A UBC professor with a keen interest in sustainability has written a paper that raises alarming questions about the NDP government's housing policies.
James Tansey, executive director of the Centre for Social Innovation and Impact Investing, declares that the province's approach "is based on capturing higher tax revenues from the growth in the value of property in the region and directly investing it in social and affordable housing".
The Sauder School of Business professor's paper points out that the NDP government has focused on demand-side measures rather than taking steps to increase housing supply or even acknowledging that Metro Vancouver's density is quite low compared to other cities around the world.
"The failure to consider legislation that will improve supply conditions ultimately means that the cost of delivering on those government targets for social housing will be higher, since the underlying land values will remain high and competition for labour will be increases unless there is a significant regional slowdown in construction," Tansey writes.
He notes that the government's approach is predicated on a belief that housing prices will continue to rise in the Vancouer region.
This is demonstrated by the government's three-year revenue projections. They suggest speculation tax revenue will increase from $87 million this fiscal year to $200 million by 2020-21.
The new asset tax on properties valued at more than $3 million is also expected to generate $200 million by 2020-21.
That's up from $50 million in this fiscal year.
"If the goal of these policies was to cap or reduce housing prices, the most recent 2018 budget forecasts would show declining revenues over time as the market responds to higher prices with fewer transactions or transactions at lower prices," Tansey writes.
He also states: "The provincial government appears to view housing stock as the asset base for raising revenue for social programmes including affordable and social housing, by taxing the value tied up in private property at current prices."
Prof argues more density is needed
Tansey points out that on a per square foot basis, the cost of Vancouver housing is high in comparison to other cities around the world.
"Affordability is made worse by the relatively low salaries offered in Vancouver, compared to other 'middleweight' global cities," he adds.
In the meantime, Metro Vancouver's density ranks 140th among cities in the 37 countries that belong to the Organization for Economic Co-operation and Development.
It's nowwhere close to Paris, which has 21,498 people per square kilometre, according to Tansey's paper. (One of the reasons Paris achieves such high density while remaining so livable is its thin streets, which leave more room for housing.)
The City of Vancouver has 5,491 people per square kilometre, whereas Metro Vancouver only has 490 people people per square kilometre.
The City of Vancouver has about half the density of Manhattan and is on par with that of Seoul and Tokyo.
"By comparison, the City of Surrey has less than one quarter of the population density of Vancouver and Burnaby has just under one half the population density of Vancouver," Tansey writes.
By 2038, B.C.'s population is forecast to rise from 4.6 million to 6.6 million.
Yet housing starts declined 26.8 percent in 2018, according to the government's budget documents.
Despite this, property transfer tax revenue is projected to increase to $3 billion in 2019-20, "which suggests a decline in house prices is not anticipated".
"One of the core arguments of this paper is that in the medium term, all levels of government have to take on [a] stronger policy leadership role beyond taxation and must have the political courage to also address the barriers to increasing the supply of housing," Tansey states.
Among the research he cites is a far-reaching Canada Mortgage and Housing Corporation study. It showed household formation, income, and sustained low interest rates accounted for two-thirds of the growth in Vancouver housing prices from 2010 to 2016.
Moreover, Tansey emphasizes, Vancouver's housing market is the least "elastic" of any large central metropolitan area in Canada.
In addition, he highlights supply-side approaches such as cutting the time for development approvals and simplifying zoning processes.
He points out that while "municipalities have the capacity to make most of these changes", it's important to recognize that "ultimate authority lies with the province", which could establish maximum wait times for permitting.
"A study by [the] C.D. Howe [Institute] suggests that regulations add up to $600,000 to the cost of a new home in the Vancouver CMA," Tansey writes.
Perhaps most worrisome is this comment in the paper: "Independent of which party is in power, the province has been reluctant to lead the process of developing a strategy that can better absorb the 50% population increase projected for the region over the next 20 years. This long-term strategy is essential to the future of the region."More