It’s not every day that three well-respected urbanists meet to discuss what is happening in the Vancouver housing market, but that is exactly what happened at the Union of British Columbia Municipalities convention which is currently being held in Vancouver. As reported in the Vancouver Sun by Matt Robinson , University of British Columbia’s David Ley, Simon Fraser University’s Andy Lam and Josh Gordon from Simon Fraser University’s public policy program laid it out succinctly and painfully.
Andy Yan illustrated that the so-called ‘million dollar and more‘ detached houses are concentrated around the City of Vancouver. However if transportation costs are factored in as paid by households over a 25 year period to commute to work, those ‘million dollar’ housing units are located right across the lower mainland. Noting that you can’t use sprawl to provide housing affordability, Andy pointed out the disparity between incomes and housing values. “Where does Vancouver sit? Its (housing) values are between Honolulu and San Francisco at Halifax incomes.” In the Fraser Valley Andy pointed out that housing prices are seven times what median income is, showing that even there local people are not able to buy in this market.
Dr. Ley backed up Andy Yan’s points by showing that 2017 data from the Demographia consultants illustratesthat Vancouver’s detached homes cost over 11 times median incomes. As a guide, affordable housing is classified as three times median income.
And with locals taking on large debt to finance a house there are implications if interest rates change or if there is a recession. But most importantly workers will not be able to live in Vancouver. “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. And in just 10 years, most people will forgo career opportunities in the region and simply relocate elsewhere.”
That is huge~if workers cannot live in the city, they won’t have any incentive to stay here and raise families. Calling Vancouver “a honey pot for global investors” Dr. Ley noted that you can’t build your way to affordability, and that increased supply through redevelopment feeds land assemblies at higher prices, driving up land costs which are reflected in higher valued units. “Housing has become a valued asset in an investment portfolio. Capital flows to select desirable locations, resort locations and gateway cities.”
So how to mitigate the affordability of housing? Josh Gordon from SFU’s School of Public Policy, bluntly described the challenge of one of foreign money stating “You have to understand supply claims are largely about distracting us from doing stuff on the demand side,” said Gordon, who added that developers simply want to be able to build endlessly for the world’s rich.”
Calling the foreign-buyers tax and the marginal increase in property purchase transfer tax “insufficient and modest” Gordon observed that what is 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.” Local home buyers subsidize foreign buyers as local buyers use income upon which taxes are paid for social and other services. Foreign buyers do not. A property surtax would eliminate that subsidy. With housing prices over 11 times the median income, and the median housing price now skirting two million dollars, this is no longer a local market. What happens if workers simply decide to live somewhere else other than the Metro Vancouver region? What shifts can be made by municipalities and the Province to ensure that people in this area can purchase their own housing? Is it all too late?
September 27, 2017