CMHC Executive Says Renting Is Better Than Owning. Calls to Stop "Overpromotion" Of Homeownership: Opinion
This morning I read an article published by The Globe and Mail that quotes Evan Siddall, the chief executive of Canada Mortgage and Housing Corp., discussing the need to stop "overpromoting" homeownership.
To quote Siddal, “We have to call out the glorification of homeownership....renting is a perfect and valid housing option, and may, in fact, be the best long-term option for many households.”
His statement comes at a time when there is a massive housing shortage in cities like Toronto and Vancouver. Real estate is currently hugely overpriced in these cities and bought up by rich people, and the rental vacancy rate is less than 1%.
In Toronto, the average rental apartment costs $2,515 per month, and the average home sells for just under a million dollars.
Therefore, nobody can deny Toronto is experiencing a housing crisis, however, should Canadians really stop looking at homeownership in a positive light? Is renting truly the best long term solution or is Siddal's comment just a talking point used to suppress the conversation of those who are outraged and hopeless?
The reason housing is currently unaffordable in Toronto and Vancouver is because of loose regulations on foreign real estate investment and the BIG issue of money laundering. For example, an article written by Vancouver Sun, entitled, "Anatomy of money laundering in B.C. real estate: 12 cases, $1.7 billion, 20 countries and 30 banks" reveals the hundreds of millions of dollars put into real estate through money laundering. For example, as far back as 1993, it was found that drug money was being laundered through Vancouver Real Estate. In 2015, "bundles of 20-dollar bills were seized as part of RCMP E-Pirate Investigation into money laundering at alleged Richmond Bank, Silver international." It is also alleged that $100M was was washed with real estate.
There have been numerous articles written exposing the laundering issue in Canadian real estate and how drug money has been used to artificially prop up its value. For example, an independent report was released in 2019 that showed $5B was laundered through British Columbia's real estate market in 2018.
It's obvious that average Canadians simply cannot compete with those who have oodles of cash (illegal at that) at their disposal and are often outrun and outbid. And, although the Government did implement a foreign investment tax, there are many loopholes investors can get through such as setting up Corporations and using straw men who become difficult to track. There has been tremendous concern expressed about how perpetrators are abusing the system in Canada by setting up phony corporations to buy real estate. In fact, according to Kevin Comeau, author of the C.D. Howe report on money laundering, he says it's likely "more than $3 trillion in dirty money entered the international finance system last year." In Canada, Corporate structuring offers anonymity by allowing the real, or “beneficial,” owner to go undisclosed.
Canada has also unintentionally allowed a private American company (Airbnb) to permeate its housing market and persuade homeowners to turn their rentals into hotels. Everyone knows "hotels" are never a viable long-term housing option for renters due to price and, therefore, the contributing factor to the decimal vacancy rates for rentals is that what once was considered a long term rental priced out at fair market value is now a "hotel" priced out at commercial rates.
Airbnb is squeezing Toronto's rental market, but because everyone is ultimately governed by Capitalism there is only so much policy democratic Governments of the world can put in place. For example, Toronto recently enforced a 180-day a year policy for Airbnb's, which will help stop some, not all of the rental issues since there are still 180 days that homes can be hotels.
And, as more home builders are now building rental buildings instead of condominiums, which are considered a luxury, the inflated rental market is here to stay.
I have analyzed the differences between owning and renting numerous times and for numerous clients. I have compared the advantages and disadvantages, and my conclusion is the ONLY time renting is a better option than buying is when market rents are lower than mortgage payments, and where a person can consistently hoard away cash and earn interest.
When rent is inflated like it is now and equivalent to or more than mortgage financing, for the average person, there is little room to save money. Therefore, renters would be losing wealth over time because they wouldn't own assets such as real estate that would be appreciated in value, nor would they pay into investments that earn money.
In a time where existing property owners are experiencing a surge in their net worth, and rental rates are getting more expensive, how on earth can anyone say renting is a good option and that we should stop "glorifying" homeownership?
They can't and they shouldn't. Talking points have never fixed problems. The wealthy shouldn't get wealthier well the ones who never get a chance slip into poverty.
Just because we failed to stop a housing crisis and lacked efficient Government policy, doesn't mean we should lie about the reality of which is the better choice. Just because we can't see a way to change things doesn't mean we should discourage those who intuitively know owning is better than renting.
In my opinion, homeownership will always be a superior choice for most people, and we shouldn't deny the obvious. Siddal shouldn't pretend he isn't a homeowner who's made money in real estate.
The Government is failing us when they lie to us. The Government is failing us when they are hypocritical. The Government is failing us when they think they are smarter than us.
Instead of CEO's who are real estate owners telling us we should forget the dream of homeownership by lying about which is the better option from a financial perspective, they should focus on the reasons why there is a crisis to begin with and spend their energy trying to repair the damage so everyone can prosper.
It's become clear as day that unfortunately for Sidall, the problem is not people who glorify homeownership but the Governments who have failed them.
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By: Sarah Colucci
Senior Mortgage Agent, Lic. M14000929