Lawrence B. Smith

Homeownership Returns, Tenure Choice and Inflation

This paper empirically investigates the impact of inflation on homeownership returns and tenure choice when the assumptions underlying the user cost of housing are modified to reflect separately the effects of unanticipated and anticipated inflation. The analysis demonstrates that when the user cost model is specified to reflect the impact of anticipated inflation on house prices, the mortgage interest rate and the capitalization rate, the returns to homeownership are lower than determined by previous user cost studies and are consistent with a reasonably efficient market. Copyright American Real Estate and Urban Economics Association.

Price Effects of Rent Control on Controlled and Uncontrolled Rental Housing in Toronto: A Hedonic Index Approach

This paper examines the price effects of rent controls with exemptions on rent controlled and non-rent controlled housing in Toronto. A model of rent determination in the controlled and uncontrolled markets is presented. The paper then applies a hedonic pricing technique to develop indices of the uncontrolled rent relative to the controlled rent for standardized sets of housing characteristics. Approximately one-half of the difference in observed rents is attributable to quality differences between markets and one-half to the effect of rent controls.

The Demand for Housing, Household Headship Rates, and Household Formation: An International Analysis

This study investigates the influence of availability and affordability of housing on demographic changes through an international analysis of the relationship between age specific headship rates and housing availability and affordability. The researchers describe the basic trends in household formation and headship rates in Canada, France, Great Britain and the United States, investigate the economic determinants of age specific household headship rates in the four countries, and discuss the implications for future housing analysis. It was found that the considerable increase in household headship rate during the recent postwar period has been facilitated in these four countries by the increasing real affordability of housing. In addition, there was a clear relationship between the household age category and the responsiveness to economic variables.

Rent Controls in Ontario: Roofs or Ceilings?

This paper describes the rent control program in Ontario and discusses the consequences of these controls. It indicates that rent controls caused both a small nominal decline and a large real decline in the per unit value of rental apartments, substantially reduced new rental housing starts, generated a rental housing shortage, created a dual market with significant rent differences between the controlled and uncontrolled (new construction) sectors, and imposed large costs on government in the form of foregone tax revenues and increased rental housing subsidies. The paper also indicates some of the political responses to the developing economic effects, such as the imposition of additional land use controls and increased government spending programs to stimulate new rental construction. Copyright American Real Estate and Urban Economics Association.

The Canadian-American Reciprocity Treaty of 1855 to 1866

The Reciprocity Treaty between the British North American Provinces (Canada) and the United States was ratified in February 1855 and terminated in March 1866. It provided for free trade in all natural products, free access for United States fisheries to the Atlantic coastal waters of British North America, and access to the St. Lawrence River for American vessels under the same tolls as native vessels.

An economic assessment of rent controls: The Ontario experience

Rent controls have existed in Ontario since 1975. Although controls have undergone numerous changes, the basic approach has remained a modified cost-pass-through system with provision for the elimination of financial loss and for a return of new capital expenditures, and, prior to 1986, an exemption for new construction. This paper analyzes the economic consequences of the first twelve years of controls. The major effects have been to reduce rents on pre-1976 units but to increase rents on newly constructed post-1975 units, to reduce new construction, to accelerate deterioration and conversion of the existing rental stock, to generate a severe rental housing shortage, to create an environment for “key money,” to inefficiently and inequitably redistribute income, and to significantly exacerbate government budgetary deficits by reducing tax revenues and inducing increased government housing expenditures.

Financial Intermediary Lending Behavior in the Postwar Canadian Mortgage Market

I. Financial intermediary investment behavior, 494. — II. Long-run trends and structural shifts in the postwar mortgage market, 500. — III. Financial intermediary mortgage investment behavior, 503. — IV. Conclusions, 513.

Intertenancy Rent Decontrol in Ontario

Intertenancy rent decontrol (referred to in Ontario as vacancy decontrol) forms the headstone of the Ontario rent-control system. The transition from a relatively rigid rent-control regime to intertenancy decontrol created distortions in the rental market, the most significant being the creation of a two-tier rent system with rent on decontrolled units above the rent that would have existed in the absence of controls. As an intertenancy system matures, maturation diminishes these distortions and recontrol provisions provide protection for long duration tenants. Alternative options for terminating intertenancy decontrol while retaining rent control all entail significant economic costs compared to the mature decontrol regime presently in Ontario.

The Crisis in Rental Housing: A Canadian Perspective

Concern has recently been raised in the United States and Canada about a growing crisis in rental housing. Since many of the issues raised in connection with the possibility of a U.S. crisis have surfaced earlier or in magnified form in Canada, this article examines the question of a rental housing crisis from the Canadian perspective. The article begins with a discussion of the background of the rental crisis and an examination of the pre-1972 tax preferences for rental housing. Evolution of the crisis is then analyzed, focusing on the 1972 restructuring of the tax system, expectations of accelerating inflation, government support for competing housing forms, and rent control. The impact of high interest rates on the decline in rental construction and changes in the socioeconomic composition of tenants and in the affordability of rental housing are also discussed. The article concludes with an analysis of the outlook for rental housing.

The Resale Housing Market

This paper describes and analyzes the structure and operation of the market for existing single-family homes. The paper develops aggregative models of sales and renovation activity based on the adjustment choice decisions of households to alter their housing consumption by moving or by undertaking renovations. The models demonstrate that housing resales and renovation expenditures occur when the present value of the gains associated with a housing adjustment exceeds the costs of the transaction. The choice of the adjustment mode is shown to be significantly influenced by the relative transactions costs of moving versus renovating. Copyright American Real Estate and Urban Economics Association.