hitops

You may have misunderstood what the CMHC does. It does not provide a loan to you to make your down payment, it provides insurance for your loan if you cannot make a 20% down payment. It therefore allows for the bank to lend you money even if you are a bad risk, because it promises to cover the bank in the event of a loss. Perhaps you are talking about borrowing money from some other source. In that case yes that would be incredibly foolish thing to do to come up with a down payment, but I doubt anyone would lend for that purpose. Skin in the game is indeed important. The CMHC facilitates the ability to buy a house with no skin in the game. It makes it possible to put very little down, because you can get CMHC insurance anyway. It has not lent a hand to aspiring people, it has created a situation where those people need to take on a lifetime of debt to own a house. The long term result will be that interest rates will rise, people's payments may double or worse, and they will not be able to pay. They will lose their homes and the home will be sold. Because the market will be down with higher rates, the price of the home will drop, and the sale will not cover the loss. Because this is Canada, the buyer will still be responsible for that loss, and now without a home either. The choice then becomes bankruptcy, after which there is basically no chance of getting another loan for a house, or figuring some other place to live, probably renting, and also having to pay your debts. This is not giving people a helping hand at all, it's a temporary handout that feels good to some people now and will destroy them later. It's truly foolishness. In other words, the helping hand is hurting more that it is helping. And in the meantime it's making home-ownership more expensive for everyone else, including those who are lower risks. I neglected to mention what I think the solution might be however. Obviously you can't suddenly abandon the program or raise interest rates. I would propose a gradual continued tightening of the lending rules. Enough that it cools the market and allows prices to fall a bit but does not tempt to many people to declare bankruptcy. Unfortunately the people who borrowed at the 40yr no down period of time are on the hook, but at least the situation could be improved for young people and those with less money.

In other words, you still can't explain away the fact that the incentives inherent to your system are bad and would make it a money loser.

If I knew exactly I could make a lot of money. US did in 2007. How high can we go?

That's almost certainly false since during 2 whole months they put in close to zero hours per day. But even if it was true, so? That doesn't mean they deserve 100K. Nobody forced them to become teachers, that was their choice. In fact right now its difficult to find a permanent job as a new graduate teacher. I say get rid of the ones collecting 80K and hire the new grads who are eager to work and not just to report their various entitlements.

Look at the graphs again. If the increase was because of dual incomes, then increases in prices would reflect increases in income per household. They do not. They reflect increases in debt burden. It's not because people are making more money. It's because they are borrowing more money. And they are not borrowing more because they are making more. They are just borrowing more. Interest rates are important as you point out. This is exactly why its so dangerous to subsidize housing insurance. When interest rates go up, it will push hundreds of thousand out of their homes. I saw a good graph awhile ago showing just how much of an impact the CMHC has. In fact they have the biggest impact of anything. The reality of other factors playing a role does not make the CMHC a good idea. Edit: This isn't the graph but helps to tell the story. The 40 yr mortgage was introduced in 2006: The difference between the blue and purple line is totally because of change in CMHC policy. And that is just going from 25yr to 40yr. Just imagine where it would be if the CMHC did not guarantee loans. That is the impact it has. The impact it has it probably close to doubling the cost of homes. This doesn't mean people are getting more house. They are just able to borrow more for a house that is now much more expensive. It's wasteful and hazardous. It is exactly what pushed up home prices in the US until they crashed.

You have been kicked off this site numerous times, so that is quite an ironic statement. You simply cannot explain how to deal with the problem of idle students who just go because it is perceived as free, do not complete or complete with worthless degrees, and then cannot pay enough to fund it. The incentives of your system will only explode this problem. You don't see that. Your only argument is insults. This tells us everything we need to know. It took you 10 pages just to realize you cannot claim your system as free when it costs 1%. My expectations are pretty low that you are going to tune into this one.

Those numbers are based on historical data, not made up. When the CMHC rules were tighter and interest rates were average, that was the reality. Or, just check prices 5 years ago and 10 years ago. They are rising WAY faster than normal. Traditionally they parallel wages. Today they parallel borrowing. This is unsustainable. Look at the graph. We are not just carrying on with our usual financial responsibility. Things have changed. The new situation is highly dangerous. Just to give you an idea of how the CHMC economics do not work. Just a few years ago they were profiting about 2B per year. Last year, with a tiny uptick in foreclosures, that was slashed to 250M. It is a totally unstable model. Not just because they cannot even come close to covering the losses, but because they actually create the problem. The reality of right now has already proven that renting becomes more expensive, not less, when housing prices go up. Rentals costs are at all-time highs.

1) The borrowers will not be able to avoid it. Just think through the numbers. $300-400K average home price, purchased on an average household income of 50-55K after taxes, paying at near nothing % interest. When interest rises, defaults kill the price of homes and they owe more than it is worth. Preventing the buyer from walking away from the debt will not make them magically able to pay the debt, it will just make them declare bankruptcy. The taxpayer will be holding the bag. 2) The banks have repeatedly shown they are perfectly willing to loan money to those that cannot afford it. By definition, the reason somebody gets CMHC insurance is because they cannot afford it.

The converse of this has already been proven wrong. The converse is that when housing prices rise and more people move into homes, rentals should drop. Rentals are at record levels. When housing prices get too high, more people think about renting. This drives rental prices up, supply and demand at its core. The proof is that is exactly what has happened. A lot of people believe they were helped by the CMHC. But don't miss the point. If the CMHC did not back loans, the house you needed $200,000 to afford would have only cost $120-130. Therefore you would probably have been able to afford it without mortgage insurance. This is the whole point, the CMHC does not actually make homes more affordable, it just make people go into more debt. Not when the bubble bursts it won't. See my first post describing the economics of their profit and liabilities.

But they don't. You have answered your own question - housing insurance should function like fire and life insurance.......administered by banks of private companies. Because, also just as you point out, those entities can appropriately do the calculations. The government has proven it cannot. Correct, but the critical difference is that programs to clean up earthquakes do not contribute to the creation of earthquakes. It would be one thing if the CMHC was just there to protect against unforseen housing busts. But it creates the conditions for the bust. I've mulled over those facts for a long time, and the media feeds the idea that because of all that, we are safe. It's false. Just because we don't have all the factors, does not mean our fundamentals are good. The major problem is still here - people are buying a lifetime worth of debt that they can only successfully service because the interest rate is rock bottom. This is unsustainable. Just because we don't have sub-prime lenders who will rates the rates after 3 months doesn't change this. If the bank of Canada raises the rates, the effect is the same. You may believe what is reported that our banking system is good and it hasn't changed. What you may not have heard about is what has changed, which is the record levels of mortgage debt, unprecedented in our history. That's why it's different now. Read my original post and you'll see I very much took that into account. This is exactly what I'm saying, renters cannot save up because their rent it too high......as a result of the CMHC driving house prices up. Even if the poor borrow, they will lose the home as soon as interest rates go up, leaving them even further behind than with saving, in fact most likely bankrupt. The CHMC is the biggest long-term obstacle to the poor owning a home, not to mention everyone else. False analogy. It would make as an analogy sense if we allowed people to borrow money to buy alcohol, and allowed them to buy government provided insurance as a fee on alcoholic purchases that guaranteed against the customer defaulting on their liquor loans. We don't do that for alcohol and we should not do it for housing either. Or, the appropriate analogy would be banning alcohol vs banning home-ownership. I agree we should both allow them and not subsidize them. So when the analogy is appropriate applied, yes we should treat them equally. Basically the CMHC benefits one group of people. Older folks who bought their homes many years ago. I have personally benefited from the CMHC driving up the cost of my house since I bought it. But I am being objective and I realize how this is a toxic policy that will only do damage and ruin the lives of a lot of poor and new home buyers in the very near future.

I have a post-graduate degree, 10+ of uni and work as a professional making six figures. You responded with your usual, non-arguments and insults, consistent with your level of debate and understanding. Every system that operate on a similar premise as you are proposing, does nothing but lose money and increase in cost. We already have the proof that this does not work. Every person in this thread sees the problem, you are the only one who does not. You still don't get it. It's the not the cost of 1% that people stay in school to avoid. It's the fact that when there is no up-front cost, you attract the kinds of people to university who do not complete and just go to hang out and take various subjects that interest them. It's free, so why no just go? Who cares if you don't have much direction or know what you want. The 'finding yourself' aspect will explode, and the relative goal-oriented proportion of students will decline as a proportion. This is beyond obvious. It exists right now because of students loans, it will be amplified under your system. When there is no immediate perception of costs, it fosters that kind of behavior. This is basic human nature and we have plenty of examples occurring right now, we don't have to guess if it would happen, it already does. If there is no up-front cost, there is little consequence to lack of completion. The amount of students who enroll vs those that complete would skyrocket, and the system would operate in the red because the majority who enroll would never go on to the good-paying jobs that are supposed to fund the system. Basic economics.

One other point that is vital to understanding this problem. If there is a housing crash, can't you just say f_ck it and let the bank foreclose on the house you paid $400,000 for which is now worth $250,000? No, not in Canada you can't. Unlike in the US, if the bank sells your home and there is a big difference leftover, you are still responsible for it. A housing crash would not only push millions of out of their homes, it would push them into bankruptcy.

It is a subsidy because the government guarantees the loans. How would we look at premiums? The government has no way of assessing a reasonable premium because it is all artificial and based on politics, not market forces. But there is a critical, massive difference between the two. Healthcare has a budget for its costs and potential costs, and generally adheres to this budget. Gov housing insurance liabilities are not budgeted, if a crash occurs there is no way to cover it and the taxpayer will foot the bill. Put another way - you are right the government is a health insurance company. But there is no way to create 'health bubble', where people can borrow against their health and then suddenly all become sick when a bunch can't pay. Rather it's a predictable (although rising), fairly steady rate of health problems that will always be generally spread out evenly over time for the whole population. The CMHC is not bound to something natural like the rate of health problem's over time, the CMHC itself can create a cliff of problems for itself, and it has. It's a massive bill. Their liabilities are $600 billion. CMHC profits last year were $250 million. That means if 0.04% of additional homes foreclose, it's in the red. 1% would mean insolvency. The total tax revenues of Canada are $230 billion. Canadians are currently running their highest debt-to-incomes ratios ever, 150% today vs 60% in 1980. If the interest rate goes up even a little bit, there will be mass of foreclosures. This is because Canadians are spending a huge portion of their incomes on mortgage servicing today, more than ever before, around 50% of net income. That is with interest rates nearly zero. When people are spending half they money on their home every month with rock-bottom rates, guess what happens when the rate goes up? It is in no way a sound business. It is a business that responds to the politics of the moment. It only makes money when housing prices are rising and people are not foreclosing. How did that assumption/strategy work out for our friends to the south? The difference is you cannot have a 'human capital bubble'. And the reason is simple.....there is no government institution that artificially subsidizes human capital (only banks to do that, and they do it according to real risk). There is for homes, and that's why its a major problem. Whenever the government gets involved in a non-necessary market like home-ownership, it makes it more expensive for everyone, including the government. Housing is not a right, and trying to make it possible for everyone to borrow has only succeeded in making it virtually impossible for most new buyers to ever actually own their home. To summarize, the cmhc: - Drives up the cost of homes, making it impossibly expensive for new buyer's to buy without borrowing - Adds cost to mortgages because virtually all new buyer's need to pay cmhc fees - Encourages borrowing far more than would be reasonably safe for a given income, discourages saving - Drive poor people out of the housing market - Prices poor people out of rentals

Very true you need property owners. But owning a lifetime of debt is not owning a property, it's just owning liability. We do not require the government to make property ownership possible. The reason you need a rich parent is exactly because the CMHC has driven housing prices through the roof! It's the standard attempt at social engineering and that, so predictably, just makes everyone poorer in the end. if you got rid of the government loan guarantee, you could leave it to private bank to offer insurance themselves. They would assess risk more accurately and charge for that insurance as appropriate. Housing prices would drop in half and reach their true value in the economy. Lost the CMHC, and you lose the need to have a rich parent to own a house for so many people. It means of course that they might have to save up a little longer.....you know......that insane strategy of actually saving up for something until you afford it. We are at 70% homeownership, which is WAY too high. Servicing debt just means less disposable income for other things. So from the economy's perspective, its just robbing Peter to pay Paul. My fear is that the government will cower and do something stupid like print money to help everyone (and themselves) with their debt, which just encourages stupid financial planning and instability.

I disagree. US teachers are paid quite well, unless you are saying all teachers are paid poorly in which case US teachers still make a solid wage compared to most places. Consider the wages of teachers by country: http://www.guardian.co.uk/news/datablog/2012/sep/11/education-compared-oecd-country-pisa Those are stated in USD. But once you consider the significant purchasing power parity advantage of Americans over most other developed countries, it changes. GDP per capita corrected for PPP is $48K in the US vs $40K in Canada. Just to clarify, this means that if you reverse the numbers, you get the correct ratio. So in this case, it means something who makes $48K in Canada has a similar standard of living as someone who makes $40K in the US, a ratio of 1.2. Looking at that link, the US and Canadian teacher salaries therefore become equal, same with Germany (ratio 1.23). Checking the top 6, actually the US teachers are paid more or equal to the top, except the outlier Luxembourg. So I would disagree that they are necessarily 'making less' than other countries.

I'm assuming you asked because you know the answer and I totally understand that WIND is dependent on the networks of others. But why not? When you are small, you make the decision that makes the most economic sense at the time, which is to rent network space if you need to. There is nothing fundamentally wrong with that. The big issue is that the government and mobile industry make it seem like spectrum is somehow limited and has to be auctioned. In modern times this is basically irrelevant now. We should simply open the doors to any company to set up a network if they want. The current system basically has Rogers, Bell and (to a lesser extent) Telus operating like crown corporations.

And this problem would be even worse under your system. What you perhaps are refusing to see is that it encourages people to hang around in school and not take anything of any particular economic value. It's way more interesting and fun to take social science degrees and chill on campus than do something useful, and when its free this basically makes that demographic of student explode in numbers. This is beyond self-evident. Those people either do not graduate, or go on to gain no benefit from their fluff degrees. This increase the cost of the system, but those people never go on to pay back into it. The entire assumption about how it would work, totally ignores human nature. It would operate in the red, and the taxpayer would foot the bill.

Here's a mini-rant. The CMHC no longer serves any productive purpose in Canada. It was founded because the influx of soldiers returning from war and the difficulties in finding housing as a result. Worthy goal, perhaps. Today it basically serves one purpose.....to enable people who should never receive loans, to receive hundreds of thousands of dollars in home loans. There is absolutely no reason why a 22 yr old grad who cannot cobble together even 10% for a house should receive a large bank loan. I shouldn't pick on the young, there are all kinds of people who have never learned or cared to live within their means or save. Banks know this, and they don't give loans to those kinds of people.......unless they have a guarantee that those loans are backed. Welcome to Fannie and Freddie the CHMC. If you don't pay at least 20% down, you need CMHC insurance. This allows banks to lend foolishly because they eliminate their risk. This situation should not exist, and is basically exactly the same problem that led to the American housing collapse. Same story - government creates an entity that allows those with no ability to manage their budget, to get huge loans. But doesn't that help poor people? No. The mandate of the CHMC "includes facilitating accessibility to a "wide choice of quality, environmentally sustainable, affordable housing solutions." It has created just the opposite effect. When every kid stepping out of high school can get $300,000 and who's financial attention lasts about as far as the commercials during the Bachelor, this obviously drives the price up for everybody else as well. Way up. Home ownership is at ridiculous levels which are not supported by the economy, and homeowner debt is at out of control all time highs. Poor people cannot afford the median $350,000 home, nor even homes much less than that. Subsidizing home ownership has basically made it impossible for poor people to ever pay off a home. Attempts to help people without lots of money get stuff they cannot afford......what could go wrong? (facepalm) Yet we keep trying these dumb ideas time after time...... But they will rent right? Wrong. Home prices have gone up, and as a result so have rentals. It is a major issue right now that the poor are being priced out of their rentals. The other serious problem is that the Bank of Canada has to keep interest rates low to avoid pushing millions of people out of their homes. They do this to avoid the political backlash of people losing their homes, but the economy needs interest rates to go up, not down. Many factors contribute to the housing boom (bubble). By the number one factor BY FAR, is the increase in debt financing for homes. And the number one source BY FAR for this debt, is mortgage insurance through the CMHC. But it's making money you say. Yes, during housing booms it will always make money. When the crash hits, it will be losing money big time. And guess who gets to pick up that tab? The taxpayer of course. Moving the max amortization to 40 years was one of the worst financial decisions of the decade. Moving it back to 25 years recently was a good move, although much of the damage has been done. An even better move.....get rid of it! That was more of a full rant.

I agree, but the problem is it might only a be start to get pounded at the polls. In fact I would suggest adding on yet another super cheap program that sounds nice to the clueless, while targeting real financial liabilities. For examples, medicare.

The federal government should just get the h___ out of the way. We don't have a free market or competition, we have protections for the big 3 and terrible pricing/service as a result. Making more laws to allow other providers is not the answer, removing the laws we have protecting Canadian companies is the answer. Let foreign investment come in and allow the Verizon's, ATT&T's and Vodaphone's of the world get involved if they want to.

They make the same as teachers in Korea and Japan, but Korean and Japan have far higher costs of living and therefore those teachers in real purchasing power dollars are paid less. How are the Korean and Japaneses students doing compared to American students? Finish teachers make a good 6-7K less than American teachers, how are the Finns doing?

Where does your 50% number come from? Unless there are 35 million seats in parliament then technically 100% of people will never be perfectly represented.

Correct. Those that can fit in between commercials during American Idol, that is. Those votes will go from NDP to liberals. The CPC will come out on top again, but probably with minority status.

Based on what? I can'd fine any more evidence that those would be his policies than that the exact opposite of them would be.

Sure but for $300,000? Why not just leave it alone and cut something worthwhile, there are many choices in the subsidy department.