RAISING THE ROOF
Douglas Todd on foreign capital and housing.
The Royal Bank of Canada quietly reported this month that housing costs in Metro Vancouver have reached “the worst affordability levels ever recorded anywhere in Canada.”
In this city of relatively tepid wages, the RBC says owning a home requires an “astounding 85 per cent of a typical household’s income.” That compares to 75 per cent in Toronto and roughly 42 per cent in Montreal, Calgary and Ottawa.
Royal Bank CEO David McKay last month became the latest bank head to point to how foreign wealth is contributing to unaffordabilty by “distorting ” the country’s housing markets, by adding “gasoline” to them.
“We do not need foreign capital using Canadian real estate as a piggy bank.”
While numerous factors are behind the housing crisis, vested interests have attempted to craft a narrative that counters McKay and other realists. They act as if it’s xenophobic to suggest foreign capital has anything substantial to do with unaffordability in Vancouver and other gateway cities.
Their diversionary methods are not unique to Vancouver, where UBC geographer David Ley, author of Millionaire Migrants, said developers first began playing the “racist” card against affordability activists in the 1990s. Fear of the xenophobia label is why many have not publicly opposed foreign capital flowing into housing in Toronto, London and Sydney. The smokescreen has not proved effective in Singapore and Hong Kong.
The surprising development in Canada’s housing debate has been the way top bankers have become the latest to publicly join Vancouver Mayor Gregor Robertson, the B.C. NDP, Ontario Liberals and diverse economists and scholars in citing how billions of dollars in foreign capital is warping affordability in Vancouver and Toronto, and even nearby cities like Victoria and Windsor.
It goes without saying there are multiple causes of unaffordability, including interest rates, zoning laws and the availability of “empty” land. But housing specialists who don’t have financial self-interest at stake (and even some who do) have evidence that foreign capital, money made outside the country, is key.
They’re simply following the former governor of the Bank of Canada, Mark Carney, who was unfortunately mostly ignored when he warned a Vancouver Board of Trade audience in 2011 that “Asian wealth” was one reason city dwellers were experiencing “extreme” prices and an “inequality crisis.”
How can advocates be truthful about the causes of unprecedented unaffordability, including nonresident wealth, without being unfairly accused of being xenophobic, which is defined as “fear and hatred of foreigners or strangers?”
How can they fight lobbyists for the real-estate industry, some B.C. Liberal politicians, Justin Trudeau-appointed Senator Yuen Pao Woo, and the occasional academic and blogger (some of whom receive real-estate funding) who have labelled those concerned about foreign capital as fomenters of fear of a “Yellow Peril?”
The best thing is to keep focusing on evidence. It is significant when executives in Canada’s banking industry, who otherwise champion economic globalization, openly admit how destructive foreign capital has been for hundreds of thousands of wouldbe home buyers.
It is hard for anyone from the political right or left to ignore the declarations of, for instance, The National Bank of Canada, which said “almost $13 billion was spent by Chinese investors in Vancouver” in one recent year alone.
Economist Benjamin Tal of CIBC World Markets also confirmed Ontario’s government had no option but to bring in a foreign-buyers tax. And BMO Financial Group chief Douglas Porter said “foreign investors are a very big part in driving ” the market in Vancouver and Toronto, especially for single-family dwellings and high-end condos.
Significantly, the “gasoline” metaphor adopted by the Royal Bank’s McKay is much like the one Vancouver activist Justin Fung, of HALT (Housing Action for Local Taxpayers), has been trying to get out for years.
“I have always made the analogy that local speculators are the firewood and the foreign investors, money launderers and fraudsters are the fire starter. The fire would have burned either way, but with the fire starter added, it creates a fireball,” Fung said.
Still, HALT, whose members are roughly half people of colour, has had to counter fake accusations that it claims foreign capital is the “only” cause of astronomical prices. Ethical analysts know speculation, with both foreign and domestic capital, is key to why housing prices have no correlation to local wages.
So is high in-migration, including by immigrants bringing in wealth made offshore, says Tal. And so are urban density rates, even while the recent census shows the City of Vancouver has the highest density of any city in Canada and one of the lowest portions of people in single-family homes on the continent.
To be clear, it is not just development industry apologists who cite the dangers of xenophobia. UBC sociologist Nathan Lauster, author of The Death and Life of the Single-Family House, posted a blog this year with the stark warning that “anti-foreigner rhetoric is the handmaiden to fascism.”
Lauster, who does not receive funding from the development industry, said this week that even though he would like to “possibly limit the speed and quantity of flows of capital around the world … the left-wing progressive move is to talk about capital and wealth flowing into the city’s housing, without too much concern over its nationality.”
But it’s hard to find Canadians who target foreign people themselves. In general, Canadians have done a standout job of sticking to facts and avoiding stranger fear. One measure of that is the UN’s recent World Happiness Report, which found Canada is “the fourth most accepting country for migrants.”
SFU planner Andy Yan says Chinese-Canadians are as worked up as anybody about “wealthbased immigration” expanding the gap between the house-rich and rent-poor in this metropolis of 2.5 million, in which one in five have Chinese origins.
Fung agrees with Lauster that “by definition blaming foreigners is kind of silly.” But Fung emphasizes it’s not OK to “be naive about Chinese economic soft power” in housing markets.
“It’s something we need to talk about. The problem is foreign wealth and much of this wealth can be attributed to China.”
Upwards of 100,000 wealthy foreign nationals have moved in recent years to Metro Vancouver, Fung said, “and effectively bought their citizenships via the (now defunct) immigrant investor programs, or continue to do so through the Quebec Immigration Investor Program.” The “fire starter” of foreign capital has in turn fuelled domestic speculation.
“We should look at ‘locals’ as well as ‘foreigners,’” said Fung, who supports the B.C. government’s broad anti-speculation taxes. “Whether it is millionaire migrants or ‘old stock’ locals who are speculating on housing, we need to deal with the problem.”
I have always made the analogy that local speculators are the firewood and the foreign investors, money launderers and fraudsters are the fire starter. The fire would have burned either way, but with the fire starter added, it creates a fireball. Justin Fung