January 11, 2018

MLA Sam Sullivan Weighs in on the "House Price Crisis"

 
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Sam Sullivan needs no introduction to Vancouver readers. For those outside of Vancouver this multi-faceted, well read, personable individual is currently an MLA for Vancouver-False Creek, a past City Councillor and former Mayor of Vancouver, and his Sam Sullivan Disability Foundation has raised over $20 million dollars and served thousands of people with disabilities. Sam has also founded the Tetra Society which invents customized devices for disabled users and was fundamental in setting up the Disabled Sailing Association in Vancouver. Among many other activities, Sam is also an adjunct professor in the University of British Columbia’s  School of Landscape Architecture and Architecture.
Sam is currently running for the leadership of the Liberal Party of British Columbia. He has sent the following letter out to his supporters on the “House Price Crisis”.

For the sake of our economy and young people, we must address the house price crisis. But we must first identify the problem.

For the last couple of years, a debate has pitted non-economists against economists. The non-economists claim foreigners are to blame. The economists claim we Canadians are to blame.

NDP politician David Eby has led the anti-foreigner group. A study he initiated indicated up to 70% of Westside Vancouver houses were purchased by foreigners. Just last month Stats Canada researchers and Government of Canada housing economists finally released their report. They found 3.2% of all single detached homes in Metro Vancouver were owned by non-residents. This includes Americans and British Columbian snowbirds who live south most of the year.

Most foreign ownership was in condos (7.9%) which have seen the lowest price rises. They tend to own newer, smaller, more expensive condos downtown where many have business relations or have ‘pied à terries’.

This report seems to have solved nothing. The theory that foreigners are responsible is popular among British Columbians. The non-economists claim that foreigners are hiding their ownership. Government researchers and economists are now researching this claim. This will not deal with the other accusation that the statisticians are deliberately misleading the public.

British Columbia has always had non-resident owned housing. The poet Rudyard Kipling bought lots in Vancouver in 1890. The Vancouver streets Westminster and Ninth were changed to Main and Broadway to increase sales to US investors. World-renowned neighbourhoods like Concord Pacific and Coal Harbour were built by Asian investors.

Let us hope that the new numbers will settle this issue. If the researchers uncover a massive conspiracy of foreigners buying our houses and pushing up prices then we need to take corrective action.
But if not we need to take action to deal with our own problems.

In Vancouver, since the 1970s, it has been practically impossible to convert suburban areas to high density. Today, almost 70% of residential land continues to be in suburban form. Many of these neighbourhoods have fewer people living there today than the 1970s.

My plan will deal with the bottleneck in the creation of housing. I will remove elected politicians from public hearings. Legislators should not be acting as judges in a properly designed government. Judicial Tribunals should be responsible for judicial functions.

I have created the following VIDEO which describes my analysis of the problem and how we can solve it.


 
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      1. So what? That 16%, if they are buying to speculate, are driving prices up for everyone. I’m surprised there was no post about the Vancouver Sun article yesterday quoting Andy Yan and others:
        “..Yan’s analysis shows while the rate of foreign property ownership is as low as one per cent in some segments of the Metro Vancouver housing market, it’s above 20 per cent in others.
        Yan found that of all City of Vancouver condos worth $1.5 million or more, regardless of when they were built, at least one in five were owned by foreigners (people whose primary residence is outside of Canada, regardless of immigration status or citizenship). Richmond and Coquitlam had similar rates. This isn’t a tiny number of “luxury” units in Vancouver. The median price of a three-bedroom condo, considered a suitable housing type for a local working family, was $1.62 million last month, according to the Real Estate Board of Greater Vancouver.
        A 20 per cent proportion of foreigners owning higher-value condos is “a very high number” by international standards, and enough to “drive up housing prices for local residents,” said Manuel B. Aalbers, an associate professor of urban and economic geography at the University of Leuven in Belgium..”
        http://vancouversun.com/news/local-news/dan-fumano-digging-deeper-following-the-money-on-foreign-property-ownership

    1. “Until governments get more complete data on foreign sources of housing finance – not merely foreign citizen or “non-resident” buyers – these commentators should not insult our intelligence with claims that foreign money is not important. There are many channels for foreign money to enter a housing market and properly gathered data can, and will, tell us this.”
      This is a mixed and confusing message. First Josh Gordon slams commenters who remain uncomfortable about putting the cart before the horse and blame foreigners before the data is in and properly analyzed. Then he moves on to the need for better data, tacitly admitting that his supply myth narrative is based on incomplete information.
      Not one word about the constellation of other influences on prices (sustained record low interest rates vs demand, constrained land supply, significant demographic and development pressure on prices, mass untaxed inheritances from Boomers to their underpaid Millennial children directed into housing…). He is half a step away from stating categorically that foreigners are solely responsible for the affordability crisis. That would be highly premature.
      There are commenters who prefer to sit on the fence and wait for the data to arrive (including, importantly as he mentioned, income tax and property title analysis from the CRA) and for the experts to run the final numbers. Then – and only then – will the Gordons and Yans and Leys and economists be able to do the math properly and finally determine how much of the price increases over the last decade are actually attributable to foreign money, and how much can be apportioned to all the other influences.
      Foreign wealth is obviously part of the problem, but I for one am fed up with academic commenters like Gordon who parse other’s discomfiture with an insufficient analytic process and who dare to criticize a supposedly infallible view from academia, then put words in the critic’s mouths claiming foreigners are not an influence on prices.
      Gordon and others need to prepare themselves for a potential final result that may prove that a plethora of causes exist for unaffordable prices, foreign money being only one. So what if the foreign ownership rate is 20% of condos? The real concern should be on the level of influence that 20% has had on prices over the past decade (roughly when prices started a steeper incline curve), and whether the owners pay income tax.
      What is Gordon’s solution should he prove to be right? Ban all foreigners … more specifically mainland Chinese? Should there be a reciprocal ban on Canadian real estate investment and influence abroad, notably by masses of Snowbirds in the SW states and Florida, or in large Canadian developments and controversial mining operations all over the world? What has been the experience in other countries that banned wealthy Chinese investors? A roaring success, or marginal if any reductions in prices?
      The jury is still out.

  1. Lets commission a 5 year study to see what the issue. Meanwhile Foreign buyers will continue buying up all the condos we are told to settle for as owning a single family house is a dream from yesteryear. Meanwhile the amount of empty commodity homes and apartments builds and builds. But lets build more supply to get out of it. Give your head a shake!

      1. Some evidence for your views that everything is hunky dory would be appreciated. You know, like real data that foreign buyers aren’t having an impact that incorporates purchases through numbered companies, students, relatives, etc.

        1. So you admit there is a lack of data, therefore that the conclusion that foreigners are or are not 100% responsible for the affordability crisis is premature?
          Thank the god of your choice that medical science does not follow the same shoddy methodology.

  2. Did you every wonder why the Statistics Canada report on Foreign buyers didn’t identify the nationalities of owners, only the so called percentages? Why? Are they hiding the massive Chinese presence?

      1. I have a problem when massive offshore funds from a country that only allows its citizens withdraw 50k a year is somehow able to send our real estate to the stratosphere through River rock casino money laundering and smurfing techniques and the government tells us there is no impact. I have nothing against Chinese, my wife is from Taiwan it’s the Canadian government that is the joke here.

      2. Would the Chinese also be responsible for the record low interest rates and the resulting record demand and record household debt? All demographic pressure? All developmental pressure? Local speculators like empty nesters holding out for the best offer on their family home? Square kilometres of land locked up in low density zoning when there is no developable land left? The misperception that Vancouver is isolated from Metro-wide real estate, or that affordability is non-existent everywhere in the Lower Mainland? And the delusion that the large lot with detached home will ever see its generation of price increases erased given its wasteful consumption of land undergoing serious constraints? Or that housing supply is detached from land supply?
        Foreign money has an influence. But it’s relative. To state otherwise is incorrect.

        1. Oh not the record low interest rate angle again. Every city in North America is dealing with the same playing field regarding interest rates, debt yet only Vancouver has stratospheric gains since 2008 outpacing San Francisco, LA, New York, Miami….

        2. Correct. But not every city in North America has a land supply hemmed in by the mountains, the sea and protected agricultural zoning. And guess what? The ones that do have a similar problem with affordability that cannot not always be blamed on foreigners alone.
          Calgary has had phenomenal growth and foreign investment in real estate and business until their one horse economy nosedived in 2014. But their housing price increases up to the peak, though steep, were nowhere near ours. Why is that? Could it be the fact is Calgary has vast oceans of cheap farm land at the periphery and builds several low cost subdivisions at a time. Could it be that Calgary just isn’t as desirable as Vancouver?
          Land supply matters. Interest rates matter. Local speculation matters. Reputation matters. And foreign money matters. Omit any of these or other known influences on prices and the picture is obscured.

        3. So, let’s compare median and average housing prices, shall we?
          Manhattan:
          – average apartment $USD 2 million
          – average detached: N/A – transplant a Vancouver 33-foot lot to anywhere in Manhattan and you’re probably looking north of $USD 10 million
          Metro NYC median price: $USD 690,000
          San Francisco median price: $USD1.5 million
          Metro SF median price: $USD 756,000
          Metro Miami and Miami Beach: under $USD 500,000. Almost every major city in Canada outcompetes Miami on prices. Your comparison is irrelevant on this one.
          Now, compare the above prices to the latest REBV numbers from last month, remember to deduct about 25% to equalize with the US dollar.
          Metro Vancouver median price (detached): $CAN 1,050,300
          Vancouver city – west side (detached): $CAN 1,351,600
          Vancouver city – east side (detached): $CAN 1,089,100
          Metro (condos): $CAN 655,400
          West side (condos): $CAN 807,100
          East side: $545,600
          Clearly you have not done much real research and are cherry picking to favour the highest west side peak prices, not the average or median prices in the region.

  3. As much as it pains me to agree with someone running for leadership of the BC Liberals I agree with Sullivan here.
    I doubt many will be convinced though. It seems as though the various sides in the housing debate agree on nothing, other than that prices are high. They disagree on values, on facts, on interpretation, on logic, on desired outcome.
    There are supporters and opponents of dense housing on environmental grounds, social justice grounds, political, self interest, neighborhood character, and on. It is a very complicated multi-faceted issue with complicated effects before direct and indirect.
    As just one small example:
    The most affordable forms of housing in Vancouver are old apartments, and old basement suites. Ideally we’d love to have a lot more old apartments and houses. Since we can’t create more old housing we have to build more new housing which will eventually ‘filter’. It is the only way to increase the supply.
    But many affordable housing activists oppose the building of new apartments! They must be irrational! But they aren’t. The new housing is more expensive in the short term, and too often it is built by tearing down existing old housing that is affordable right now, at least to those already in it. In fact that is often the only legal place for that housing to go.
    It is even more complicated than that of course. There are many layers and many interacting moving pieces. Few people agree on what all the pieces are or what outcomes are good. The don’t agree on who should benefit, on who should live here, on what types of housing are good, and more.
    I hope that in our rush to fix this long standing issue, we manage to get through some solutions that people can agree with after the fact once they see them work.

    1. There are perfectly fine old apartments with rental units next to transit that are being torn down and replaced with new apartments not much larger in size that require mandatory underground parking ballooning the costs and then are marketed and sold to Mainland Chinese buyers. I am specifically talking about the apartments in Kerrisdale along West and East Blvd south of 41st. Look at the before and after on Google Earth. How the hell has this helped affordability? You supply people are delusional if this is the build more pattern. The City of Vancouver is to Blame! COPE please win the next election.

      1. Anecdotes from Kerrisdale (of all places!) do not translate to massive price increases in 20 other cities in the Metro.
        You would do well to consult the Mountain Math site for real estate prices that are mapped out for the region. The maps clearly indicate pinpointed and localized high prices specifically on the west side (like — oh wadda surprise! — Kerrisdale), high-density waterfront zones designated as “luxury,” and West Van.
        You would also be better informed if you consulted the real estate data posted in several places that covers the Metro. One luxury Kerrisdale suite is worth three or more in other municipalities. Shocking, eh?
        Don’t like the idea of living in a condo in Coquitlam? Then let me introduce you to yet another well-known but largely ignored (in these blogs at least) phenomenon influencing prices: localized demand attributable to the desirability of certain locations.

      2. The City of Vancouver has:
        – More jobs than people
        – More people who want to live here (and have a legal right to) than it has places for people to live
        – An increasing population
        – Increasing local incomes
        – A decade of record low interest rates
        – Built out residential land
        – Restrictive zoning that prevents all but the lowest density residential uses in the majority of the land
        – Years of being rated/advertised as one of the best cities in the world
        – Major slowdowns/complexities in the development process that favor larger builders and investors
        – Problems with illegal money (drug or otherwise)
        – An attractive market for property flippers
        – Super low rental vacancy rates
        – The rise of AirBnB
        – A generational shift to urban living
        – A generational shift to smaller households
        – Senior governments that stopped building subsided housing 20 or 30 years ago
        – A tax regime that makes purpose built rental housing unattractive
        – Very low property taxes
        – High mandatory parking requirements
        – A very strict (and hence expensive) building code
        – A capital gains tax exemption on principal residences
        – A lax tax enforcement scheme verifying the capital gains exemption is legally applied
        – Lots of local property speculators
        – Lots of international speculators
        – People who own second homes
        – A growing student population
        – Increasing income inequality
        I’m sure I’ve missed at least half the relevant issues and people will disagree with me that a bunch of those are even issues. Plus based on different values people think some of those are fine and good, and some are bad and to be prevented.
        I don’t think that building more homes is the only thing we have to do to fix our housing crisis. I certainly think we can build more homes in ways that make the problem worse if we tear down dense affordable housing and replace it with less dense less affordable housing.
        Let’s tackle money laundering. Let’s get senior governments back into subsidized housing. Let’s enforce the rules on the capital gains exemption or get rid of it.
        That said I’m not sure how you can have a growing city with more jobs than people and more people than homes without having increasing prices. So let’s add housing to the expensive single family neighborhoods that make up the vast majority of our residential land. It doesn’t have to be towers. It can be row houses, triplexes, 4 story apartment buildings. Eco-density if you will.

  4. Doesn’t Sam know that NIMBY never was literally “my back yard”? “My back yard” is an expression for my neighbourhood. So his NIMNBY makes no sense.
    What he is proposing is a weakening of democracy by removing elected representatives from rezoning decisions. I have trouble with that. I agree that the tyranny of the majority has been a problem. But the majority is becoming a minority (that happens to occupy the majority of land). Maybe this resistance to density is going to flip over like a switch without heavy-handed decrees from the likes of Sullivan. We certainly saw the Cambie corridor switch from single family to multi-family almost over night. Yes, there was the usual resistance, but it seemed to be overwhelmed by those ready and willing to take the high offers and move.

    1. I agree with you about the NIMBY/NIMNBY thing. As for “weakening of democracy” I don’t really buy that.
      Let the elected officials come up with a clear set of rules and let professionals apply them. Like a (hopefully simpler) version of the building code. Unelected building inspectors aren’t a problem with democracy.

      1. “All professions are a conspiracy against the laity” – G.B.S.
        It was professionals that created the second biggest human-caused economic catastrophe in history (after the nuclear bombing of Japan) in the form of the leaky condo crisis.
        Be pollyannish and assume professionals know better?

        1. I would disagree with that. It was unprofessional developers who thought they could import ubiquitous dry climate California stucco design into a rain forest, the unprofessional style-over-substance marketeers, the unprofessional mass production architects and engineers who rushed their projects to permit application, and the unprofessional building code minders who should have known better, especially about rain screen technology in the context of new housing design styles arriving en masse.
          Most professions that hold a lot of responsibility (architecture, engineering…)are self regulated and have strict codes of conduct and authority to remove licences. These professions are orders of magnitude stricter than the real estate industry. The condo rot fiasco is still having major aftereffects and things like professional liability insurance have skyrocketed while some firms folded under all the lawsuits. You will note that the building code was revised to seriously beef up the rain screen sections.

        2. The leaky condo crisis was “the second biggest human-caused economic catastrophe in history”? In what alternative universe?

  5. Many factors influence housing: demand related and supply related. As such both have to be addressed. Only a combination of taxation changes, supply changes, density changes, building code changes, immigration rule changes and certainly, expectation changes will solve or at least partially address the issue.
    There is no easy answer, and for any policy decision, say increased density in SF neighbourhoods, or higher taxation of foreign money or foreign ownership or inherited wealth or gifted offshore money, or less complex building code, or more modular homes on provincially owned land, or more rapid transit, or a bridge to the Sunshine Coast, or reduced immigration, or more subsidized rental units, there are arguments for it, and against it.
    Politicians are usually elected on a platform of “for X” and “against Y”. Let’s hear it what they are for, or against. For any X or Y there is a counter argument, of course, why it is not a good idea.

  6. It isn’t as simple as Supply and Demand when it comes to housing speculation.
    Spain provides a good example. The country saw massive housing construction in the decade previous to the 2008 crisis. Over the same period, house prices skyrocketed.
    See the data below (and choose MAX data extent):
    Housing starts: https://tradingeconomics.com/spain/housing-starts
    Housing prices: https://tradingeconomics.com/spain/housing-index
    Here tremendous increased supply went hand in hand with huge price increases.
    The real story behind it was increased mortgage lending, cheaper credit and housing speculation which saw prices balloon (as did residential debt levels and housing unaffordability, and eventual mortgage defaults).

    1. So what are you saying. Cut access to mortgages, or cheap mortgages? House prices will fall? That is better ?
      Spain overbuilt due to cheap credit amind high offshore demand, main,y from UK. That then dropped to almost 0 when the financial crisis hit. Not a good example to use for MetroVan.
      As stated, we need more supply and less demand. Both have to be addressed, but any measure taken has pro’s and con’s and as such will be argued form both sides forever.

      1. Or we need supply which is speculator-resistant … Vienna Style for instance … land trust, lease-hold, purpose-built-rental, etc … basically create a parallel market so that existing prices don’t have to be tanked for cheaper prices to also exist.

        1. City could, for example, convert 50% of city owned Langara golf course to purpose built rentals. So far, they chose not to.
          The province could have used their land given to the Musqeaums. http://www.vancouversun.com/First+Nations+provincial+properties+extinguish+land+claims+others/9721369/story.html
          Perhaps some more dialogue on this, ie consultations with affected BC residents would have been in order. Discrimination in reverse in my opinion. Or the price for reconciliation if you want to call it that.
          Musqeaums happy .. other BC residents especially lower income folks not so happy.

        2. We don’t need to go so far as changing over golf courses or regretting returning land to its owners … the city has enough space for 30000 units easily on its own land which isn’t parkland … let’s at least look at using some of that before we start saying we need to kill parks also.
          Low hanging fruit is a lot easier to start picking.

        3. It doesn’t make sense to the quality of life to remove park land while increasing development. I would argue for a conversion to park uses that are less exclusive and have higher recreation value.

  7. House price crisis? Well maybe but not for everyone including some of the commentators on this blog!
    House price crisis? Yes, for some as evidenced by the extremely nuanced analysis of the new city affordable housing strategy which deals with rental housing for certain populations: single parents, seniors, unemployed, homeless persons, and so forth.
    So, if you can not afford to buy then rent, if you cannot afford to rent then that is called a real crisis, a misalignment of incomes and expenses. Non-market housing is a solution for this but this is not a densification strategy it is a support strategy.

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