‘ABSOLUTELY BIZARRE’
Dark predictions for housing
It’s not often that data about Metro Vancouver’s much-debated housing market can make a roomful of politicians gasp, but that’s what happened Monday during this year’s annual Union of B.C. Municipalities convention.
A trio of experts gave captivated municipal leaders from around the province insight into the affordability crisis plaguing parts of B.C., a look at serious ramifications that could follow, and a glimpse at possible solutions.
David Ley, a geography professor at the University of B.C., helped lay the groundwork for the discussion.
“We are in an absolutely bizarre situation here,” Ley said, presenting 2017 data from U.S. consultancy Demographia that showed detached homes in Vancouver cost 11.8 times median incomes. A ratio of at most three times income is defined as affordable.
Andy Yan, director of Simon Fraser University’s city program, put that same relationship a little more simply.
“Where does Vancouver sit? Its (housing) values are between Honolulu and San Francisco, at Halifax incomes,” he said.
Things are also bad in the Fraser Valley, where housing prices are seven times median incomes.
Here’s where the gasps and exclamations came in: Yan presented a slide that showed million-dollarplus detached homes in Metro to be concentrated in Vancouver. Then he showed another that included household transportation costs paid out over a 25-year period. Suddenly, those million-dollar homes spread clear across Metro.
“We can’t necessarily sprawl our way out of this housing situation,” Yan said.
Local families have taken on extraordinary debt loads to get into the housing market, Ley said, calling it “a very serious problem just waiting to happen.”
“What if current economic conditions change? What if there was a significant recession or even a small recession? What if interest rates went up two to three per cent?” he asked.
Even if those things don’t happen, what is certain to occur at this rate is a serious Metro labour shortage, he said.
By 2020, workers in 82 of 88 in-demand jobs will be unable to afford a single-family home in Metro, Ley said, citing a 2015 study from Vancity. In just 10 years, most people will forgo career opportunities in the region and relocate elsewhere, he said.
There are a few things driving the out-of-control market, and it’s not a strong local economy or in-migration from other parts of Canada, Ley said. It’s not a lack of supply either, the panellists agreed.
In fact, increased supply through redevelopment can actually worsen the problem, Ley said. As an example, he said speculative land assemblies drive up land costs and are eventually converted into high-priced units. Instead, what is driving increased prices is global demand and investment.
“Housing has become a valued asset in an investment portfolio. Capital flows to select desirable locations — resort locations and gateway cities,” said Ley, who added that Vancouver has become viewed as “a honey pot for global investors.”
Josh Gordon, an assistant professor at SFU’s School of Public Policy, agreed the problem was foreign money.
“You have to understand supply claims are largely about distracting us from doing stuff on the demand side,” Gordon said, adding that developers simply want to be able to build endlessly for the world’s rich.
He called current demand-side measures like the one-percentage-point increase in the property transfer tax on pricey homes, Vancouver’s empty-homes tax and the now-weakened foreign-buyers tax “insufficient and modest.”
Gordon said what’s needed is a progressive property surtax that is offset by income taxes paid. “What that would do … if you wanted to own property on the basis of foreign income and wealth, you’d have to pay your fair share of taxes,” he said.
Most residents pay for their homes using local income on which they pay taxes that are used for social and other services that make their properties so valuable, he said. A buyer who uses foreign income doesn’t — and for Gordon, that amounts to a subsidy, which could be eliminated with a surcharge.
Ley pointed to changes in loan regulations, steep and progressive property transfer taxes and sellers’ taxes to prevent flipping as other possible measures.
There were few hints of optimism in the presentations. But Ley had this to offer: “We are at a very promising juncture with a federal government (and) a provincial government that is concerned about affordability in a way we have not had for many years. I see this as a moment of opportunity.”