The Globe and Mail‘s Vancouver real-estate writer, Kerry Gold, has been doing some of the best analysis on our housing dilemma, notably in her most recent column, based on an SFU Urban Studies forum:
Some wonder if it’s time Vancouver acts to slow foreign buyers
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If a city defines itself as interdependent communities that are connected, funded and guided by a taxpaying base of businesses and full-time residents, then Vancouverites are now finding themselves on the sidelines.
They’re often not even on the radar of real estate marketers, especially where purchases of high-end properties or bulk-sale condo presales or land assemblies are concerned. Those high-stakes buys drive the market from the top down, pushing prices up across the entire region. And yet a good many of those purchases are made by the mysterious international investor, a nebulous “other” who has all this power and yet so much anonymity. Who are they? What are their primary residences? How many properties do they own? Which properties do they own? …
Considering that the median family income in Vancouver is $66,000 – and we carry household debt that exceeds the national average – that demand isn’t coming from anywhere inside the province.
It’s not even coming from inside the country, according to geography professor David Ley, who gave a presentation last week at Simon Fraser University’s HOUSE: Rethinking the Affordability Crisis symposium.
Dr. Ley has been studying the unaffordability crisis in Vancouver and cities such as London, Sydney, Hong Kong and Singapore for several years. He has found a direct correlation between net immigration and Vancouver housing price increases over a 30-year period. As house prices continue to climb crazily while incomes stagnate, there is a decoupling under way between the local economy and the housing market. As one local pundit put it, the market is no longer income driven – but capital driven.
“Incomes are low, and there is very negligible net migration into Vancouver from the rest of Canada, and those are the two leading indicators that usually tell you something about a housing market,” says Dr. Ley. “In this case, the capital that’s coming to the market is clearly not from the people with those low incomes, and the new people are coming in as immigrants.”
He sees no end in sight for the insatiable demand by foreign investors. In fact, he sees prices only intensifying – as does University of Melbourne urban geography professor Kate Shaw, who was in Vancouver this week. And the weakened dollar is stimulating the demand, offering the foreign buyer a price reduction of 20 per cent.
“I don’t think it’s a bubble,” Dr. Shaw says. “I can’t see Vancouver and Toronto and Melbourne and Sydney becoming unsafe places to invest. I think it could go on for a very long time.” …
Both academics see government intervention as mandatory in Canada and Australia, if the average-income resident is going to manage for the coming decades.
“The solutions are pretty easy,” says Dr. Shaw. “Taxation is a very powerful mechanism and you can absolutely disincentivize as much as incentivize. So it’s not that we don’t have solutions. The politics around it are an entirely different matter. Possibly the biggest problem is the political class in Australia is one of the largest beneficiaries of the taxation regime, so there’s not a lot of appetite.”
But judging from this week’s jail-time announcement, Australia’s political class is clearly having to respond to its voters. The only way there will be government intervention here is if people demand it, Dr. Ley says. “The only reason I could see for government interest is if there is a political push-back by people, that this becomes a political issue.” …
“I’m quite surprised that there has not been a politicization around this,” Dr. Ley says. “I think the fact that we suppress data means they can’t be well informed. The kind of data that is normal in other cities, we just don’t have here.”
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So why hasn’t this issue become ‘political’? – in the sense that the political class at least has to talk about it.
While the city of Vancouver has relatively modest resources, the federal and provincial government, in particular, could take action, Dr. Ley says.
“I think it is negligence. There is just no interest in dealing with these questions at the provincial level. It is just a non-issue.”
Indeed, the two most critical issues that shape a city – housing and transportation – are either not agenda items for our provincial representatives or have been shifted onto the region with the intent to remove them from provincial responsibility. Whether it’s about transit funding or housing interventions, the Liberal MLAs for Vancouver have been almost totally silent.
Silence is a good defensive strategy – until that point when the electorate is catalyzed into action.
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Trish Kelly in Metro thinks it could happen among ‘Generation Squeeze’.
Want affordable housing Vancouver? Turn those hashtags into votes
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Recent university grads went into their degree programs expecting they’d obtain good jobs upon graduation, maybe better jobs than their parents had. Now, after busting their butts in school, they’re sitting down to do the math on how long it will take them to get the white picket fence their parents had, and the answer is: probably never. Not in Vancouver.
The #DontHave1Million campaign is getting lots of attention and retweets, but will it result in any change for this generation? Not unless it finds a vehicle for this discontent in the real world. These frustrated young people better figure out a way to channel their concern from social media hashtagging to actual political advocacy, because politicians don’t listen to Twitter users, they listen to voters. Organized voters.
Here’s one idea: UBC’s Paul Kershaw has launched Generation Squeeze, a national lobby group aiming to, among other issues, improve affordability for Canadians in their 40s and younger.
The project is modelled on the success of the Canadian Association of Retired Persons — we all know how politicians prick up their ears when Boomers declare what they want.
Kershaw’s organization wants to make the federal government pay attention to obstacles faced by younger Canadians, such as the high cost of housing and child care, stagnant wages, and high debt loads.
How bad things are can be seen in a video called What Is Generation Squeeze? at gensqueeze.ca. One profound image shows just how little family incomes have grown since 1976 and why all of us who can’t see a future in our city need to stand together.
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As Kelly says, getting government to pay attention will require way more than a hashtag campaign or a petition at change.org. Social media may actually be part of the problem, giving the illusion of action while avoiding the organizational effort that really makes a difference.
(For some insight into real-world examples of the difference between how effective political organizing works and how it trumps social media – drawn from the Arab Spring – go the TED Radio Hour’s April 24th podcast, Getting Organized – and start at 21.20.)
Still, given the amount of media discussion that reflects a general public anxiety if not anger about the way the city seems to be changing and the resulting inequity, it may be just a matter of time before politicians have to catch up with the public and propose some effective interventions. Why it hasn’t happened yet is actually a bit of a mystery.
Reblogged this on Metro Van Musing and commented:
It seems ludicrous that the average family can’t afford to buy a house in the city where they grew up.
Best comment ever:
“Yes, they’d rather get everybody paying an extra 0.5% Translink Tax rather than going after non-residents and non-citizens who buy Vancouver real estate like penny stocks on the Shanghai stock exchange… Worst part is the leave the house vacant and unrented.”
time to act:
Sign the petition:
https://www.change.org/p/premier-christy-clark-mayor-gregor-robertson-mayors-and-city-councillors-of-the-gvrd-restrict-foreign-investment-in-greater-vancouver-s-residential-real-estate-market?just_created=true
Rally:
https://www.facebook.com/events/419315721574615/
Land is limited in the Lower Mainland. Cities full of empty condos are not desirable. Neighborhoods where people don’t even speak English is alien and undesirable. Young people, young couples or young families being unable to afford starter homes because foreigners snap them up is unhealthy for a society.
Since foreign ownership is hard to track, as one can open a Canadian trust or corporation easily, it is better to increase land transfer taxes and property taxes. How about 1% land transfer tax per $1M of value, up to 15%.
Property taxes and land transfer taxes need to be increased in BC as provincial services such as healthcare, parks, policing or education used by passport seekers (also referred to by me as “fake Canadians”) cost money, yet these immigrants often do not pay enough, or any, income taxes here nor PST. The tax mix has to be revised. BC residents then get a credit on their income tax form as foreign ownership is tough to track. The result is that BC residents pay similar taxes as today whereas the non-income tax paying passport seeker or foreigner pays far more.
Just because you have an address in BC does not mean you derive your income here, as many foreigners or immigrants operate abroad and derive incomes, often vast incomes, elsewhere.
That should be the focus, as opposed to outright ownership restrictions that are hard to track or enforce.
The tax mix has to shift far more onto properties, from income taxes or PST !
“Neighborhoods where people don’t even speak English is alien and undesirable,”
This sounds like the small farming town near my Ukrainian + Romanian-speaking grandparent’s Prairie homestead in 1906. No one on these thousands of surrounding homesteads spoke English initially, yet they were welcomed and thrived and added three more generations to the Canadian melange of peoples, not to mention a huge contribution to the economy over a century.
I can’t help but compare the impact of Mexican immigrants both legal and illegal, on the state of California. Worked extremely hard, did the jobs no American wanted to do, added incredible value to the economy, powered the agriculture, construction and hospitality industries, improved the lifestyles of the Californians (Maids, gardeners, mechanics, cooks, etc). Started their own businesses on mass, scrapped and sacrificed to buy their own homes. The value to the California economy = Billions.
Can you say the same about Asian immigrants? Asian immigrants have driven the real estate out of reach for everyone ever since we sold the Expo lands to Li Ka-Shing and Concord Pacific marketed it to Hong Kong and Taiwan. Have there been economic spinoffs from business creation? No. Mulroney sold the passports to the wrong region, he should have targeted Mexico and Central America instead.
You’ve missed a key point, Ron. It’s a few wealthy immigrants of whatever origin throwing money at real estate here. The issue is money, not origin.
To blame “Asian immigrants” is to omit mention, as one example, of the Chinese labourers who worked and died here building the CPR and who arguably hold a place in BC history and confederation that outdates a huge number of European immigrants.
Your totally right, sorry I got a bit off track there. I totally value and respect the history of the hard working Chinese immigrants to BC, no issues at all. I guess I was referring to alot of the Asian immigrants who in the last few years were targeted by our government as economic whales who I believe have done little to improve the lives on the residents in the region (From an economic perspective)
We haven’t heard anything from our politicians because the causes of the housing crisis are complex and the potential solutions just as varied. Politicians, in general, prefer a clear narrative that will resonate with voters, and corresponding solutions that appear to rationally tackle the problem. Ideally, the proposed solutions should have a low risk of going sideways within the scope of a single term.
Unfortunately, there is no single narrative (or set of policy solutions) of housing affordability which would give our politicians the traction needed to act. We have all these moving parts of benchmark rates, domestic speculation, foreign speculation, limited land, mortgage policy, and municipal zoning that defy a clear policy thrust. I find that the blogs and newspaper columns seem to periodically move between these themes, but never settle on one long enough to rally the electorate (and their representatives) around a specific cause.
So well said, Chris, in only a few paragraphs.
Why is it so hard for our politicians and not those in Australia, Hong Kong, Singapore, London…….
Don’t buy it. Vancouver is a city who’s main economy is selling homes to one another and especially foreigners to make a quick buck. Surprise surprise the Liberals are the ones who seem to be frozen with a lack of decision making, they love whats happen at the moment, make the richer richer and screw the working person for quick buck. As I mentioned earlier they would rather tax us an extra 0.5% Translink Tax rather than going after non-residents and non-citizens who buy Vancouver real estate
Why not tax property transfer more, say 1% per $1M sold / flipped ? To my knowledge 15% is now charged in UK, Hongkong and other nations. Toronto charges a second such tax, besides the Province of Ontario. Couldn’t “Vision” Vancouver do the same ?
“Vancouver is a city who’s main economy is selling homes to one another and especially foreigners to make a quick buck.”
Uh, no.
Real estate is not at the top of the list. And the portion of real estate oriented to luxury homes and condos does not form the largest portion. It seems to get all the news, though.
You have discounted ordinary condos, the port, tech industry, financial services, public administration, etc. etc. in your hurry to score a point.
I watched the Generation Squeeze video with less and less enthusiasm as it went on. Lost in its generalizations is the truth that it wasn’t easier for a lot of young people in the ’70s and ’80s. My first mortgage was 11 3/4% — a deal, I found, when I had to renew it at 14 1/4%. More than 75% of my after-tax income went to housing. I was envious of my friends who had gotten into the market before me and locked in at 8%. And therein lies the more fundamental truth of the Vancouver housing crisis: it’s not about this generation, it’s about who’s in, who’s out and who got there first. True, a lot of younger people are coming late to the party, but it’s a big party and there are a lot of places to buy farther out of the urban core at prices that aren’t much different than 5 years ago.
When I spent a few years as a CMHC Scholar at MIT doing research on housing I came across a truth that still seems as true today as it did back then: affordability depends a lot on expectations. Yes my parents were able to afford a house on a single salary and they paid off the mortgage a lot quicker than I will. But they didn’t expect to live as expensively as we do today. They chose to live on the outskirts of a small and unglamourous city, shared an old car, travelled rarely beyond where the car would go, had one small TV, cooked from scratch, didn’t have life insurance and rarely had the latest technological conveniences. Every time I think of how expensive it is to live in Vancouver I remind myself that there are plenty of small towns where I could live cheaply like my parents, but the fact is I don’t want to live there. Too slow, done that.
That’s all well and good but back in your parents heyday you could get a well paying job without going to university and if you did go to college (Which was dirt cheap) you were set with well compensated work. Also the moving to the small towns and provincial cities was a possibility because there was a good amount of work and a pension to match
Good jobs exist today in trades without a university degree.
Look no further to excessively paid civil servants and associated taxation as the root cause of higher taxes and an inability to save on low after tax wages.
Again, that was all true for some, but my parents had university degrees, didn’t make a whole lot of money, didn’t have a pension and in fact spent their money like the world didn’t owe them a living. Then I graduated from 8 years of university into a recession. And again, expectations were lower. We didn’t start the day by going for the equivalent of today’s $4 designer coffee. But there was one thing that we did exactly the same as today’s young first-time home buyers: we went out expecting a house at least as good as the last one we lived in with our parents, and we were equally shocked to find that we couldn’t have everything. We got over those expectations quickly.
Have you actually spent any time talking to young people and understanding their current struggles? I asked my twenty-something hairstylist that lives in Chinatown if she was enjoying any of the hip new restaurants coming to the neighbourhood and she says that she can’t afford to go out at all. I suspect the ones who are consuming “$4 designer coffees” as you put it are probably so disillusioned with the cost of living and keeping their head about water that all they have in life to look forward to is a cool place to hangout and nice fair trade beverage to sip on. Most of them support these type of places because they don’t believe in trampling workers and the environment like has gone on for years in the times you and your parents were growing up in.
This might surprise you: my kids are 20 and 22 and just out of university. They look around and see there’s no future in modestly-paid service jobs anywhere, not just big and growing cities like Vancouver. It’s a pretty recent phenomenon in Canadian cities that eating in “hip new restaurants” can be seen as a basic indicator of affordability. In Victoria in the 1950s my uncle tells me “there were 3 restaurants good enough to take your mother, and I ran one of them.”
Yes interest rates were high when you bought into the market and that made life difficult, but the difference between a year of salary and the price of a home wasn’t anything like what it is today.
In the late 1970s a man could make $15-20,000/year. A detached house on a prime west side lot could be had for $90,000 (5-6 years’ salary). Out in the wilderness of South Surrey full acre lots were going for under $40,000 (2-3 years’ gross income).
Today similar jobs pay $60-80,000/year.
If affordability had remained static over the years a house in Dunbar would cost $400,000 and a big chunk of land on the fringes of Metro Vancouver would sell for $160,000.
Vancouver hasn’t just gone up in price, it’s a different city. Go to Victoria today which is about as sleepy as Vancouver was in the ’70s and you can get the equivalent of a Dunbar lot for pretty close to your $400k — $600k in prime Oak Bay. There are a lot of places people can go where prices are more in line with incomes (and urban amenities are more in line with what people got in Vancouver in the 1970s.) I should know. I just moved back from there. Why? It was too sleepy. I rent in Vancouver now; it’s not ideal and I couldn’t buy half of the house I owned outright before I left Vancouver 15 years ago. I could be bitter about it but I prefer to look at it this way: any time I want I can go out to the sleepy suburbs and buy back in or I could rent here and walk the waterfront every day. For now I’ll stay.
David, the income-home gap isn’t nearly as wide with standard condos as it is with $2 million detached homes on 4,000 ft2 lots. To compare with detached houses with big yards became unrealistic over a decade ago and it’s unfortunate so many still assume the unattainable is a standard measure.
No the income-condo gap isn’t nearly as wide, but like the market for detached houses it’s growing and that’s really the point I was trying to make. What once took 5 years’ salary now takes 25. What once took 2 years’ salary now takes 12. The condo that was once just 2 years of very modest earnings is now 7 years of management level income.
Exactly. this is the scary part. They tell us we can’t expect detached homes so ok condos then. They tell us we can’t expect condos in the city so ok MICROSUITES then…. The rest to the bottom
Dunbar homeowners decide not to sell to Foreign buyers and instead to couple for less money who actually wants to live in the house and not tear it down. Yes!
http://www.vancouversun.com/opinion/columnists/Barbara+Yaffe+Realtors+devising+creative+strategies/11047711/story.html
Yes, that works some of the time, but it only works when the price from the local buyer is high enough to be enough, and (ironically) right now that’s because local buyers have been forced by the foreign competition to bid much higher than they would otherwise bid.
What’s the issue? Foreign money distorting the market or low earnings?
Eric – I’d say both. But the former is something government can do directly and soon, while the latter even a $15/hour minimum wage won’t do much about, but should still be legislated at the right level.
The question I have is why are wages historically so much lower here for trades and even professionals than elsewhere in Canada? Absence of head offices? The fact that we’re pretty much a service rather than manufacturing economy? The so-called “quality of life” bonus?
I don’t think the number of head offices is a viable measure of performance. Calgary has quite a few more head offices than Vancouver yet their economic performance, being run by a one-piston engine, has tanked.
BC’s performance was actually higher than Alberta’s last year because we are far more diversified and barely felt a twitch when the price of oil halved. I also believe that the urban design and development response to a varied economy was quite innovative with such things as mixed use in stand-alone downtown buildings with residential on top of offices, dedicated residential buildings in or within a short walk of the CBD, even with the development of ‘mingle’ condo units where individuals living in one condo have separate mortgages and share common kitchens, dining rooms and living rooms, etc.
In Calgary and in some parts of Toronto massive, block-filling single-use corporate offices predominate. But Vancouver will still retain its finer-grained and more nuanced approach even with the latest trend to build more dedicated office towers.
Wages are lower because enough folks show up for lower wages. Why pay $30/h if enough qualified folks for $24/h show up ? Generally speaking not all wages are lower than elsewhere, say for accountants, waitresses or construction managers. In many categories there is a vast oversupply of qualified applicants, say teachers or environmental engineers and that is why their wages in BC are lower than, say AB.
We also have a large immigrant pool, and many work for 1/2 or less than a similar non-immigrant, especially in categories where language skills are less relevant than the core required skills, say as cab drivers, plumbers, landscaping, painters, hairdressers, or in retail, even as dentists or opticians.
After considering historical and the present situation, any action on the first point is impossible to contemplate from either the municipal or the provincial level.
The absence of manufacturing and head offices are important. We probably all know professionals that had to go east to earn proper salaries because there is so much less industry here in BC.
Since we now have resistance to the traditional resource industries, even these cannot be expected to generate high paying work and provincial wealth. There is some hope that high-tech will become more prominent as an industry, although the bay area of California and the Boston region will always be massively larger, as will Hollywood.
That leaves us with the dubious prospect of becoming even more of a resort and retirement town, where the minimum wage becomes more important because the gap between those wealthy enough to enjoy the resort and those servicing it is always wide.
Eric – I don’t agree about the impossibility of action. Examples from elsewhere say differently.Absence of political will, perhaps, as evidenced by the rest of BC’s premier’s comments today.
Does anyone really expect the Premier, whose chief backer is Biob Rennie, to do anything that will upset the real estate ponzi scheme this city’s economy is built on? Ditto for Vision Vancouver who is funded by developers. You are on your own here folks, don;t expect government action unless you vote in governments that publicly pledge to do something about it.
Ignoring the populace for too long may result in an orange crush, as we’ve seen recently in Alberta.
The tax mix has to change, from income & PST to also include far higher property taxes, and regulations who can or cannot buy real estate. Taxing is far easier and more profitable actually. As such, let’s not outlaw it, tax it. For example, 1% per $1M in value up to 15% on land transfer and doubling of property taxes while giving tax credits to BC income tax payers.
Frank – Have you read Bob Mackin lately?
Eric – must I, in order to have a semi-informed point of view?
Good question. Unfortunately I can’t answer that.