June 24, 2015

Morning Thought: HITS for Vancouver

This is boggling:

From The Globe and Mail:

Chinese envoy says lack of oversight behind Vancouver’s house-price crisis

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The Chinese government’s top envoy in Vancouver says the city’s skyrocketing house prices and affordability crisis are due to a lack of regulation in the booming real estate market.

In a wide-ranging interview over tea at the Chinese consulate in Vancouver, Consul-General Liu Fei said local residents are blaming wealthy Chinese buyers for the city’s increasingly costly real estate but that the real blame lies with officials who monitor buyers, sellers and real estate developers.

“People are blaming the buyer. It’s the wrong direction,” said Ms. Liu, who has served in Vancouver since 2011. “I mean, the regulation here, nobody’s playing the role.”

Ms. Liu said this situation would not be allowed to occur in China, and pointed out that China’s government frequently wades into the country’s real estate market, and has strict policies with regard to affordable housing. She suggested a number of possible measures Vancouver could take to make housing more affordable, including the introduction of quotas to increase the number of affordable housing units within new buildings, greater oversight of real estate developers from the city and a tax or fee for overseas investors who want to buy luxury properties in the West Coast city.

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I doubt the Chinese envoy made these remarks off the top of her head in an unguarded moment.  The message has a purpose, though I’m not entirely sure what it might be.

(1) The Chinese are really concerned about the use of Vancouver real estate as a way of illegally laundering their currency.

(2) They fear a racial backlash.

(3) They can’t afford Vancouver real estate for staff housing!

Okay, maybe not, but it is still extraordinary for a foreign envoy to intervene in an incendiary local issue with such specific recommendations.  It makes the current lack of interest on the part of the provincial government even more stark – as Pete McMartin documents in his column:

Government is, um, studying it

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In the wake of Vancouver Mayor Gregor Robertson’s letter to Premier Christy Clark last week suggesting the provincial government should tax real estate flippers and owners of luxury homes, and the province’s reply to Robertson that perhaps the mayor should (and I paraphrase) suck eggs, we here at The Sun wondered how the provincial government can:

(a) Dismiss Robertson’s suggestions out of hand if there was a lack of data;

(b) Admit there was a lack of data but then quote a study by the B.C. Real Estate Association suggesting offshore investors had a negligible effect on the housing market (because, you know, the real estate industry is completely unbiased on this issue), and; (c) Sleep at night.

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When a government is indifferent to everyone from the kids in the streets (you can join them today at the Library plaza on Robson at 5 pm for another affordable housing rally) to the Vancouver Sun, then this is more than suggesting Vancouverites can all suck eggs.  It’s another four-letter word that ends in “uck” followed by ‘you.’

At least the ‘you’ that is on the other side of the equity equation when it comes to housing: ‘you’ll not be getting any of the equity increase from the escalating value of housing, and you’re not likely to get any in the future.  And we don’t care enough to even collect information that clarifies what’s happening.’

When we get the results of the referendum, I expect it too will be accompanied by a distinct lack of sympathy in the event of a No vote:  ‘Too bad the region’s future is dependent on the development of a first-class transit system; you’ll have to learn to live with a second-rate one, regardless of the fact that we, the Province, will be reducing our budget by the same amount of money that would fund the Mayors’ Vision – so we can cut the tax rates of the richest 2 percent of British Columbians.  Priorities, people, priorities!’

This is part of a pattern with respect to two of the most important constitutional responsibilities of provincial governments: housing and transportation.  Not only will they be downloaded to local government, but sources of revenue – even information – will not be forthcoming.

So let’s give that a name: Housing Ignorance, Transportation Sacrifice – or HITS.  Because that’s what happening to us: we’re getting a double whammy on two of the most critical shaping forces of our future.

It’s mind boggling.

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Comments

  1. Would be nice to get more of the influential baby boomers out to the event tonight in addition to the great support so far from Gordon, Peter Ladner and Ian Young. Any of the other Urban heavy hitters consistently on this blog willing to lend support?

  2. the government is incredibly arrogant pushing this aside. Interesting take from the local Chinese community:

    “Instead of being able to talk about (foreign buyers) openly, now you are being muzzled just by, ‘There’s no data to prove what you’re saying,’” said Ivy Li, a core member of the neighbourhood association.

    “By doing all that, it’s particularly making the Chinese community even more vulnerable, because they now become the target of people’s anger,” Li said.

    http://www.vancouverobserver.com/news/track-foreign-buying-real-estate-says-chinese-canadian-group

  3. The Chinese envoy is spot on !

    Indeed the politicians play hardball .. against each other. Either government could do more, to monetize this foreign cash for local residents’ benefits.

    The mayors can, and should:

    a) increase property taxes,
    b) increase parking fees for any car parked on residential roads, say to $200/month/car
    c) borrow more money to build more RAPID transit,
    d) reduce civil servants wages and benefits (or increase them less) to more market oriented wages& benefits, savings 10% of the $5B+ annual budget that could be invested in transit

    The provincial government could, and should:

    a) enforce taxation on houses that are sold, say for speculation purposes, or by non-residents [ much tax leakage here today]
    b) allow road tolls in conjunction with cities to reduce congestion
    c) allow rebates on raised property taxes to BC residents, by linking it to the SIN number and tax filing, thus effectively taxing foreigners far more, and locals the same as today
    d) treat a subway, a dedicated bus lane or signalling system or LRT the same as a tunnel or highway, i.e. an infrastructure investment where billions can be borrowed at sub 2%, i.e. still show a balanced budget and move this debt into the asset/investment columns of the provincial balance sheet
    e) charge immigrants fees for healthcare and/or schools, that will be reduced, say by 10% per year after year 5 ie forgiven in 15. We educate far too many immigrants for free, just to see them leave with a new shiny Canadian passport, while almost no property taxes, taxes of gains on houses income taxes or PST are paid while they live here. Are we this desperate for foreigners and their cash here ?

    1. I’m sorry, Thomas, but as worthwhile as these ideas may be in their own right; raising prices, fees, and taxes will not reduce housing prices. The higher the cost for a developer to build, the higher he/she must charge for that unit.

      In some sense, the Chinese envoy is not wrong. If the City is serious about reducing housing costs, and I don’t think it really is, it needs to be willing to ‘step in’ – in this case, be willing to take a hit on property tax revenue by incentivizing or prioritizing lower-cost housing at the expense of the higher rates the market will pay. Not just raising taxes on everything that moves.

      The City needs to reduce the cost of new housing construction for preferred developers (i.e., non-profits or ones who provide some minimum % of affordable units or). It will ultimately mean less property tax revenue to the City, compared to an alternative, at-market-rate development; but if they want to meaningfully increase housing options and reduce costs, this is one large thing they can do.

        1. Technically, no, but then you won’t get more affordable housing. TB is just advocating for more money all around, which higher taxation will achieve. And why pick on civil servants? The vast majority don’t earn that much. They’re just an easy target (full disclosure, I am not one).

  4. The backlash mentioned could all to frighteningly become real. I was talking to a young person who grew up in my neighbourhood and the anger at being priced out of their hometown was palpable. Spineless and well-meaning politicians alike have done Chinese immigrants no favour by trying to downplay or cover-up foreign buyer statistics.