Pete Fry: Tackling the roots of Vancouver's housing affordability crisis

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      The affordability crisis in Vancouver certainly isn't news—it was a central theme of our most recent civic election, and the two preceding it—but in recent weeks, calls for senior government intervention have landed on the premier's desk in the form of a petition seeking restrictions on foreign ownership of property.

      Readers might be confused by Premier Christy Clark's warning that implementing taxes on foreign real estate investors would cause housing prices to drop, while Housing Minister Rich Coleman insists the provincial government has no intention of even collecting data on foreign ownership, nor has it come up as an issue for his ministry.

      Are the growing number of Vancouverites’ concerns warranted? Is the unfettered flow of global capital into our local market affecting our housing affordability? It would be hard to argue that it does not.

      To describe the notion of external capital affecting a local market, I need look no farther than my own backyard. Over the last decade and a half in my Strathcona neighbourhood, long-time family homes would turnover as the elderly tenants would pass on, or could no longer afford the upkeep. One notable speculator, the scion of a wealthy B.C. industrialist family, began amassing a real estate portfolio by buying these homes as they came on the market, in cash, and with no conditions. Of the estimated 340 detached single family homes in Strathcona, the Point Grey speculator may have snatched up a dozen, less than five percent of the available stock, but enough to change the market economics. The result was that many local residents—neighbours of more modest means—could not afford to buy into their community, and that house prices rose incrementally with each bidding-war for the limited stock available.

      What this tells us of course is that speculator investors certainly aren't all foreign, but that externalities like non-local capital can price locals out of the market and inflate the median market value. Today, the median home price in the city of Vancouver is more than 11 times the median income. Even with the conservative estimate of five percent foreign investment, the premier is correct in her assertion that foreign capital buoys our domestic real estate market to the benefit of resident and non-resident speculators alike.

      While no level of government has yet to amass real data on speculation, there's been no shortage of musing on the subject. South China Morning Post's Ian Young has written extensively on the subject of foreign capital; urban planner and researcher Andy Yan has compiled records of utility usage to develop data on empty condos; the website Beautiful Empty Homes of Vancouver has itemized scores of empty million-dollar houses; in their 2008 campaign platform, Vision Vancouver called for "unlocking vacant condo units as rental housing".

      Real estate and development professionals caution against demand side intervention as they may yield unintended consequences and risk cooling off Vancouver’s white hot real estate market. At the same time, the world’s top money manager is advising global investors to “Forget gold, buy a Vancouver condo if you want to stash your wealth”.

      For many, life in Vancouver—the most livable city in the world in the best place on Earth—is a gilded cage. Almost half of Vancouverites pay more than 30 percent of their income on rent, and half of that number pay more than 50 percent. According to the 2011 National Household Survey, over 50 percent of Vancouverites are renters, in my riding of Vancouver-Mount Pleasant that number is closer to 75 percent, in the DTES it's 90 percent.

      When we talk about foreign investment—there is an important distinction which often gets lost in this conversation—foreign investors are by definition not immigrants or necessarily even residents: by law they cannot spend more than six month a year in Canada, and by circumstance, they do not pay into our "social contract" by way of income tax, nor do they pay capital gains tax on the sale of their property.

      Real estate investors do pay the same property tax that all Vancouverites (either directly or indirectly) pay, which helps cover costs of things like road maintenance, schools, and garbage. As senior governments play less and less of a role in providing housing, city governments are bearing the brunt of the affordability crisis, with developer cost levies—used to fund things like public amenities and community centres—increasingly being used to provide social housing but at a rate that can’t keep up with the market growth.

      There’s a sad irony in the notion that a “yes” for the transit-plebiscite proposed increase in sales tax will result in transit-oriented development that could create investment vehicles for people who might never pay sales tax at all (that said, I personally think the sales tax increase is money well spent for improved transit infrastructure).

      China, Hong Kong, Australia, and the U.K. all apply special taxes on foreign investors. Closer to home, Alberta, Saskatchewan, and Prince Edward Island restrict foreign ownership of real estate—ditto resort destinations like Mexico. Last year the B.C. Chamber of Commerce released a report calling for the provincial government to address foreign investment and asserting that affordable housing is good for our economy. With one million new residents projected for Metro Vancouver over the next 30 years, we can expect the demand to remain buoyant.

      Over the last five years, Hong Kong in particular has successfully reduced property speculation and simultaneously redirected dividends to the provide public benefit through a three-tiered stamp duty. Hong Kong’s “3D” taxation scheme effectively targets corporate and non-resident buyers, quick resales (or “flippers”), and luxury property buyers; providing billions of dollars worth of social housing investment and cooling the market all without any long-term damage to housing values.

      Foreign investment is good for B.C.—ultimately it creates jobs and benefits for our economy—and it certainly is not the only cause of our affordability crisis, but to deny its role is irresponsible. Let’s look to solutions like a non-resident tax premium that could be remitted back to the municipalities to encourage more foreign investment or build social housing as local demand dictates. Let’s look to solutions like fixing our homeowners’ grant so that it recognizes the importance of investor-owned rental properties, rewarding “good” landlords and discouraging empty apartments. Let’s look at ways of closing corporate tax loopholes that allow bare trust holdings to avoid paying the property transfer tax. Let’s look at ways to use the property transfer tax to discourage speculative flipping for quick profit.

      Affordability will remain in focus on Friday (May 22) with Bob Rennie addressing the Urban Development Institute, where he’s expected to advocate for more supply; while the #DontHave1Million rally will see middle-income Millenials calling for senior government intervention; and I’ll be at the B.C. Green Party AGM to discuss this very issue.

      The time is now. It wasn’t too long ago that climate change deniers were refusing to act until they were presented with conclusive, definitive proof of anthropogenic change—and as a result we wasted valuable time. By that same notion, we cannot continue to ignore the roots of our affordability crisis and our obligation to act on it for the benefit of all British Columbians.




      May 20, 2015 at 2:32pm

      Terrific oped.

      I would like to add that we also need to look at 'empty' condos and homes bought by locals, new immigrants and their proxies. We obviously have housing stock. But there's a lot of it sitting empty. We need to figure out who the 'beneficial owners' of these properties are---and ensure that they either rent them out or pay a dividend to keep them empty. empty units, solely used for the purpose of parking money and not to house people, doesn't only affect the rental stock in the region. It affects neighbourhood small businesses who see towers---and few shop visitors.

      This, as well as the shocking stat that many high net worth new Canadians are not paying their fair share of global tax is extremely worrying. Sure, work offshore. But be prepared to declare your income in your new domicile.

      Let's recognize the scope of the problem, and get this mess straightened out now. If building is our only industry, we are in a helluva pickle.


      May 20, 2015 at 2:53pm

      Thoughtful intelligent article. I'll add to the scope of the debate. The jobs in the 21st century will be outside of Canada. A Non Resident includes both Canadians and Foreigners so should policies be imposed on Canadians that declared non-residency to force them to rent their home in Canada. Constitutionally the Province of PEI has their own version of the Charter of Rights with exclusions for land rights that excludes other Canadians from owning land in PEI so should BC revise their Charter of Rights so that no Canadians from another Province can live in BC?


      May 20, 2015 at 3:28pm

      So, if the 'jobs will be outside of Canada' who will pay income tax?

      If Canadians working outside of Canada wish to keep th2-r CDN res they should plan on dexlaring their global tax as required by the CRA.

      I also know snowbirds who realize that being away for 6 months is a problem for neighborhoods. They are willing to pay some additional tax to be absentee landowners. They are willing to do this because they foresee a day when many landowners will have empty homes and be vacationing outside of Canada for long periods of time.

      To not do so and to avoid paying the fair share of income tax or to leave housing stock standing empty without penalty with evermore building going on means trouble for the next generations.


      May 20, 2015 at 3:33pm

      I didn't answer your PEI question.

      PEI is a tiny land mass under the same pressures as Vancouver. I am sure they reward those who live, work and pay taxes in the province. If I move and work there, I'm sure they'll welcome me with open arms. If I come and provide jobs, they may even carry down Main Street Charlottetown, on a litter! If I pay my taxes, they may make me Mayor!

      We can make a 'made in Metro' solution that suits our needs.


      May 20, 2015 at 4:01pm

      The CRA doesn't require Canadians to pay tax on Global income if they declare they left Canada but the interpretation on the steps required to declare their residency is up to the courts. Why should non-residents pay Canadian tax to subsidize social programs in Canada? Canada tax based on residency. If you want to rewrite the Income Tax Act than you are most welcome to try. India doesn't believe you pay your fair share of taxes for social programs in India and they have a tax structure where they could tax you as a Canadian in Canada.
      PEI discourage other Canadians from relocating to PEI but all their best and brightest want to relocate to where the jobs are because there are no jobs in the province.

      Devil's Avocado

      May 20, 2015 at 7:41pm

      Excellent work leaving out these terms:
      "interest rates"
      "last few decades"
      "free money for billionaire bankers"

      The central bankers around the world applaud your diversion.
      Maybe you can get a sweet do-nothing job at RBC or HSBC when you're done destroying the middle class with division politics.

      S. Cheng

      May 21, 2015 at 2:32am

      It is not true that non residents do not pay capital gains tax upon sale off the property. On the contrary, they no not get any exemption as per residents who have a lifetime capital gains exemption cap.

      Let's focus on the real issues, and not use misleading falsehoods.

      Great article

      May 21, 2015 at 7:10am

      I totally support increasing taxes for foreign investors/ speculators.
      I also suspect that these parties have so much money that it might not even make a dent at all in their practices but I do hope the increased revenue will help pay for better services (ie: transit) for residents. Tax em!


      May 21, 2015 at 9:16am


      "It is not true that non residents do not pay capital gains tax upon sale off the property."

      That depends, is the property held in the name of a family member who is a resident? I wonder how many 19 year old students "own" 3 million dollar homes.

      "Would you begrudge boomers the the big bucks they've made cashing in on this run up in prices?"

      Absolutely yes. They don't deserve it.

      Dee Chardain

      May 21, 2015 at 9:46am

      Yes - lets focus on the real facts ... The material essentials of life are food, clothing & SHELTER - but that requires the provisioning of a coherent society & given the pressurization of world events ... we must as a human race get to the root causes of the exponential ramping-up of incoherency

      And that is the deeper essentials of life which are: 1) A inner sense of purpose & 2) A sense of belonging.

      Unfortunately its not so simple as political fixes. We the human race started as children of one family - Science now verifies this thru vectoring our DNA back to a common Grandmother/Grandfather ... When we return to the family values of truly taking care of each other & respect for the governance of the experienced Elders ... then we will again find the coherency of the Ancient Future.

      Suggestion: ... Make a respectful visit to your nearest Traditional Native Indian elders. And, the emphasis is on the word 'respectful.'

      "We cannot solve our problems with the same thinking we used when we created them." - Albert Einstein