NO SILVER BULLET THAT WILL FIX HOUSING CRISIS
Addressing speculation is a top priority, write Dan Garrison and Gil Kelley.
Vancouver is in the midst of a housing crisis that has reached the point of jeopardizing our city’s diversity and long-term economic resiliency. Over the past 14 months, the City of Vancouver has fundamentally rethought our approach to housing. After extensive engagement with expert stakeholders, partners from cities around the world, and over 10,000 Vancouver residents, we have developed a housing strategy that reflects the core values of our city. This week, Vancouver City Council will consider the outcome, a new 10-year housing strategy called Housing Vancouver.
Through the Housing Vancouver consultation, we have learned a lot about the factors driving up the cost of housing in our city. Vancouver is experiencing critical gaps in the supply of housing that is affordable to people looking to live and work here, especially rental housing. Vancouver is also experiencing high and sustained demand for housing, in part as a result of the region’s economic growth and its desirability as a place to live. However, demand from these areas alone does not explain why housing costs are outstripping incomes in Vancouver.
Over the past 15 years, the cost of a modest east side home has increased 350 per cent while real incomes grew just 21 per cent. Average rents went up by 70 per cent over the same period, spurred on by chronically low vacancy rates. The rising cost of land has also become a barrier to the development of affordable housing, with excessive speculation — the purchase of a property based on anticipated price growth rather than what it’s worth today — distorting land prices.
The role of investment and speculative demand as drivers of this surge in housing and land costs has dominated the housing cost conversation in Vancouver and other large cities. Investors around the world increasingly view housing as an asset that can generate large financial returns, or as a relatively safe place to hold wealth. The result has been the financialization of global housing markets, which has led to housing becoming an investment rather than a home. Vancouver is not alone in this, from Sydney to San Francisco to London and beyond, many cities are experiencing housing cost growth well beyond the earning power of the average resident.
In response to this relentless demand for housing and the dramatic price escalation that has resulted, Housing Vancouver proposes two bold solutions.
First, we need to address problematic demand and limit speculative investment in our housing market. The strategy’s main aim is to ensure that housing is used primarily as homes for people who want to live and work here and contribute to our communities. The City of Vancouver has already taken significant steps in this direction. We have introduced Canada’s first Empty Homes Tax to encourage owners to bring underutilized residential properties back into use as rental housing. New short-term rental regulations will limit the use of properties that should be providing long-term rental housing for short-term vacation rentals. We’re also proposing new requirements for pre-sales of condominium units that will see them offered for sale to locals first, before they are marketed and sold overseas.
The City recognizes that rezoning areas and increasing permitted densities can act as a catalyst by increasing the value of land. In order to limit land value speculation before the adoption of an approved plan, we’re adopting a new approach that evaluates the land value before the launch of new planning programs that reflects the development potential under existing zoning. We can set future land-use policies and public benefit strategies based on that evaluation. The city will put in place clear policies that require land value increases to be recaptured in the form of affordable housing and other public amenities.
While the city can take the kinds of actions outlined above, many of the tools for addressing speculation and investor demand rest with senior levels of government. Through Housing Vancouver, we have identified the need to work more closely with governments in Victoria and Ottawa to look at how the taxation and financial regulation systems can be brought to bear to limit the impacts of speculative investment on our communities. We want to collaborate with senior governments to explore how measures like flipping taxes and new approaches to property taxation could work. We also see opportunities to monitor and learn from approaches in other cities around the world, such as recent actions taken in New Zealand to limit foreign access to ownership.
While these actions will address the demand side of the equation, we also know that there needs to be more affordable housing. The actions in Housing Vancouver will facilitate a major shift toward delivering what we are calling “the right supply” — homes for people who live and work in the city — including substantial increases in rental, social and cooperative housing. We also know that we need more diverse and affordable options for families, such as townhouses and infill development. To achieve this shift, Housing Vancouver sets aggressive housing supply targets. About 72,000 new homes are projected as part of the new targets, with nearly half of these aimed at households with incomes less than $80,000 per year, and 40 per cent appropriate for families with children. Approximately twothirds of new homes will be rental housing.
There is no silver bullet that will solve Vancouver’s housing crisis. Concerted effort on many fronts is required. The City is making sustained commitment over the long-term to create a healthy housing market that provides homes rather than investments, and we call on all levels of government and community partners to do the same.
Dan Garrison is assistant director of housing policy and Gil Kelley is general manager for planning, urban design, and sustainability, both with the City of Vancouver.
We need to address problematic demand and limit speculative investment in our housing market ... to ensure that housing is used primarily as homes for people who want to live and work here and contribute to our communities. Dan Garrison and Gil Kelley Over the past 15 years, the cost of a modest east side home has increased 350 per cent.