Martyn Brown: 10 measures to make home ownership more affordable in British Columbia

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      [Heads up: this is a very long read, intended as a discussion piece, not as a column. It offers several provocative ideas for those who have the time and inclination to bear with it.]

      At its core, the housing crisis is a problem of demand outstripping supply. But it is also an affordability crisis that has been compounded by unchecked foreign investment, rising property taxes, and other government-imposed costs that target wealth instead of income.

      This discussion paper is concerned with the affordability crisis as it affects home buyers and home owners. I hope to deal with the rental-housing crisis in a future article.

      Premier Christy Clark has been quick to point her finger at the federal government and at local governments for their failure to address the affordability problem. Yet there is so much more that the provincial government could also do to help.

      We all know the gist of what needs to be done to stimulate more supply: speed up permitting approvals; fast-track rezoning applications; increase densities; and expedite desperately needed public investments in transit and social housing.

      But what about the demand side of the housing equation? As I see it, we essentially need to act on two fronts.

      First, we need to curb unwanted forms of incremental demand and unfair competition that are exacerbating price pressures and that are making it harder for local residents to buy and own a home. That unwanted demand largely relates to foreign buyers and to speculators.

      And second, we need to encourage long-term sustainable local demand that allows more B.C. residents to enter and stay in the housing market.

      That means making the cost of buying and maintaining a home more affordable, today and tomorrow.

      Here are 10 strategies that might help in that regard.

      If nothing else, they might provide John Horgan and the NDP some much-needed food for thought in developing their 2017 election platform.


      Strategy #1: Reduce unwanted demand from foreign buyers and speculators

      As Vancouver mayor Gregor Robertston recently explained, "With unregulated, speculative global capital flowing into Metro Vancouver’s real estate, we are seeing housing prices completely disconnected from local incomes. First and foremost, housing needs to be for homes, not just treated as a commodity."


      Which is also why I recently argued that we should act to restrict unwanted types of foreign ownership and investment, as so many other jurisdictions have done, including China, Hong Kong, Denmark, Switzerland, India, Singapore, Thailand, Brunei, England, Australia, and even Prince Edward Island.

      It is beyond me why we would allow foreign buyers to outbid our residents on price-pressured properties that are often left to sit empty, while British Columbians are pushed further afield to the suburbs, because they can’t afford to live where they work.

      It is hard to fathom why we allow people from other countries to buy up our limited and most coveted housing stocks, when Canadians are legally precluded from buying those same types of properties in those foreign nationals’ own countries.

      We can’t even buy a fee simple property in China. At most, all Canadians can buy in that country is a leasehold interest in a single condo.

      That is not a reciprocal or fair relationship. It is a one-sided gift to foreign buyers who are outbidding us on our own turf.

      Sadly, it has also opened the door for absentee owners and speculative investors, including some who have engaged in money laundering, tax avoidance, and proxy buying.

      To make matters worse, those precious Canadian properties are being bought by people who start with a major currency advantage, due to the current weakness of the Canadian dollar.

      It’s not right. It’s not fair. And we should stop that without further undue handwringing.

      It’s time the politicians in power stopped pussyfooting around and started acting to restrict foreign ownership in designated areas and on designated properties, with measured responses that enjoy clear public support.

      There is no reason why the federal or provincial governments cannot tailor reasonable restrictions on foreign buyers to only apply in price-pressured regions, like Metro Vancouver, Toronto, and Greater Victoria, if they are too timid to more broadly impose them.

      Restrictions on foreign ownership do not have to be applied on a "one-size-fits-all" basis, across Canada.

      They can and should be targeted to prevent abuses, unfair competition, and unwanted foreign investment in the areas that are facing undue pressure in respect of the cost and supply of housing.

      A reasonable initial step in that regard might be to pass a law that restricts foreign buyers to purchasing only new condos and other new strata title properties. That is, provided those properties are not marketed abroad until British Columbians have first had a fair crack at buying them.

      The laws governing those shared land parcels, buildings and complexes should also be changed to limit their total combined foreign ownership to 49 percent, such that a majority of those housing units are always available to Canadian citizens and permanent residents.

      We should also ensure that the governance of those strata properties must be legally conducted in Canada’s official languages, not in any other foreign language.

      Board meetings, decisions, minutes, and all official business should be conducted and recorded in English and/or French, even if it is also translated into other languages, as a courtesy to property owners who are more comfortable speaking and reading another language.

      It is high time the provincial government, in particular, stopped worrying so much about its party paymasters from the real estate and property development sectors, and started acting instead to protect the interests of the people it was actually elected to serve.

      No more excuses or studies.

      Let’s get on with penalizing speculators and flippers who are driving local housing prices through the roof, regardless of who they are, or where they come from.

      It’s appalling that governments have sat on their hands and done nothing, while properties get flipped "like penny stocks," as blogger Steve Saretsky has so helpfully documented.

      His research revealed that of 179 homes sold in May last year in Vancouver West, 15.6 per cent were resold within a year, at an average profit per house flipped of over $1.1 million.

      One house in South Granville that was originally marketed as a tear down resold four times in the last two years, with its sale price escalating each time, from $5 million to $7.6 million.

      That’s nuts.

      We should impose significant new surtaxes on properties that are flipped for resale within a year, to tax back the lion’s share of any windfall profits realized, with provisos for specially authorized exceptions.

      That should include commerical development properties that are being flipped by speculators at enormous profits and that are driving the cost of new condos into the stratosphere.

      As the South China Morning Post revealed, one such property on Nelson Street that was bought in 2013 for $16.8 million, and that had been earmarked for a 60-story residential skyscraper, was resold for $60 million in 2015. Then it was flipped again for $68 million a month after its new owners took possession.

      Whenever that site is eventually developed, its new condos will only be affordable by the super wealthy, mostly targeted to rich Chinese buyers. That’s scandalous.

      We should pass John Horgan’s proposed bill to close the existing loopholes in the Property Transfer Tax Act that are allowing speculative "shadow flippers" and large institutional commercial property investors to avoid paying property transfer taxes.

      We should extend the new rules for property reassignment sales, or so-called "shadow flipping," to also apply to condominiums—something the provincial government failed to do.

      We should outlaw the ability of developers to quietly presell the units of their new condo projects to their relatives, friends, and insiders, or to profit from those buyers’ speculative resales that only push prices up for everyone else.

      Those permitted projects should be open for purchase on an equal basis to all local buyers who register with their parent development companies to "get in on the ground floor" on any units marketed for presales.

      We should also impose a surtax on luxury properties, as Mayor Robertson has called for.

      And as the NDP and so many economists have suggested, we should be severely penalizing those nonresidents who leave their homes vacant and who don’t pay their fair share of taxes.

      Personally, I don’t think that the two percent tax the NDP have proposed is nearly high enough, but it is certainly better than nothing.

      It’s great that Mayor Robertson has also taken a strong stand on that issue, even going so far as to promise to impose an unspecified local tax on vacant homes. But he and his council need to do more.

      They should also impose an indefinite moratorium on the demolition of all heritage homes and newer homes.

      They should impose new mandatory maintenance penalties on those who are deliberately allowing their houses to fall into unacceptable states of disrepair.

      If those home owners neglect to do even the minimal maintenance required to keep their properties habitable and civically respectable, the city should it for them. And it should bill those owners for that work, at a significant premium.

      If those derelict owners refuse to pay those bills, the city should place liens against those properties, and if need be, expropriate them at their purchased value, less any amounts owed for the work.


      Strategy #2: Reverse new borrowing restrictions that are hurting affordability

      At a time when housing prices are pushing so many local buyers out of the market, the last thing the federal government should be doing is making it exponentially harder for them to qualify for government insured mortgages.

      In today’s market, not many first-time buyers can come up with a minimum 20 percent down payment on most homes in Metro Vancouver. Without that, they are obliged to seek a Canada Mortgage and Housing Corporation–insured mortgage.

      As of February, the minimum down payment for a CHMC loan was increased from five percent to 10 percent for the portion of the house price above $500,000. It’s 20 percent for properties valued at $1 million or greater.

      That has been done to reduce the government’s risk to the threat of mortgage defaults on government-backed loans and to potentially dampen escalating price pressures by deliberately pricing more local buyers out of the housing market "for their own good".

      In essence, instead of acting on the unwanted incremental foreign demand that is causing so much of that price pressure and that is also indirectly increasing Canadian taxpayers’ risk exposure, the Trudeau government is punishing those who most need its help to buy a home.

      I think that’s perversely misguided.

      In justifying its changes, the federal government pointed to the fact that the average price of homes sold across Canada in October 2015 through the Canadian Real Estate Association’s Multiple Listing Service system was about $453,000.

      That is certainly not the case in Metro Vancouver.

      In fact, none of the 21 areas in Greater Vancouver tracked by the MLS Home Price Index has an overall residential benchmark price of under $500,000, other than the Sunshine Coast.

      The latest benchmark price of a townhouse is $725,500 in Vancouver East, $1,035,400 in Vancouver West and $798,400 in North Vancouver. For residential properties of all types in Greater Vancouver, the current benchmark price is $889,000. For detached homes, it is $1,513,800.

      On a modestly priced $700,000 home in those areas, under the new rules, prospective buyers have to come up with a $45,000 down payment—or an additional $10,000 from the amount previously required—to qualify for a CHMC mortgage.

      In the overall scheme of things, that extra $10,000 is a teensy fraction of their mortgage. It doesn’t much affect their ability to afford their monthly mortgage payments, on a typical 25-year amoritization.

      But it sure does make it harder to buy a home.

      It would take most people several years to save that extra money for their required minimum down payment. Which leaves those would-be home owners with three options.

      They can wait those extra years to buy a home, with prices rising all the while, pushing the amount they need to save ever higher.

      They can move further out into the suburbs, as Bob Rennie suggests.

      Or they can perhaps buy a condo that has a fraction of the space, that likely won’t increase as rapidly in value, and that it is not as conducive to family living.

      If nothing else, the CMHC lending rules should be changed to make them regionally sensitive.

      The five percent down payment threshold should be increased to at least $700,000 in price-pressured markets, or better yet, across Canada.

      At the same time, the government should recognize that longer allowable mortgage amortization periods actually increase affordability, provided borrowers’ debt-service ratios are not too high. They don’t necessarily raise the risk of loan defaults.

      The maximum amortization period has been reduced from 40 years to 25 years.

      That, too, has priced local buyers out of the housing market, as it has severely limited the value of homes that people can afford to finance on their monthly incomes.

      Again, the government should consider allowing different amortization rules for borrowers living in places where housing prices vastly exceed the Canadian average.

      Incomes across Canada do not vary nearly as significantly as housing prices. Why not recognize that fact and allow people living in places like Metro Vancouver the option to finance their much higher mortgages over a slightly longer period of even 30 years, as they could previously?

      After all, the most important indicators of credit worthiness have also been tightened.

      The gross debt service ratio must be no more than 39 per cent and the total debt service ratio must not exceed 44 percent. That’s good.

      The former is the share of the borrower’s gross household income that is required for monthly home-related expenses, such as mortgage payments, property taxes, and monthly utility costs. The latter is the proportion of income needed to pay for home-related expenses and all other debt obligations, such as credit card debt, car loans and student loans.

      Those are sensibly conservative lending thresholds that protect taxpayers’ interests and that should serve to prevent borrowers from becoming over-extended.

      But there is more that could be done to help more families qualify in meeting those thresholds by targeting home-related tax relief to people’s incomes and ability to pay, as suggested below. 

      Certainly that goal will not be served if the federal government bows to those who want it to suppress demand through even higher minimum down payment requirements and other measures that would make it harder for people to borrow and afford a home.

      That push is largely coming from the big banks.


      Strategy #3: Tighten lending restrictions on foreign borrowers

      If Canadian banks really wanted to make a contribution to lowering pressure on housing prices, they could start by taking a page out of some Australian banks’ playbook.

      In the last two months, three of Australia’s largest banking groups—Westpac, ANZ and the Commonwealth Bank of Australia—have all taken steps to strengthen and restrict lending to foreign buyers.

      In tandem with the other restrictions and taxes that Australian governments have imposed on foreign property investment and ownership, the banks’ new lending policies are beginning to reduce the growth in housing prices that have been compounded by foreign buyers.

      As reported in the Australian Financial Review, the Westpac banking group "will no longer accept mortgage applications from non-residents, home buyers with foreign self-employed income and those who hold temporary visas in Australia."

      Instead of punishing Canadian home buyers who are struggling to get into the housing market, our financial institutions could follow suit and act to reduce their exposure to future mortgage defaults from foreign buyers who are aggravating today’s current price pressures.

      They could stop lending money to foreign purchasers, who in some cases can obtain mortgages for which Canadians would not even qualify.

      It is not fair that foreign buyers can sometimes obtain mortgage financing, with a 30 to 35 percent down payment and a year’s worth of prepaid mortgage payments, courtesy of their rich relatives in China or other countries.

      It is not right that Canada’s major banks and credit unions offer special lending programs not available to Canadians that allow some foreign buyers to become eligible for loans without any required proof of income, or without divulging their true source of income.

      If those loans go south, all Canadians will pay the price, to the extent that they impact those financial institutions’ bottom lines and the effects of that fallout cascade throughout our economy.

      Scott Rothstein/iStock

      Strategy #4: Reduce local governments’ reliance on property taxes

      As I recently outlined in the Straight, rising property taxes are a crippling burden for many home owners and would-be buyers in Metro Vancouver.

      To reduce reliance on property taxes and other regressive taxes, local governments need additional revenue sources.

      No wonder. The Clark government has cut their transfer payments by about $100 million from what they historically received in annual provincial assistance.

      It’s time the provincial government—and perhaps also the federal government—shared a portion of their income tax revenues with local governments.

      In its most recent budget, the province projected that its personal and corporate income tax revenue will grow by nine percent over the next two years, from $11 billion this year, to $12 billion in 2018.

      If the provincial government shared even two percent of that forecast income tax revenue with local governments, in addition to their current transfer payments, they would have about $240 million more to help meet their rising cost pressures without raising property taxes.

      That would be a substantial lift for cash-starved municipalities, at a cost to the province of less than half of one percent on its $50-billion total revenue forecast for 2018.

      It’s a lot of money, no doubt.

      But it’s barely a rounding error for a government that has stashed $100 million in a phony "prosperity fund" and that is expecting a cumulative surplus of over $600 million over the next two years. And those projected surpluses do not even include the additional $700 million "buffer" that the government has budgeted for in forecast allowances over those two years.

      A truly progressive government would sit down with the Union of B.C. Municipalities and hammer out a new revenue-sharing deal, potentially in exchange for a time-limited freeze on further property tax hikes.

      Instead, the Clark government is actually forcing Metro Vancouver governments to further raise property taxes to pay for needed investments in public transit.


      Strategy #5: Make property taxes income sensitive

      Rather than only taxing the wealth of property assets, whereby those who own more expensive homes are taxed more, we should also be exploring new ways to make property taxes at least somewhat sensitive to home owners’ income and ability to pay.

      As such, we should be reforming the way property taxes are levied, to apply income-sensitive mill rates that are also graduated by property value, attenuated to net taxable household incomes.

      Those who earn less than the median income should pay a little less for similarly valued properties that are owned by those who earn more than that threshold, such that no one in those two income ranges pays more than they do today.

      Such an initiative would obviously have to be carefully evaluated and phased in over several years. Yet the goal is clear enough.

      The cost of that tax shift could be partially offset by new revenue-sharing agreements with senior governments and by the other new revenues indicated in the strategies above.

      In addition, a third residential mill rate could be introduced to impose relatively higher property taxes on those who can most afford them, say, those with net annual household incomes of over $250,000.

      Remember, the gross incomes of those taxpayers are typically much higher than that amount.

      In my mind, anyone buying a multimillion dollar home, who makes easily twice what even the top 10 percent of taxpayers earn, should be obliged to contribute a significantly higher proportional share in property taxes on their assets than someone living on a much lower income is compelled to pay on their homes.


      Strategy #6: Make the home owner grant income sensitive

      The home owner grant (H.O.G.) was a welcome political "goodie" that hasn’t been fundamentally changed since its inception. But it is growing more expensive for the province.

      This year, that tax expenditure is expected to cost $804 million.

      Which is why the H.O.G. is phased out on homes valued at over $1.2 million and eliminated altogether on primary residences that have assessed values in excess of just over $1.3 million.

      Trouble is, it is also insensitive to home owners’ income or to their actual need for property tax relief. We should correct that, as politically unpopular as that would be with society’s highest income earners, including many seniors.

      It makes no sense to subsidize property taxes for those who are making hundreds of thousands of dollars annually, or in some cases, millions each year.

      The H.O.G. should only be available to those home owners who really need that grant, again those who are earning less than $250,000 a year, regardless of their age.

      Because the grant is not income sensitive, the government likely doesn’t have a clue how much of its total cost for that program is going to subsidize those top-tier income earners.

      We should know that and we should redirect that money to help those who most need a little extra property tax relief.

      We should be looking to create an additional H.O.G. grant similar to the one that all seniors currently enjoy, targeted directly to those on lower incomes, regardless of how old they are or where they live.

      Moreover, we should be acting to address the current grant’s regional disparities.

      It is simply not fair that home owners living in the Greater Vancouver Regional District, the Fraser Valley Regional District, or the Capital Regional District are not eligible for the higher home owner grants that are available to all so-called "northern and rural" residents outside of those regions.

      Those people get an extra $200 in annual property tax relief from the province, simply because of where they live—regardless of what they earn, or how much they are obliged to pay in property taxes.

      That’s not right. Especially since in many cases, they often pay less per capita in municipal property taxes.

      For example, according to the province’s latest figures, Vancouverites collectively pay $560 per capita just for that 46 percent of their total property tax bill that is for the municipal portion, not including TransLink, the regional district, the local school district, et cetera.

      That alone is $247 more for every person in Vancouver than the $313 per capita that residents of 100 Mile House pay.

      It is $267 more than people living in Chetwynd pay per capita for their $293 in per capita municipal taxes.

      It is $291 more than the $269 in per capita municipal taxes that the people of Burns Lake pay.

      And it is a whopping $422 more in per capita municipal taxes than the $138 per person that Cache Creek residents pay.

      Yet all of those rural and northern residents get an additional $200 from the province in a higher H.O.G., to say nothing of the extra tax relief they get for the carbon tax and for other programs.

      Many other rural residents do pay much higher per capita municipal taxes, because of the small size of their residential tax base and because of the higher proportional cost of providing critical services. But that’s not always the case.

      The rationale for offering those lower-taxed residents higher property tax relief than those living in B.C.’s largest cities is more political than anything.

      It doesn’t take into account the much higher costs of living that typically face those city dwellers who must also pay much higher fuel taxes, parking fees, transit costs, insurance costs, and more.

      If we made the H.O.G. at least somewhat sensitive to income, it would allow the province to correct that inequity over time and to immediately pay for a modest increase in the H.O.G. for those home owners who are living on lower incomes.

      If we reduce the costs of providing that grant money that is now going to B.C.’s wealthiest citizens, it might further allow the government to raise the maximum property value governing H.O.G. eligibility in price-challenged urban markets, like Metro Vancouver and Greater Victoria.

      The latest benchmark price of a detached home in Greater Vancouver is $1,513,800. That’s $200,000 more than the cut-off point for the home owner grant.

      That grant should at least be applicable on homes worth up to that benchmark value, for those who are earning up to $250,000 a year.

      Piotr Adamowicz/iStock

      Strategy #7: Allow first-time home buyers to defer their property taxes

      The property tax deferment program offers low rate, simple interest (i.e. not compound interest) loans to help eligible home owners pay their property taxes on their principal residence.

      Essentially, it allows eligible applicants to defer a portion or all of their residential property taxes, net of their home owner grant, in any given year, until they sell their home. At which time, the government recovers its loan, with interest, out of the equity realized on the sale of the property.

      That particular form of tax relief is available to those who are 55 or older, to surviving spouses of any age, to persons with disabilities, and to parents, step-parents or other persons who are financially supporting a child.

      It is a tremendous cash flow benefit that can save those home owners thousands of dollars a year in property-tax payments, to help them meet their annual costs of living.

      To qualify, regular program applicants must have and maintain a minimum equity of 25 percent of their property's assessed value—a level that drops to 15 percent for participants in the families with children program.

      The government could significantly help first-time home buyers to enter the housing market by extending a similar benefit to them.

      It would be available to those who purchase a home with a minimum 10 percent down payment on properties that are below a maximum designated assessed value.

      That allowable threshold might be higher in price-pressured areas. For example, the maximum threshold might be set at $700,000 in the Lower Mainland and in Greater Victoria, with a lower allowable amount set for other regions, where houses are typically already more affordable.

      That new first-time buyer property-tax deferral program could be structured so as to allow for a maximum deferral period of up to three years, provided the amount owed to the government remains within any applicant’s ongoing minimum 10 percent equity in their homes.

      Most first-time home buyers need all of the help they can get in meeting their initial housing-related expenses.

      Allowing them to defer some or all of their property taxes for a few years would give them access to thousands of dollars for their first homes when they need that money the most, at minimal risk to taxpayers.

      It would also allow those typically young families to redirect some or all of their net income that would be otherwise going to pay property taxes for other strategically important purposes.

      They would have more to invest in their RRSPs and RESPs, which would also reduce their annual income tax bills. They would have more to invest in TFSAs, or in furthering their education and skills.

      In the long run, that could be much better for both their financial security and for their ability to pay for the upfront costs of their new homes.

      A smart government would at least initiate some financial modelling on such an initiative to ascertain its costs and risks under different program scenarios.


      Strategy #8: Make the property transfer tax fairer

      The property transfer tax has created a windfall for the government that currently generates over $1.2 billion in revenue.

      That’s more than nine times more than what the province will collect this year in natural gas royalties. It’s more than 13 times greater than what it expects to receive in mining and mineral revenue.

      Obviously, it is too lucrative as a revenue source to be phased out any time soon, despite the assurances that the Vander Zalm government made when it introduced the tax, three decades ago.

      Still, it can and should be changed to make it fairer.

      The Clark government certainly helped in that regard, through its new property transfer tax exemptions on newly built homes of up to $750,000, with partial exemptions on properties of up to $800,000.  

      First-time home buyers are also already eligible for property transfer tax exemptions on homes with a fair market value of up to $450,000, again with partial exemptions on properties of up to $500,000 in fair market value.

      The trouble is, the property transfer tax is at once too high and not at all income sensitive.

      The government should commit to addressing both of those flaws through a newly graduated rate structure.

      The property transfer tax rate is set at one per cent on the first $200,000 in property value, and two per cent on the value in excess of that amount.

      That might have been defensible in the 1980s, but it is highway robbery in today’s context.

      It is outrageous that the government effectively adds a tax cost of $12,000 on a modestly priced home valued at $700,000, for example.

      That’s $2,000 more in that one tax alone than the additional $10,000 that a typical home buyer purchasing such a property must now come up with for the 10 percent portion of their down payment that is required for a government-insured mortgage.

      That tax should be amended in two ways.

      First, the one percent base rate for the property transfer tax that is applicable on the first $200,000 of fair market value should be extended to apply to all properties with a value of up to to $400,000 in most of the province.

      That allowable base value for the one percent tax rate should increased to at least $500,000 in Greater Vancouver and Greater Victoria, in recognition of those regions’ higher housing prices.

      Second, the property transfer tax should be amended to impose higher tax rates on high-value properties.

      In addition to the one percent tax on the base value level, and the two percent tax on the value in excess of that level, two new tiers should be introduced to ratchet up the rate as home values soar.

      A third rate of three percent might be set on the value of a property that exceeds $1.5 million—roughly equivalent to the current benchmark price on a detached home in Greater Vancouver.

      A fourth rate of four percent might be set on the entire value of any property selling for more than $2.5 million.

      Those two new tax tiers would only affect those rich enough to afford such expensive properties. It would affect people who either have massive amounts of disposable capital wealth or exceptionally high incomes. 

      Under that proposed regime, a home that sold for $2.5 million would generate $53,000 in tax instead of the $43,000 that would now apply—not a particularly onerous burden on such a costly abode.

      A home that sold for $5 million would generate $200,000 in property transfer tax, instead of the $93,000 currently applicable.

      That extra tax on the most expensive properties may not do too much to discourage the kind of rampant speculation we are now seeing on luxury properties, which should also be subject to a new property surtax, as Mayor Robertson has called for.

      But it would generate a significant sum for government that would help to ease its cost of raising the regionally variable base threshold on the one percent tier of property transfer tax.

      More importantly, it would help make homes more affordable for most local Metro Vancouver buyers by cutting their property transfer tax on the first $500,000 of fair market value by $3,000—money that could instead go towards their down payments and help more people to qualify for CHMC financing.


      Strategy #9: Cap the cost of real-estate commissions

      At today’s housing prices, real-estate commissions are costing those who sell their homes way too much of their realized profits and their precious equity.

      It is not right that realtors and mortgage brokers should be able to cream off unlimited amounts of money in commissions from the profits on residential property sales.

      Like the property transfer tax rate, the percentage rates charged through those commissions were set in another time, a long time ago, when properties were worth a fraction of what they are today.

      Here’s the thing.

      Those extravagantly high commissions are now severely cutting into the equity earnings that families are increasingly using to help younger generations enter the housing market.

      Much of that realized equity on home sales is being gifted or bequeathed to help those older generations’ kids and grandkids buy a home, as it also is increasingly key to aging boomers’ retirement plans.

      It is being leveraged to enable first-time buyers to enter the housing market.

      It is being handed down through inheritances that help new home buyers come up with their down payments.

      It is being generationally transferred to help make homes and home ownership more affordable for those lucky enough to receive such a helping hand from their families.

      That wealth should not be unfairly confiscated by realtors and brokers who simply help people sell and buy their homes. People should not have to resort to cut-rate agencies that are too often accused of offering less than optimal service.

      I submit it’s time to put a legislated cap on real-estate commissions and brokerage fees.

      Those costs should be capped at no more than 2.5 percent of any property’s sale value, up to a total hard cap of maybe $25,000 on any home that sells for less than a prescribed amount, say, $2.5 million.

      That commission cap could be doubled to $50,000 on properties that sell above that amount—still a sizeable payment to the listing and selling agents, but much less than what most would now take from the proceeds of home sales on higher value properties.


      Strategy #10: Re-regulate the real-estate industry

      Since January 2005, when the Real Estate Services Act came into effect, the real-estate industry has been fully self-regulating. That experiment hasn’t worked. It has not served the public interest.

      The standards set by the Real Estate Council of British Columbia for people entering and practising its profession are now weaker and worse.

      The sanctions for those breaching its standards are woefully inadequate. The compliance and enforcement of those standards has become a bad joke.

      We have seen too many examples of how the council has been ineffectual and negligent in holding its members accountable.

      The public has lost confidence in that body’s capacity to assiduously serve its mandated responsibilities in the broader public interest.

      Too many people have been hurt by agents that have been engaged in shady practices and unconscionable behaviours, most of which went uninvestigated and unpunished, until the media and the Opposition exposed them.

      Those bad actors in B.C.’s wild west real-estate market have effectively been unregulated through the sorry experience of fully autonomous self-regulation.

      The council has too often turned a blind eye to reported abuses that are only rarely caught and acted upon, typically with a weak slap on the wrist.

      The experiment with self-regulation has afforded no real accountability to clients, despite the laudable efforts of those in the profession who have tried, unsuccessfully, to affect desperately needed change.

      As such, we should repeal the changes that were passed over a decade ago, to restore proper government oversight and accountability of the real-estate industry, to better serve the public interest.

      That change should be made in tandem with the welcome changes that should flow to British Columbians from the federal Competition Tribunal order that will give consumers online access to Multiple Listing Service sales data held by the Toronto Real Estate Board.


      Together, the above strategies point to a new vision for encouraging affordable home ownership; a vision that places new emphasis on limiting unwanted demand, on targeting tax relief to those who need it, and on reducing some of the one-time costs and regulatory failures that are unduly impacting B.C. home buyers and sellers.

      The art of any good policy platform is to start with an open mind about what needs to change and about how we might address those needs by turning ideas into actions.

      That is what this long discussion piece is aimed at advancing.

      I thank the Straight for caring enough about the critical issue it addresses to share it with you, for whatever it’s worth.

      And I thank you, dear reader, for giving the ideas it proposes your considerable time and attention.

      Martyn Brown was former B.C. premier Gordon Campbell’s long-serving chief of staff, the top strategic advisor to three provincial party leaders, and a former deputy minister of tourism, trade, and investment in British Columbia. He is the author of the ebook Towards a New Government in British ColumbiaContact Brown at