From another devastating analysis of the insane housing scene in Vancouver by the Globe and Mail’s Kerry Gold:
(Development consultant Richard Wozny has) studied the situation and has come to several conclusions: that more supply is nothing but fuel for the unaffordability crisis; that house values that are wildly disproportionate to incomes indicate a high level of tax evasion; that government is failing to institute fair tax regulation to ensure infrastructure needs are met; and that all this “growth” is simply not paying for itself.
The result is that a basic necessity – housing – has become a low-risk profit-making tool.
“What would we think of someone who hoarded food? Why is real estate any different?” asks Mr. Wozny.
This is the second recent piece by Kerry Gold that contained real kernels of truth, notably on finding solid evidence of speculation. Last week’s column referred to developers using the condo tower presale period to market units to overseas investors / flippers therein vastly inflating the price before locals are offered the dregs. That must be dealt with through taxation and housing policy.
However, after Wosny’s insightful comments (notably on public infrastructure) it didn’t take this piece long to devolve into an anti-development / gentrification / foreign corruption jumble. Gold is smart enough as always to find others to say these things for her.
One remembers her lengthy feature piece in The Walrus that dismissed supply and demand in all of two lines. Meanwhile, the Globe’s Report on Business found that Toronto’s recent sky high prices were not just due to foreign money, but discovered local demand was surprisingly high and was a significant measure driving prices up. Could that be a factor here too?
Then there is the conflation of land prices with housing prices with no accompanying analysis of land supply, and no discussion on the dearth of housing TYPES and creative architectural and planning solutions that could bring a measure of affordability into the mix along with taking action on foreign wealth in the local markets.
Nothing Gold has written so far has changed my view that foreign money alone is not the only culprit in creating an affordability crisis. But it does sell newspapers, especially when loaded words like “corruption” are presented as fact.
And yet we had Andy Yan pointing out nearly the same thing a few weeks ago. A huge amount of transit oriented units sit empty because they are not being sold as homes, they are being sold as a money vault.
So deal with it already. Create new legal tools if needed. Enough of the anti development claptrap.
It’s amazing how “urbanists” have been seduced and swayed by the highrise siren song of developers. A sad comedown from the days of TEAM alluded to in Gordon’s other piece today. There is no more soulless and impersonal form of housing than the highrise.
It’s amazing how “suburbanists” have been swayed by the siren song of the auto industry. You can’t get more impersonal than being wrapped in a private cocoon. It’s easy to lose your soul as you degenerate into endless impatience and road rage.
Elevators are actually quite friendly by comparison.
Yan-by-way-Gold’s flotations about empty TOD are based on a few census tracts with unusually high levels of non occupancy on census day in 2016 – around Marine Drive Station and Joyce near Boundary notably.
If you dig down into the Census block level and review the development history of the area you can discover that this comes down to a couple of very large buildings that had only recently opened on census day that seem to account for the disproportionate non-occupancy of the census tracts. You might notice that there does not seem to be a similar effect at Brentwood or Sutterbrook or the Olympic Village (about which similar hand-wringing was expressed during the last census only to go away as the area has gone to fairly normal levels of occupancy). The only area which has persistently high rates of unoccupancy compared to the rest of the city is Coal Harbour.
An excellent point, Brendan.
Jens with Mountain Math drew this to our attention a while back and provided a link to the census counts down to the single-block scale. Two blocks in Metrotown punched the district vacancy rate sky high because at least two high rises were vacant when they were under construction at the time of the census. It will be very illuminating to compare the next census results to these, as well as compare the effects of all the anti-foreign wealth regs and taxes in the pipe to today’s.
My guess is that the vacancy stats will read lower, especially if the census methodology develops greater sophistication to account for sites under-construction. And prices will not have dropped magically to 2001 levels, though they could lower by a third or so.
Speculation is a factor, but it has not been accurately tabulated. Once it is, and once that’s dealt with, then we will still have to learn to live more efficiently on the land. It’s too bad we have to be subjected to so many conniption fits before seriously looking at intelligently mass rezoning RS1 districts.
Some neighbourhoods rang in at 10-15% vacant under the flawed census. Still, that also rings in at 85-90% occupied. That is a much better occupancy rate than many senior’s complexes in winter when a good number of them are wealthy Snowbirds and live in the SW US for half the year. I suppose you could define them as foreign buyers too.
It’s clear this is just another piece of evidence that building more and more condo units is doing nothing to help with affordability. This is because so many are being bought up just as a commodity to be banked and held by offshore money. Local investors at least rent them out for cash flow.
Building more supply of anything will always bring down the price once demand is met. That’s basic economics.
The issue with condos is we have a lax environment that encourages some (but not all) developers to hold back the supply for their friends (not all are offshore) during the presale stage for multiple flipping before the remaining supply is opened to the public.
There are solutions but they require closure of tax loopholes around foreign income, new development rules on presales that eliminate reserving the supply, and the creation of new laws to protect all honest buyers, renters and builders. Many wealthy foreign buyers are honest, hard-working people who declare their income and pay the requisite taxes and intend to become full citizens because this is a great country and they have lost faith in their own.
Even with new legal and regulatory action, don’t be surprised if prices come down at a less quick rate than Gold and all the other speculation-is-everything pundits imply until demand is sufficiently met and we finally learn to build more family housing on less land.
My guess is that people in general would really like stability in prices, even though that may come to rest at a relatively uncomfortable high level. If this is THE primary issue for readers, then the best advice may be to give the affordable housing policies of the three provincial parties a read and vote accordingly. The article below is as good as any place to start.
http://vancouversun.com/news/local-news/the-province-housing-promises
I thought I would add this interview with Ian Young of the South China Morning Post. He’s not saying what I want him to say, but I’m simply posting a viewpoint from from an experienced journalist on the topic of foreign money effecting our real estate market.
http://newayopinion.com/2017/04/24/what-is-young-peoples-future-in-vancouver-interview-with-scmp-correspondent-ian-young-part-1/
Good one: “What would we think of someone who hoarded food? Why is real estate any different?” asks Mr. Wozny.
Answer: it is not as both are un- or undertaxed ! People respond rationally.
We need to indeed tax real estate more, FAR MORE, and incomes less, FAR less. The result of excessive income taxation is that the creative mind finds better ways to make money. Foreign money discovered that a while ago as do affluent locals. Why work extra hard and make an extra $100,000 to get taxed 50% on it, if one can buy a bigger house and pay 0% on the gain ?
Our taxation of consumption and income is based on old assumptions of high interest rates, and thus slowly rising real estate values, and little international movement of money. Today money moves fast around the globe, and people make money in all sorts of places, such as live in Vancoiver but make money in Alberta, Hongkong, China or USA. It is then not necessarily taxed locally where the person lives, if at all. We ought to think more like Texas or even Monaco which taxes real estate very high but incomes very low or not at all.
How would BC look like if real estate property taxes were TRIPLE, land transfer taxes double and there was a 10-12% PST and no income taxes at all ? How would behavior change ?
You beat me to the punch on this one, Gord. I was just about to post it myself!
This was also out recently. The UN Report on the commodification of housing and the movement of international capital.
https://www.theguardian.com/housing-network/2017/feb/28/un-report-lays-bare-the-waste-of-treating-homes-as-commodities
As is the case with all of her recent articles, K.Gold demonizes foreign investment as the sole cause of our housing affordability woes, and dismisses supply improvements outright as a viable solution. Very simple, black-and-white thinking, and typical of the ‘crusader journalism’ that we’ve seen from her and I.Young.
A deeper dive would possibly reveal such findings as:
– yes, there is foreign investment in our real estate market, but it primarily impacts the upper end of the market.
-efforts to curtail demand from foreign investors has had an impact on that specific market, but has done little, if anything, to assist middle-income purchasers. The demand for this segment is not driven by offshore money, but by low interest rates, strong interprovincial migration, high household formation rates, and a very tight rental market.
-just as “demand” is made up of different market segments, so is supply. We need to build more family-friendly ground-oriented housing, ideally in the established single-family neighbourhoods. By building more duplexes, triplexes, row houses, etc. we can (for the most part) retain neighbourhood character, create more affordable ownership units, and revive these areas with new population, specifically young families with kids, increasing enrollment levels in local schools. Yes, there is still a need to build single family homes, and high-rise apartments, but we desperately need to provide more choice in the market.
One of the biggest problems that we face is that the dialogue about our housing issues has come down to black-and-white, good-and-evil, us-vs.-them. We need to explore all of the issues, all possible solutions, and realize that a one size fits all (neighbourhoods, cities, demographic groups, price segments) solution is neither possible or desired. A collaborative solution, involving government, industry, non-profit housing organizations, and yes, local residents who have been resisting neighbourhood change, is the only way we will work our way out of this.
Journalists who seek to polarize are not helping — they’re just looking to sell papers.
Well said.