Fact Check Team: The rising cost of housing in North America

WASHINGTON (TND) — Housing costs in the U.S. are getting more and more expensive as new numbers from the Bureau of Labor Statistics show it has increased by the largest amount in 40 years.

This is not a problem unique to the U.S. Canada is dealing with some of the priciest housing costs in the world and Canadian Prime Minister Justin Trudeau recently announced plans to lower those prices.

According to the Canadian Real Estate Association, home prices have soared more than 50% over the last two years and are nine times more than the average household income.

In an effort to cool down the market, the Canadian government announced a two-year ban on foreign home buying. The goal is to prevent foreign investors from pushing out local buyers.

Data shows that property investors make up the largest buyer segment in the Canadian housing market, but foreign buyers account for a small portion of these investors. They own 2.8% of Canadian housing on average.

Some economists are not convinced this ban will have a huge impact on the market — but there should be more data as to whether this ban works in the coming months.

The ban doesn’t apply to everybody, which might be another reason why some economists are questioning the ban’s effectiveness.

Permanent residents, foreign workers, refugees and students are excluded and foreigners who are purchasing their primary residence in Canada will also be exempt.

Canada is also setting aside billions to help with their housing issues. They’re providing a tax-free first home savings account that would give prospective first-time home buyers the ability to save up to $40,000.

It is estimated that the tax-free first home savings account would provide $725 million in support over five years. They’re also setting aside $1.5 billion for thousands of affordable housing units.

With inflation at 8.5% and the Federal Reserve increasing interest rates, buying a house in the U.S. is getting more and more expensive.

Foreign investors are buying up the nation’s real estate and possibly contributing to the high prices. Foreign investment was actually slowed due to the pandemic with a travel ban in place for almost two years.

According to the National Association of Realtors, foreign buyers spent $267 billion on U.S. real estate in 2018 and $183 billion in 2019. In 2021, spending dropped to $107 billion because of the lack of access.

According to CNBC, cities like New York, Miami and Los Angeles attract global investors but those investors are buying up entire neighborhoods in suburban areas.

The Washington Post reports homes that used to be largely owned by first-time homebuyers are now acquired through the use of a computerized property-search algorithm and swift all-cash offers. This, of course, beats out middle-class buyers.

Canada, China, India, Mexico and the United Kingdom are some of the biggest investors in the U.S. and as a whole, foreign investment in U.S. commercial real estate increased by 49% last year.

The U.S. government does charge foreign property investors a tax of up to 30% on profits made from U.S. commercial real estate. However, unlike Canada, there are no plans to outright ban them yet.

Foreign investment also is not unique to commercial and residential real estate.

There is growing concern that Chinese, Canadian and European firms have expanded their presence in American agriculture by buying thousands of acres of farmland.

As a result, there has been legislation introduced on state levels and on the federal level to to restrict foreign ownership of farmland.