Housing affordability challenges aren’t unique to Vancouver
There’s an affordability crisis gripping a bustling West Coast city. Within the city, dwindling supply, a strong economy, and healthy immigration are putting pressure on the scarce available land, constrained by the sea to the west, mountains to the east, and an international border to the south. Housing prices have jumped by double-digit percentages year-over-year and even entry-level homes are falling out of reach for locals.
It’s a situation familiar to any Metro Vancouverite, but this is happening in San Diego, California.
“Time and again we hear from employers who say their employees, and potential employees, can’t find housing they can afford,” Jerry Sanders, San Diego Chamber of Commerce President said. “For businesses in San Diego, to continue to grow and create jobs we need to make sure our workforce can afford to live here.”
San Diego Realtors and the city’s chamber of commerce have their own recommendations to increase the housing supply and improve housing affordability. Tax incentives intended to move home owners up the property ladder to increase entry-level supply for firsttime buyers is one idea. Cutting red tape and encouraging more housing development, especially for low and moderate income levels, is another.
A global trend?
While San Diego’s rising housing costs are a fraction of Vancouver’s, the overlying trend that’s causing the problem is the same: the demand for housing is far outpacing the new supply coming on. This trend is affecting other cities across North America and the world.
According to Helmut Pastrick, chief economist for Central 1 Credit Union, Sydney Australia mirrors Vancouver’s affordability crisis closely.
“Sydney has experienced upward price pressure similar to Vancouver due to population growth, the influx of capital, and an increase in foreign buyers,” Pastrick says. “There are a lot more foreign buyers over there due to their proximity to Asia, and the government implemented measures more drastic than ours to try to minimize their impact on the housing market.”
For example, the government instituted owning and lending restrictions for foreign buyers that prohibit them from purchasing resale homes in Australia.
These measures have seen mixed success and Sydney is still experiencing price growth well above expectations. In a 2017 report, the Australian Prudential Regulation Authority noted that while initially successful, “affordability is not expected to improve” in the near future.
“It’s the cost of developing land and expanding,” Pastrick explains. “Cities are seeing a net expansion of both urban and suburban populations.”
Global solutions
A recent report from the Sightline Institute, an independent non-profit research and communications centre based in the Pacific Northwest, found that supply is the key element to solving affordability issues.
Sightline’s report titled “Yes, you can build your way to affordable housing,” compares seven cities that maintain affordable housing for their populations. While each city, from Houston to Singapore, had their own method of solving the problem, the solutions all increased supply.
The city of Houston, for example, took an extreme hands-off approach to supply, encouraging construction and reducing red tape. According to the report, the urban sprawl of Houston is extensive, but, as a result, housing costs less, adjusted for inflation, than it did in 1980.
Singapore took the other extreme. The report claims Singapore constructed nearly a million publicly built homes between 1952 and 1973, leading to 82 per cent of residents living in government-constructed housing, with nine out of ten of them owning their home. The report shows that Singapore housing has remained modestly priced with a high degree of social equality.
While Vancouver may not be able to replicate these strategies, it can adapt them to its own situation.
The Vancouver solution
The Real Estate Board of Greater Vancouver (REBGV) offered its own solutions to improve affordability in Metro Vancouver, based around increasing the supply of housing.
REBGV’s solutions focus on using already existing revenue streams, like the Property Transfer Tax, to incentivise municipalities to rezone land for innovative, compact, walkable, mixed-use, transit-oriented communities with smaller housing choices that are available to own and rent.
REBGV also encourages the construction of the “missing middle” homes like townhomes and row homes. This gentle densification can be seen in cities like Montreal where, according to the Sightline report, homes remain affordable for a larger proportion of residents than similar cities.