What is the Function of a House

The May issue of the Walrus had an long piece about the cost of housing in Vancouver. While Vancouver's rising house prices are perhaps the most disturbing example of the cost of housing rising well beyond the capacity of young families to ever purchase a home, it is not the only city in Canada that has this problem. In fact every major city from Toronto west has a similar story to tell. What makes Vancouver's situation a bit different is that some people are clearly blaming immigrants - mainly those from China to be the cause of the problem. I think that while it appears as if much of the new- almost obscene amounts of money being spent to buy houses is coming from Asia, that is only part of the problem

When my parents were able to afford a house just after WWII, it was only because the Canadian Government contributed money to returning soldiers so that they couldn't buy a house. If that money had not been made available, I do not know if they would have considered the possibility. Neither of my parents came from families who owned a house. In fact many if not most people in Montreal lived in what they called "flats". When my parents borrowed the money to buy the house- they did not do so on the assumption that they were buying a short term, lucrative investment. They were buying a home. Somewhere they could raise a family. When my former wife and I bought our first house, again we did not do so as a way of making money, but rather as a way of having  home. While in the next twenty years we did buy and sell a couple of homes, each time we bought a new one, it was because  circumstances required us to move. Each time we sold a house, we hoped that we would make a little bit of money if only to pay us for all of the work that we had put into either building or renovating the house. But our intent was never to make money a pile of cash in the short term. We just wanted a home to raise our children in.

Something has changed in the last twenty or thirty years. Buying a house, for at least some people has become more about how much will it be worth in how short of a time. People buy expensive houses at least in part because they assume that the value of that property will increase at a rate higher than any other investment. People are selling their property for far more than it is worth  - just because they can. In the Vancouver papers one can frequently read stories of houses being sold for thousands of dollars more than the asking price the same day as the property is placed on the market. While financial advisors (and any reasonable person counsels against it), people are making offers with no conditions - including building inspections or bank approval. There is such a feeding frenzy in some markets that people are paying far more than the property is worth. In doing so, they are committing themselves to having a mortgage their entire working life.

So who is responsibly for this crazy increase in house value? Is it the buyers who hope that their investment will increase in value and therefore it is worth the risk or is it the sellers who see the opportunity to make some  money and take it. Surely when people sell something for far more than it is worth that is price gouging - which is not against the law  but it should be.

One has to wonder if it is simple greed that is driving the housing market. If house prices are continually escalating because both the sellers and the buyers see an opportunity to make more and more money. That they do so with no thought towards the future and the possibility that at some point there will be a limit as to what a house or a lot is worth is frightening. That they do so with no appreciation that cities might wither away if more and more young families are forced to live elsewhere shows how shortsighted greed can make a human be.