford as a Rhodes Scholar.

    During 1988 and 89, she was an exchange student at the University of Kyiv in Ukraine, where she studied Ukrainian, although she was already fluent in the language.
    While there she attracted the attention of the KGB, which tagged her with the code name "Frida", and Soviet newspapers, who attacked her as a foreigner meddling in their internal affairs over her contacts with Ukrainian activists. The KGB surveilled Freeland and documented her delivering money, video and audio equipment, and a computer to contacts in Ukraine. She used a diplomat at the Canadian embassy in Moscow to send material abroad in a secret diplomatic pouch, worked with foreign journalists on stories about life in the Soviet Union, and organised marches and rallies. Freeland was denied re-entry to the USSR. By the time her activism within Ukraine came to an end, Freeland had become the subject of a high-level case study from the KGB on how much damage a single determined individual could inflict on the Soviet Union.

    Remember, this is the same woman who dubbed the truckers "terrorists" and "racists".

    Prior to becoming a politician, she was a journalist for the Financial Times, The Washington Post and The Economist. She then worked as Moscow bureau chief for the Financial Times. Next she worked for Reuters as global editor-at-large in New York City.

    During the demonstrations leading up to the 2014 Ukrainian revolution, Freeland supported seizing personal assets and banning travel as part of economic sanction programs against Yanukovych and members of his government. During the annexation of Crimea by Russia, Freeland visited Ukraine where she met leaders and members of the government in Kyiv, including Mustafa Dzhemilev, leader of the Crimean Tatars; Vitaly Klitchko, leader of the Ukrainian Democratic Alliance for Reform; and Ukrainian MP Petro Poroshenko, who was later elected president in May 2014.
    Freeland was one of thirteen Canadians banned from travelling to Russia under retaliatory sanctions imposed by Russian president Vladimir Putin in March 2014.She replied through her official Twitter feed, "it's an honour to be on Putin's sanction list, esp in company of friends Cotler & Grod."

    Remember, this is the same woman that illegally seized Canadian's bank accounts and pushed for the War Measures act to be used on peaceful protesters.

    She's the power behind the throne making the real decisions in Canada.

    1. So what you're saying is that she's the syrup-sipper version of a US neocon?

      1. The syrup-sipper version of Hillary, but more internationally politically powerful and more dangerous. Hillary if she had won.

        She's Klaus' right hand woman at Davos.

        1. What would it cost to have Putin "overshoot" Kiev and drop a missile or two on Davos?

          1. Two whores and a salami sandwich.

  7. So much for open borders I guess.

    1. OBL is going to have to add Canada to Israel is his open borders screed.

  8. What about the houses and other assets they seized from truck drivers?

  9. Unless they ban corporate ownership of homes it won't make dent. In the US many nationwide rental companies are buying up properties right and left and in some cases buying sufficient homes in a subdivision to take over HOA management and make it even easier to rent.

  10. Homeownership should be widespread and accessible
    or
    buying a home should be a great investment because it continually appreciates in value

    .gov needs to pick ONE.

    i mean, ideally they would pick neither. But if they insist on meddling in the market they could at least have the decency not to simultaneously try to promote two mutually exclusive goals

  11. Prices are set at the margin so if foreign buyers (or anyone else) tend to be the high bidders then they have an outsized impact on prices.

    Idathunk a site that purports to be economically literate would understand that

  12. Nothing of the sort. Canadians do not want Positive Christian National Socialists again becoming an open running sore on the body politic. Canadians, even female Canadians, have some individual rights. Many remember the Vichy Canada fascist fifth column of the late thirties and early forties. Americans export the cruel prohibition and girl-bullying laws that foster caudillos and economic suicide in Latin America. Let American nazis deal with the waves of starving economic refugees their policies beget!

    1. Fuck you, you senile old faggot. This has nothing to do with religion or any of the other gibberish you’re spouting. We all know how much you love infanticide and how much you religion.

      Someone really needs to turn your morphine drip up all the way.

  13. First: "foreign buyers are a small percentage of overall buyers in the housing market"

    Then: "property transfer data does show a pretty steep decline in foreign-involved purchases after the implementation of the tax, from about 10 percent ..."

    Ten percent is a small percentage? Ten percent of your total property sales to non-citizens is so small that it's not worth talking about? Not in my math.

  14. Well these conversations have been going on since last year. So on December 16, 2021, Canadian Prime Minister Justin Trudeau instructed the Department of Housing to impose a temporary ban on the purchase of non-recreational housing by foreign buyers. The mandate letter sent to Minister of Families, Children and Social Development Ahmed Hussen also called for a ban on blind bidding in the Canadian real estate market, you can read here https://writemyessay.nyc if you want find more info. According to Trudeau, such reforms would ensure housing for Canadian homeowners, for most of whom properties remain unaffordable. Transparency in real estate transactions is the main goal of banning blind bidding, which leaves most bidders unable to see the bids of other buyers.

  15. It might not be perfect but I fail to see why reason craps all over the idea anyhow.

    Should foreigners be allowed to buy homes where they are not citizens or even permanent residents of?

    The easy answer is no and it seems every country should do such a thing. Let the wealthy airBNB like the rest of us schlubs.

    1. That may be the easy answer, but it's also a dim-witted one. The two often seem to go hand in hand. And capping it by saying "let the wealthy AirBnB" takes the cluelessness up to 11.

  16. For all their over the top "inclusiveness," Canadians can be just as xenophobic as people elsewhere, esp. when it comes to their neighbors to the south (who most of their economy is dependent on....). This isn't really about lowering home prices for Canadians - it's about the usual political points scored by "othering" at a time when Trudeau really needs a ratings boost. Many Canadians will be duped into thinking he's doing something for them, when it's just populist BS of the lowest order.

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