Why is housing affordability an issue in a city like Whitehorse, with little but trees for thousands of kilometres in either direction?
It is easy to see how this could become a problem somewhere like Vancouver, confined as it is by the giant mountains to the north, the ocean to the west and the border to the south. You could also see how affordability could become an issue in the densest part of a vast metropolis like Toronto, with prices declining as you move towards the periphery.
But why is the median price of a detached house in Whitehorse $384,000 – down from the peak in 2011 but still more than double what it was at the turn of the millennium?
The answer isn’t really a secret. The failure of policymakers to foresee a looming shortage of available new land to keep up with demand is the most obvious culprit. And then, when it became apparent that there was a problem, NIMBYism and (in usual Yukon fashion) bureaucratic dithering delayed moving towards a solution in a timely manner. Tack on a spike in construction costs, and here we are today.
The Yukon government’s recently released “action plan” is supposed to be the territory’s way forward for dealing with the fact that there are more people than ever who simply can’t afford to put a roof over their head here in the capital. But the phenomenal increase in housing prices in Whitehorse over the past decade and a half has had significant social and economic implications for all residents – dividing the community into winners and losers.
We tend to talk about housing prices from the perspective of renters or prospective buyers. But there are two sides to this equation. For those who already own a house, the increase in prices has been an enormous boon.
I’m sure there were more than a few residents in their late 40s and early 50s, without Yukon government pensions, who sat up at night in the year 2000 worrying about how on earth they were ever going to be able to fund their retirement. I know some of them. Then – as if it were a gift from God – a massive windfall fell into their lap when the value of their homes skyrocketed.
For the newly prudent homeowner it was problem solved. The equity that was created out of thin air combined with some modest savings, the Canada Pension Plan and Old Age Security meant that they could eke out a comfortable retirement.
Others were not so practical. They used their newfound wealth to move to a bigger house and refinance some credit card debts to help prolong that lavish lifestyle. Then they tack on a line of credit to buy that brand new 32-foot travel trailer. Maybe throw in a new motorboat and a side-by-side as well.
The ability to finance such luxuries has created the perception of a city living in the lap of luxury. But 15 years later many still have close to the minimum of five per cent equity in their home and have given the Canada Mortgage and Housing Corporation a good portion of that newfound wealth after multiple rounds of refinancing.
There is no doubt that this phenomenon has created many “losers” as well. Want to buy a new home now? Well you can say goodbye to several more years of your after tax income. And you are the lucky ones. Others are completely priced out of the market.
And where do we go from here? We know that the market has stabilized after years of eye-popping growth and has even declined some. If we consider real estate as an investment, what rate of return can we look forward to? My sense is not much. With a stable supply of new land for the foreseeable future, questionable economic growth prospects, and affordability issues one would think that the worst (or the best, depending on your perspective) is probably over for now.
But as with predicting how low interest rates will go or who will win the next territorial election, I’m loath to make firm predictions. Maybe we’re on the cusp of further price growth. When I bought my home in 2009 I thought that the market had peaked, but six years later I would have to consider myself as both a winner, in that I’ve seen significant appreciation in the value of my house, and a loser, in that I missed the great Whitehorse housing train as it left the station.
Meanwhile, several hours after I sat down to read the government’s action plan I still don’t know what the government plans to do about this mess for those who can’t afford to buy that fancy new house in Whistle Bend, other than tinker with the market. The most obvious plan – intervening to deflate housing prices – would turn those winners into losers – angry losers with underwater mortgages and no plans for retirement.
Kyle Carruthers is a born-and-raised Yukoner who lives and practises law in Whitehorse.