Here’s an excerpt from an interview by CBC News with Housing Minister Rich Coleman on the topic of our times, housing affordability:
According to the Real Estate Board of Greater Vancouver, the benchmark home price index for a detached house in the region was over a million dollars in April this year. What can the province doing about this?
We recognize that home affordability can be challenging at times and the market has the tendency to have its bubbles and move up and down.
We’re going to look at things with regarding to building code, issues around development cost charges, and work with municipalities with regards to costs they’re putting onto housing.
As we do that, we have to make sure we’re not going to do something as a government that would force down the value of people’s assets that they work very hard to pay and devalue their equity.
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I think the interpretation is clear: the Province will do nothing directly to impact housing prices. Instead, the pressure will be on municipalities to reduce the costs they incur on development or the revenues they take from development. For local government, that means more responsibility and less money.
Politically, that means mayors and council will be expected to make the excruciating trade-offs in order to offset a reduced revenue stream from new development (on the assumption that that will lower the retail costs of housing) by cutting the level of existing services or by not providing the amenities expected to come with growth.
When combined with the likely outcome on regional transit, where no new revenues will be forthcoming unless drawn from the local tax base, the provincial strategy is becoming abundantly apparent: this is the way that local government will be constrained. Service levels are to remain static, growth must be paid for from existing sources, and the political consequences are to be borne by local representatives. So long as its provincial representatives can get away with it.
Same story over and over whether housing affordability, transit, education…it’s downloading to municipalities while cutting funding sources to manage these things.
I don’t know what the end goal is, other than simply avoiding blame that the current system(s) are not sustainable.
Why ask the citizens of Kelowna or Price George to fund the bus and subway system in Vancouver or Richmond. Indeed the funding has to be found locally, not provincially or federally. But the province needs to do its bit, by, for example allowing road tolls or vehicle levies to be controlled by the cities. Of course, efficient delivery of such system needs to be discussed too, and not the currently bloated, union controlled and grossly overpaying institutions cities and TransLink have become.
Education also needs more money, especially for ESL and disabled kids, and many foreigners or affluent immigrants, often here temporarily until they get their passport, pay far too little in income or property taxes, yet they consume these services. One solution here, as it is done in some US states, is to lower incomes taxes and increase property taxes. Texas, for example, has no state income taxes, yet very high property taxes. Such a system would work well in BC where we charge far too little in property taxes, especially for non-residents or non-income tax payers !
By that logic, why should I pay for a highway in the interior?
Because the highway in the interior, and bus routes in Metro Van benefit us all.
You’re far too myopic, as is this provincial government.
Yes, a highway (or airport) benefits you as your drive through the interior. That is why it is called a provincial road. However a bus (or LRT in this case) from Langley to Surrey benefits mainly folks in Langley or Surrey, and as such the bulk ought to be paid by them, not by citizens of Kamloops.
We need more money locally, far more. As such we have to create taxation room for cities to do that, i.e. lower provincial and federal taxes which are far too high. All income taxes and GST goes to Ottawa. It is far too much. And they graciously give back $1B for transit, annually, across the entire country which is far too low.
As such, expect property taxes to go up, perhaps parking fees, but not the necessary expense cuts in this union controlled municipal jungle. The problem is excessive wages&benefits, and not enough control by cites, for example to toll roads or raise licensing fees for 8 cyclinder pickup trucks. Only if its costs more to drive will people use a car less.
The issue is the (correctly placed) distrust by the provincial government to give cities this taxing power as the cities are huge money wasters. Bus drivers that make $85,000+, Translink cops at $100,000+, city planners at $150,000+, garage collectors in city parks at $75,000+ .. it is ridiculous.
“Yes, a highway (or airport) benefits you as your drive through the interior. That is why it is called a provincial road. However a bus (or LRT in this case) from Langley to Surrey benefits mainly folks in Langley or Surrey, and as such the bulk ought to be paid by them, not by citizens of Kamloops.”
If ‘mainly used by’ is your threshold, then the bulk of that highway ought to be paid for by people in the interior. But of course I disagree with that line of thinking. More efficient movement is better for all of us. Public goods benefit the public, so we all pay for them.
I think I’m a bit ignorant in this area. Has any city around the world successfully lowered the cost of housing while increasing the livability of the city?
(Note: to me, “cost of housing” does not necessarily mean “cost of owning a house”.)
“Large Wall Street investors who made billions when the U.S. housing market collapsed in 2008 are now betting real estate values in Vancouver and other Canadian cities will crash, financial insiders say.”
“The hedge fund investors, known as short sellers, are betting against what they believe is a housing bubble in Vancouver, Toronto, Calgary and other Canadian cities. They believe Canadians hold too much mortgage debt, and that Canadian banks, mortgage insurers and “subprime” private lenders will lose money on unpaid loans when property prices fall.”
http://www.nationalpost.com/m/wp/blog.html?b=news.nationalpost.com//news/canada/u-s-short-sellers-betting-on-canadian-housing-crash-an-accident-waiting-to-happen
There is no bubble. In an in-migration country, with 1%+ annual immigration or 300,000+ people annually they have to live somewhere, and they tend to gravitate to cities as that is where their friends, the activities and the jobs are !
Canada is an energy powerhouse, the world’s 6th or 7th largest oil producer, plus a major exporter/producer of: gas, coal, potash, diamonds, agricultural products, water, forestry products. Interest rates will remain very low for 20+ years.
Vancouver will grow by 1M people in 30 years, likely faster. GTA is growing as fast, or faster.
Canada has a very strong middle class, the wealthiest in the world (see here: http://globalnews.ca/news/1284297/canadas-middle-class-most-prosperous-in-world-report/) and is not struggling contrary to some people’s opinions: http://news.nationalpost.com/full-comment/andrew-coyne-forget-the-liberal-mythology-canadas-middle-class-is-not-struggling
In such an environment real estate will NOT go down. There is no bubble.
Speaking of Bubble, you live in one. Did you see todays Headlines? Greece, Puerto Rico? China lowered their interest rate yesterday. Why? I thought things were going great? People don’t move if they loose money at home.
This is neither Greece, nor Puerto RIco nor China. THAT is the reason we have no real estate bubble here and continue to attract immigrants from these places .. but also: Iran, Saudi Arabia, Russia, S-America, Asia, E-Europe, Africa .. everyone wants to leave these dictatorships or politically volatile regions and come HERE.
So, why not buy a few properties as they all will be worth more in a decade, not less. I challenge you to challenge your belief system, Ron. Just because you think we are in a bubble doesn’t make it so.
Look up Contagion. I challenge you to challenge your belief system, Thomas. Just because you think we aren’t in a bubble doesn’t make it so.
Indeed the province could do more, such as work with municipalities to co-fund rapid transit and to monetize foreigners’ demand for land, such as tieing the land sales to the tax code/SIN numbers, and/or allow cities to toll roads or cars by engine size.
In principal I agree that MetroVan, with 60% of BC’s population is big enough to fund their own transit and to deal with foreigners’ investment demand, such as raise property taxes.
However, the lack of cooperation between province and MetroVan is unhealthy.
Our taxes on the federal and provincial level are too high to start with, and need to be lowered, so cities can start taxing more, as that is where people live ! That is where the disconnect lies.
How about: no income taxes at all on the provincial level, but far higher property taxes, say up 100-200% ? That would effectively monetize foreigners’ demand for housing, while benefiting locals. That is what they do in Texas, and we should look into it.
I’m still struggling to understand the difference between lowering the cost of (new) housing through increased supply and lower municipal fees, and lowering the cost of existing housing through tweaking demand from non-resident investors.
Either way, isn’t the goal to bring down the cost of housing, which will reduce homeowners’ equity?
Any honest politician would say “prices are not set by politicians, but by the market. Many market forces are beyond our control: oil prices, interest rates, China’s monetary policies, exchange rates, the weather, ..” But of course it is better to pretend governments can actually do s.th.
What he should have said is “Our wages and benefits paid to civil servants are far too high, and as such we have to raise taxes to pay for it, making housing expensive. We also love foreign investors as they provide jobs for architects, planners, plumbers, concrete mixers, interior designers and realtors. Any action has a reaction. If we increase property taxes everyone will pay more. So we need to find ways to rebate the increase to local residents, especially seniors. We are working on that.
Only more supply, or less demand, drives down cost. Since we do not make more single family homes in established areas (W Van, Point Grey, Richmond, E-Van) we can only work on the demand side, i.e. outright restrictions or some taxation scheme to tax foreigners and affluent immigrants more who send their kids to school here and use healthcare services yet pay too little in income taxes. We are also working on ways to adequately address that by monetizing this seemingly insatiable demand by foreigners or affluent passport seekers ( aka “fake Canadians”).”
But I guess, that is too honest.
Here is a Bill that passed in the U.S. Senate last week. Imagine, just imagine, if Canadian Provinces could split up 27.5 billion dollars for transportation over 6 years.
http://www.smartgrowthamerica.org/2015/06/24/transit-oriented-development-financing-included-in-senate-reauthorization-bill/
What’s going on in this country? Off-loading to the provinces, who off-load to the municipalities must stop!.Infrastructure, housing, the environment, transportation will all suffer.
All the Jordan Bateman nostrums won’t help us one bit.
Our federal government is making the U.S. Teapartiers look like Trotskyites.
The Canadian federal government approved $1B/year, which is the exact amount the municipalities asked for: http://news.nationalpost.com/full-comment/john-ivison-federal-budget-will-fund-up-to-1b-annually-on-transit-projects-in-biggest-cities-sources-say
A step in the right direction. Missing is effective use of funds (aka taxes collected) by aligning payments to civil servants with market realities. Pension entitlements by civil servants are grossly out of control here in Canada, given the generous wages, other benefits and low risk of layoffs: https://www.fraserinstitute.org/publicationdisplay.aspx?id=20381&terms=pensions
It also called for a funding commitment of 15-20 years, based on five-year planning cycles, with the allocation based on transit ridership, which would see most of the money going to the biggest cities.
Herr Beyer,
You left out this part of the National Post article on the 1 Billion federal commitment.
Public sector compensation is not the problem. If you have an ideological axe to grind, so be it. I’m sure the public sector Unions can take care of themselves.
The Federal Conservative’s billion a year commitment is greater than that in the U.S., since that country is ten times the size that Canada is.
If the U.S. We’re to match what Canada is offering it would have to come up with $60 billion. More than double.
Public sector compensation is THE problem, as the bulk of our taxes go towards salaries and cushy benefits, especially pensions. If we had more adequately paid civil servants then we could solve many problems in Canada, such as transit or education ! The public sector unions are out of control in Canada, THAT is the problem Sir Tom !
“the bulk of our taxes go towards salaries and cushy benefits, especially pensions”
Show us the numbers, Thomas.
The minister is saying that they will try and find ways to reduce house prices but not reduce present house values. This seems right. Imagine the disaster to the hundreds of thousands of people that have saved money and are paying down mortgages, if their properties values were reduced by their government.
Finding any way to reduce the cost of homes is the right thing to do.
“ways to reduce house prices but not reduce present house values”
Such as?
Since this is really a Vancouver issue, the province will speak out and lobby the city of Vancouver to reduce some of the DCCs and other permits and fees, on behalf of young people trying to buy a home.
In many areas Vancouver is rapidly becoming an elite market for housing that only the wealthy can afford. Massive residential areas of Vancouver are zoned for single-family residences. The province can speak out for the less rich in society and try and encourage those at Vancouver city hall to allow more density thereby reducing unit costs.
It’s fairly obvious that those happily ensconced in city hall earning tons of money have lost touch with ordinary people. Poorer people have to count on the province to pressure the wealthy Point Grey and Downtown city hall dwellers to curtail their lavish management and bureaucratic excesses to reduce the cost of housing.
DCCs and permit fees do not add up to housing price unaffordability. These are only excuses and targets for blame used by the real estate industry to detract from a hot market and exorbitant real estate agent fees at a time when incomes have not kept up to inflationary housing prices.
People who blame DCCs have never worked behind the counter and dealt with record development applications year after year, nor attempted to calculate the significant level of public services said developments will actually consume.
What solution(s) do you propose? Do you support reducing those fees, as you say the Province will push for?
It would be almost impossible to find someone outside Vancouver City Hall that doesn’t think that fees and permits requirements are a lengthy and very expensive process. Going through the process means paying interest on money borrowed to secure a site for up to two years. This alone will become highly inflationary on house prices once interest rates start to climb.
Any bureaucracy that decides to expand into new areas, in our, Vancouver, case dead and dying tree complexities and LEED and Energy Audit requirements, will inflate costs. Whole new industries are springing up to meet the requirements for Sustainability and Trees Preservation, Water Use Flows, Showers instead of Baths, etc., etc. I’m sure many of us are following Mr. Roy.
http://buildinginvancouver.com/2015/03/how-the-city-of-vancouver-is-killing-trees-with-its-tree-by-law/
The City is moving forward with its agenda and flippantly blaming the province and the feds for high prices. It seems to be working for Vision, so don’t expect prices to decline for a long time.
You obviously have no experience with processing development applications. There are often hundreds in the queue with a set number of staff to deal with the backlog. Should cities staff up more (vancouver isn’t the only one with record development), then people like Thomas will put out the call to reign in the overpaid Fat Cat bureaucrats.
The best developers understand this and plan accordingly.
And your link proves that anecdotes do not portray an entire development processessing system accurately. In fact, it appears to be only a well-designed personal bitch blog.
So…. what solution(s) do you propose?
The cities can’t do much to stop the housing price inflation. It starts with the federal government revamping immigration policy. Why exactly does Canada have a burning need to the skills of rich businessmen or communist party cronies? We are perfectly capable of conducting business with plenty of other countries without feeling a need to import business contacts. Of course, the old argument is we need to increase immigration to fund social programs for an aging population, but that’s not going to work when data shows much of the areas receiving the bulk of Chinese immigrants are reporting below average incomes, and hence little taxes paid.
We need immigrants with the skills to serve an aging population. That’s everything from doctors to caregivers to bus drivers, all of whom will be working and paying taxes here. And yet we are driving up the cost of housing for all those new arrival as well as ourselves.
I have noticed that the majority of staff in places like my mother’s care facility are immigrants, the majority of whom are underpaid compared to their hospital cohorts. They are performing a vital service to sociaety and my hope is they can upgrade to the hospital level one day … in time for us Boomers to arrive.
Bob – well said. Former mayor and former MLA of Richmond Greg Halsey-Brandt reported much the same issue a couple of weeks ago, but it hasn’t garnered much ongoing press or political attention to date, IMO. This does matter greatly, the pattern of not reporting (significant) income while at the same time using all public services.
Indeed.
But what is rational behavior of a wealthy (male) immigrant with a family ?
Buy the biggest house here they can afford, send kids for free to high school so they learn English and other useful stuff, get them all passports so they have options, use free healthcare for wife and perhaps even elderly parents, then move on to the next country (UK, Australia, USA). Then sell the house for a big gain. Almost no income taxes paid, very low property taxes, and no capital gain on the house in the wife’s name !
How long will we tolerate this “immigration” charade ?
Let’s not stop immigration, but monetize it:
a) bill immigrants for education and healthcare, or ask them to put up a bond, say $100,000 per person. After 5 years of being here, per year it gets released $10,000/year so in 15 years it is returned, on your income tax form if you are actually a Canadian citizen and pay taxes on your world income here.
b) increase property taxes, say 100-200%, and rebate that increase to income tax paying BC residents
c) link house purchases to citizenship’s tax filing system. If you do not pay income taxes or do not report world income here you get to pay a 50% capital gains tax on your gain.
d) increase land transfer taxes (“stamp duty” is what the British and Australians call it), say by 1% per $1M to 15%, and rebate that increase to income tax paying BC residents
Here’s what Philly is doing to preserve affordable housing…
http://nextcity.org/daily/entry/philly-gentrification-neighborhoods-rowhouses-repairs
What if Vancouver gave some kind of break to encourage people to keep their properties in good condition (thinking of seniors on fixed incomes in old houses but also long time homeowners who didn’t buy in when houses were $1 mil +)? As opposed to demo by neglect because they can’t afford maintenance/can’t afford or figure out how to navigate the complex city permitting system/don’t want to put any more $ into the house because you never know when you might get forced out by encroaching redevelopment.
Why give home owners of $1M+ homes any money ? That ownership is a choice. We should perhaps have a minimum yard maintenance policy, such as trim the hedge, cut your grass or don’t have weeds or we will do it for you, and bill you ? Some of our neighborhoods are deteriorating because the ( often absentee or buy-and-flip) owner doesn’t care about the visual appearance of house or yard.