myth versus reality
There’s a big news story circulating right now from the Globe and Mail by Kerry Gold which clearly suggests that increasing the supply of housing will not solve the affordability issues in Vancouver. Dr. John Rose has researched the idea that Vancouver has a housing supply shortage. And guess what~”he has concluded that Vancouver does not have a shortage of housing units. In fact, we have a surplus. And, as anybody in Metro Vancouver knows, prices have not plummeted as a result.”
In “The Housing Supply Myth”, Rose’s report looks at Statistics Canada census and Demographia Survey House Price Data. He also examined housing supply in other Canadian cities, the USA and Australia. What he found was that for every household that was in Vancouver in the last fifteen years, the region had added 1.19 “net” housing units. “Put another way, for every 100 households that came along, Metro Vancouver added 119 net units of housing. According to census data, there are also 66,719 unoccupied dwellings in Metro Vancouver.”
Even though there appears to be a housing surplus, affordability has worsened, which suggests the concept of increasing supply to solve affordability is not working. Rose does conclude that Vancouver does not have a shortage of housing units. In fact, we have a surplus. And, as anybody in Metro Vancouver knows, prices have not plummeted as a result.” Simon Fraser University’s Josh Gordon observed “There’s simply no evidence of a slowdown in construction or supply. The construction industry in Vancouver is operating at full throttle. There are around 40,000 units under construction, which is twice the historical average for the post-2000 period. The idea that we should get more supply into the pipeline is a bit silly.”
Talking about the need for housing supply distracts the public and policy makers of the “demand side, specifically in terms of foreign capital“.  What to do? Rose ” favours taxes on speculation, and doesn’t rule out a ban on foreign buying of existing properties, as New Zealand is implementing next year. He also questions the building of housing units that are overpriced and intended for speculation, and therefore “pointless.” It is not the constraints of the Agricultural Land Reserve and Rose questions whether real estate developers are right in implicating citizens that will not accept density, noting that density benefits the developers and the well-meaning “smart growth” concept. Rose states “I’m leery of attributing our high housing costs and the escalation we’ve seen over the last 15 years to an inadequate densification.”
People pushing the supply side of housing can be direct and confrontational according to Rose but he notes his data is  “publicly available. And when I did this research, I had my independence. Nobody owns this. I get no sponsorship from any industry, any sector. I’m a free agent…I’m just saying look at the numbers, and we see Vancouver has plenty of supply. And can we build ourselves out of this? Not in this current model.”
050416-housing
 

Comments

  1. I’d like to see how this analysis relates to rental housing. Surely foreign capital is not renting apartments in order to leave them empty? And yet rental prices also move upwards.
    I also can’t seem to find the actual report, has it actually been published yet?

    1. Landlords are a pretty canny bunch. When they see much of the population can no longer afford to buy and thus has no alternative but to rent, they raise their rates. Add in the fact we are seeing some alarming demolition rates of affordable rentals in places like Burnaby and it’s no surprise the average rental rate is climbing.

      1. When affordable rentals get demolished it’s because city zoning requires new apartment buildings to go exactly where the old apartments are – no new land allowed. So instead of replacing a willing seller of a detached house, it replaces 30 unwilling tenants.
        If you think, as I do, that this is a travesty, you should be lobbying council to expand the boundaries where apartments are allowed. The status quo effectively shields single family from having to compete with multi-family, keeping the land cheap (cheaper than otherwise that is) while keeping floorspace expensive. Great if you want a mansion, travesty if you want to rent an apartment.

        1. In Vancouver at least, any demo of rentals requires an equal number of new units to be built to replace them. I’m not sure if developers are allowed to put those wherever they like or not, or if they are supposed to be in the new building on that site.
          (I agree that we need to increase the amount of land available to build apartments and townhouses).

      2. Re: alarming demolition rates of “affordable” rentals…
        You cited Burnaby, where in fact many rentals were run like slum housing and were allowed to purposely deteriorate to the point of near structural failure by the private owners, who also did little to make their buildings safe from the drug culture for law-abiding and hard-pressed genuine low income residents. The most vociferous housing advocates (some live in Kits) never acknowledge these little facts in their efforts to make headlines.
        Moreover, some of the two-storey, limited residency capacity low rises are or were within a 3-minute walk of one of the busiest SkyTrain stations in the system. The economics there do not support low density in any form.
        It’s one thing to advocate for more affordable rentals and subsidized social housing, but defending slumlords is an entirely different matter.

        1. Second try.
          So your answer to housing for the working lower class is what Alex? Apparently push it further from transit, as you think proximity to a Skytrain station is grounds for erecting expensive luxury highrises.
          Here’s a sad truth, when you can’t afford much in the way of housing you get buildings which tend to be a little run down. That’s economics. The government cannot afford to provide Cadillac housing for all, but it should not (as in the City of Burnaby’s case) actively encourage the demolition of older affordable multifamily stock.

        2. Bob, you’re putting words in my mouth I never said. Again.
          I believe that development in every rapid transit-based town centre must be mixed income, mixed use and mixed density (up at the centre, down at the edges). A proportion of it needs to be subsidized social housing and non-market rental, together adding up to at least 25%.
          And “a little run down…” c’mon, some of them should have been condemned given the egregious neglect by the slumlords.

  2. The Globe news article is based on a problematic statistical analysis. Dr. Rose doesn’t seem to be familiar with Census data, or how the Census has changed over time. As a result his conclusions are dubious.
    He’s citing change over 15 years, so he’s going back to the 2001 Census for his base data. That year Statistics Canada counted 786,285 dwellings in Metro Vancouver (technically, the Vancouver CMA), of which 758,720 were not occupied by ‘usual residents’. That’s a 3.5% rate of ‘not occupied by usual residents’. It’s actually less than in 1996, when 4.3% of dwellings were not occupied by ‘usual residents’.
    Note that these aren’t necessarily actually ‘vacant’ dwellings – they might be occupied by foreign or temporary residents, who don’t get counted. In 2001 6,735 dwellings were occupied on that basis but not considered occupied by usual residents. Other dwellings might be used as second homes, during the week by business people for example, but not considered ‘occupied’ because another dwelling is the family home. There are a whole number of other reasons why a dwelling might not be counted as ‘occupied’. Some dwellings will be vacant because they’re being renovated, awaiting demolition, or for sale by owners who have already moved elsewhere. Some will be vacant because they’re in a recently completed apartment building, but not all the units have been occupied on the day of the Census.
    In 2006 Statistics Canada switched from collecting Census forms, to mailed and online Census returns. In making that change, they made a real effort to collect addresses to contact the population. One outcome of that change was that they found thousand of new dwellings, many of them secondary and basement suites. They weren’t necessarily ‘legal’ or authorized, but they collected addresses from all sorts of sources. If a bank statement or Cable TV bill was sent to ‘Basement Suite, 123 Wherever Road’, then they counted that as two dwellings in the home. You can see the change very clearly in Vancouver; the number of occupied single family dwellings dropped between 2001 and 2006 by nearly 40,000. Nobody thinks they were all demolished, or replaced in those five years – it’s just that they were reclassified as duplex (house with a suite), or if they found two suites, as apartments.
    In 2006 the proportion of dwellings that were ‘not occupied by usual residents’ went up sharply, to 6.2% of the dwellings. That’s almost certainly just because Statistics Canada discovered many more suites, most of them ‘not occupied’. In 2011 it was almost the same, at 6.1%. In 2016, in the latest census, it went up a bit more to 6.5%. So over three census periods it hardly changed at all.
    In the City of Vancouver there was a lot of fuss about how ’empty’ Marine Gateway and the area near Joyce station were in the 2016 Census. Commentators argued they were all being bought by investors, or flipped. But remember that some units will be vacant because they’re in a recently completed apartment building, but not all the units have been occupied on the day of the Census? Looking at the individual block counts of dwellings that’s exactly what happened in those two locations – there were several hundred units that were counted as existing – although they might not actually have had an occupancy permit – but nobody had moved in on Census day. That circumstance particularly applies when there’s been a building boom and large residential projects are coming on stream. That circumstance was far more true in 2016 than it was in 2011 – there were over 18,000 dwellings completed in 2016 in Metro Vancouver, compared to 13,000 in 2011.
    There’s some suggestion that the number of dwellings occupied by temporary and foreign workers was also higher in 2016, but Statistics Canada don’t seem to have published those numbers yet. Remember those count as ‘not occupied by usual residents’ as well. As we also know, some would have been Air B&B units as well.
    The 6.5% ‘not occupied by usual residents’ in Greater Vancouver in 2016 is less than in BC as whole (8.8%), Canada as a whole (8.8%), less than Portland (7.8%) and similar to Seattle (6.4%). Edmonton and Regina have higher proportions; Montreal and Toronto had slightly lower proportions.

    1. Excellent comments.
      I think your review of census data analysis interpretation dovetails with the results of the study that used hydro rates to find empty dwellings. The vacant properties, though they do tend to stand out like sore thumbs (especially in wealthy neighbourhoods), are not nearly as numerous as depicted by the prof.
      In addition, Mountain Math mapped the 2016 census with the “vacancies” depicted by dark tone on a block-by-block basis. Marine Gateway was indeed illustrated in darker colours along with the Joyce Station area. What really set off my light bulb was to see a dark blue area covering a large city block in the high-density Metrotown area. In fact, that block was under construction with two high rises where perhaps 1,200 people will live when they open in 2018/19. The census results have since been grossly misinterpreted in favour of the Supply Myth narrative.
      Mountain Math also issued a stat that represents an undeniably strong geographical fact: in round numbers, 30% of housing consumes 80% of the residential land in Vancouver. And that perfectly illustrates that the LAND supply is constrained, and therein land prices have escalated.
      There are of course all the other considerations that likely form the foundation of the rise in value, like cheap mortgages, attractive city, normal densification / growing city escalators and so forth. On top of that, of course, you’ve got speculation and foreign money. It is unfortunate that so many academics fall into the narrative supporting the latter over all else. Are there any economists among them?

    2. Except the city itself has identified an excessive amount of empty units, hence the Empty Homes Tax. Are you saying they are wrong as well?

      1. Nope. The EHT was brought in to try and douse some of the populist furor around this story. The data showed that while the precise % of empty wasn’t easily discernable from hydro records, no whatever definition you used it had barely budged in 15 years, so it can’t be the reason for price increases.

    3. Yap, that sums things up very well. Except that I am not completely sold on pinning the 2001-2006 increase mostly on suites. I agree that it smells like change in methods contributed significantly to the increase, and changes in how dwellings were counted is a prime candidate, but I would like to see more analysis before pinning it on any particular cause.
      Also, it’s curious that people keep choosing 2001 as a start year for this kind of analysis (not the first time this happens in this context). There may be good reasons to use 2001 other than that it gives the highest possible change in unoccupied units, I guess I will have to wait for the elusive report to find out what they are.

  3. Another partisan and half-baked academic assertion painted as “fact” by lazy journalists. Claiming solely that a slightly higher increase rate in new housing to new households as “proof” of over-supply is painfully dense; but perhaps not so for an adjunct geography professor.
    This issue has become too partisan. The need to ‘be right’ and take sides has poisoned any hope of constructive debate on the problems of both speculation, which exists and does not help, and under-supply, which also exists. Neither one side is entirely right. You have to focus on both supply and demand, as distasteful as that is to being singularly correct.
    The genie is out of the bottle with regards to prices. Barring economic calamity, prices aren’t returning to 2010 or before – or whatever each individual considers appropriate. Tax the living bejesus out of short-term property or property-option resales to disincentivize speculation, regardless of immigration status. Build new units to retain prices within levels acceptable to both developers and buyers. It’s not one or the other.

        1. That’s totally at cross purposes to trying to encourage more people to live in multifamily housing. I wouldn’t make the biggest investment decision of my life in a place where inches away there could be a revolving door of tenants causing wear and tear and depreciation on my investment in my home. Landlording shoudl be left to professionals, not every Joe Blow with a condo.

        2. People who refuse to buy a condo ( because they may have a tenant neighbor) would be lowering prices by reducing demand.That would be good news to other buyers.

  4. My question is where is the data on the Foreign Buyers tax now that its been in place for a year and a half. How many foreigners bought houses? Condos? Farmland? How much tax revenue has been collected? Or am I missing something and this is published somewhere? This data seems to be absent from these type of articles.

    1. I read in the G&M that the tax caused a temporary dip, then prices and sales crept up again. Subsequent stories recognized that the ALR then became a hot commodity, aided by lax municipal zoning, which needs to be corrected by the provincial ALC.
      Speculation and vacant home taxes and erasing a big chunk of the political donations by private offshore wealth will no doubt cause another dip. But my sense is that the majority of high prices overall are not caused by foreigners. It is genuine value that made the SDH obsolete after the turnoff the century.

  5. Do any of you who dismiss this report deny that the building industry is “operating at full throttle”? Are there unemployed construction workers hanging around street corners, prevented from working by the lack of apartment-zoned land? Do you believe that the billions of dollars sloshing around Vancouver is money generated by our own pathetic economy of a little software and a lot of health care? Are the U-Haul renters of the world heading to Vancouver because there are high-paid jobs left unfilled, and bidding up the price of existing housing?
    This reminds me of the smoking debate in the ’60s and ’70s. Because at the time no one could prove a causal link between cigarettes and cancer, many people dismissed the need to regulate tobacco. Do we need to wait for that causal link between speculation, untaxed foreign capital and land prices to act?
    My solutions: a stratospheric flipping/assignment tax, and if you want to own property in this country you have to pay taxes here on your world income.

    1. Indeed. I often wonder if people posting here don’t travel around the city much. The incredible amount of multifamily construction going on just the West Side is mind-boggling. It’s not just Cambie, but Granville and even Oak littered with land assembly signs. That doesn’t even take into account the River District, Hastings, Main and Kingsway. We are talking thousands of units coming online just in the City of Vancouver.
      So where are all the people buying these homes to live in? Immigration is often cited as the source but Stats Canada recently showed true immigrants are increasingly bypassing Vancouver because of the cost. We also know China is in the midst of a massive credit fuelled housing bubble, it would be naive to think some of that isn’t spilling into Vancouver. Quick, who here knows anybody who has bought a place in one of the Cambie Corridor projects….

      1. General trends of modern society beyond immigration can also account for increased demand:
        People are increasingly leaving rural areas to live in cities.
        More and more people are living alone (They get married later, divorced more often, and tend not to stay in the family home as long after reaching adulthood) – When they can afford it of course. According to this: https://twitter.com/vb_jens/status/930527935966076928 there are enough 25+ year olds (Who we would normally expect to have moved out) living with parents to fill all the new housing units three times over.
        I’m not saying that speculation is not an issue, but it is not the only explanation.

      2. If you got off the narrow and myopic confines of arterials you’d find kilometre after kilometre of SDHs in the vast areas in between. They are not being replaced at anything more than 1:1 with an additional laneway house. The lot will average six times the average price of one of those arterial condos, and 1/3rd more than a quad townhouse or a duplex with suites on the same area of land.
        When addressing supply, one has to include the land.

        1. Away from the mansion belt of the west side, you indeed have mile after mile of SDHs, but how many of them are “single family”? Many are multi-generational ethnic families, many more are shared by singles or other odd living arrangements. The arguments about redevelopment with apartments show a preference for the nuclear family – essentially “white Vancouver.”

        2. SDH = Single Detached House, not necessarily “single family” though my guess is that the majority are. A fourplex on the same lot will house four families.
          With the average SDH comes 370 m2 (4,000 ft2) of land, which translates into 3.7 km2 for every 10,000 SDHs, or about 80 people per hectare (32 people / acre). Everyone knows that the actual $ value is in the land; the value of the structure is a pittance by comparison. With 80% of the residential land in the city frozen by low-density zoning when demand has grown, it’s no wonder land value has skyrocketed.
          Land use matters.
          With land escalating in value so much it makes ultimate sense to stop being so wasteful. I commute on Kingsway every day and am glad to see the auto shops, parking lots, rundown corner strip malls and beaten down motels converted to higher density housing. The resulting condos are on average 1/5th the list price of the SDHs just across the lane.
          One can continue to harp on about the Supply Myth, but the comparison is facile when housing types and land are completely ignored in the mythmaking.

        3. “….converted to higher density housing with continuous sidewalk retail.” That is the classic way to build walkable neighbourhoods.

    2. There can be insufficient supply to house all the people who want to live and work here and harmful speculative forms of demand. It isn’t a contradiction. In fact insufficient supply can make it much easier to form a speculative bubble, because prices always seem to go up.
      The construction industry can be working full tilt building apartments, and there can be insufficient apartment zoned land. It isn’t a contradiction.
      If more apartments were being built by tearing down houses and fewer built by tearing down affordable apartments, there would be more affordable housing in the city. Also if there was more land zoned for apartments than the construction industry could use, speculators would be less able to bid up the prices.
      Both sides can be right with no contradiction. So tackle harmful forms of demand. Tackle the lack of supply. Tackle harmful low density zoning that makes us destroy affordable housing if we want more housing.

      1. Do you actually believe that developers can be induced to overbuild and thus drive the prices down in a classic supply-and-demand scenario? I always think of them as the smartest guys in the room.

        1. I don’t know how to answer this question without either being twitter levels of brief or writing a 2000 word essay.
          I’m at work and don’t have time to write the essay, so I’ll go with: Yes with lots of caveats and details to be supplied later because reality is deeply complicated place.

  6. There’s a National Geographic piece on how an Italian village was dying until the refugees came – they gave life and hope. The refugees were more than welcome here. They resuscitated the village.
    There are similar stories of boosts in Spain and Greece – people giving up on trying to make it in the big city.
    Our great country was settled throughout the praries with gifts of land, not with free or cheap housing in the cities.
    How fast do we want Vanouver to grow? It’s a better problem to have than Detroit’s virtually apocalyptic depopulation, but how hell-bent on growth should we be?
    If you want to provide housing, should you do it in East Side, or the West Side, or should you do it in Gibsons, or Spuzzum?
    Thirty years ago, hopefuls from around Canada would come to Vancouver, walk into a welfare office, and get immediate assistance. Now they do the squeegee routine.
    It should be tough and brutally expensive to settle here. It’s the only way to put the brakes on growth.
    Imagine Ernest and Vern and their families wanting to move into your house. Would you give them your basement; build them a laneway, or would you shunt them off to relatives in the Kootenays.
    BC has lots of great places to settle if you want to avoid the brutal Canadian winter. It needn’t be Vancouver.

  7. Affordability is not a demand supply equation. It is an income rent equation.
    $56,188 average income taxed@18%=$9,899 therefore take home= $46,289
    $30,000 low income taxed @12% =$3,557 therefore take home=$26,443
    $14,400 minimum senior government pension with top up
    Apartment average rents 0 bed =$1,593×12=$19,116
    Apartment average rents 1 bed =$2,043×12=24,516
    Apartment average rents 2 bed =$2,798×12=$33,576

    1. Average rents are high because there is not enough supply. Landlords with too many vacant suites would be reducing instead increasing rents.

      1. Supply is never increased at the risk of diminishing returns because there is no incentive for the market to do so.
        Rents never go down; they are always increasing: that’s why governments institute rent controls. Rents are not affordable at current income levels.

  8. Looks like the “demand” for three bedroom condos is also a myth:
    “…Recent Environics surveys found young professionals complained of a lack of three-bedroom condos (a stated preference), but did not necessarily show an interest in owning large condos themselves. In fact, 81 per cent of respondents said that they did not want a condo at all, with most desiring a detached home. Environics found that young professionals were predominantly renters and that 83 per cent did not have children…”
    http://business.financialpost.com/real-estate/haider-moranis-bulletin-why-youll-be-waiting-a-long-time-for-family-sized-condos

    1. Detached homes are now obsolete. Get over it.
      Attached homes may well be within reach of those young professions because they don’t come with the burden of so much expensive land, though small gardens and courtyards are still possible. Single-family and two-family households (e.g. rowhouse with suite) don’t need to be detached to be viable and to have a valuable contribution to making a city better.

        1. That’s ridiculous. If someone volunteers information it shouldn’t be a violation of editorial policy to call out the contradiction of their words vs. deeds. Practice what you preach and all that.

      1. So that kind of shared landscape of small gardens done by individuals that provide habitat for birds and pollinating insects and visual pleasure for neighbours, passing pedestrians and cyclists, à la Strathcona or Mount Pleasant, all passé? All the outdoor space will now be maintained by teams of landscapers with power tools? What a lovely city it will be!

  9. Many people would never rent after understanding how the Rental Board works and after hearing, or experiencing, the many nightmares of dealing with bad tenants.
    Rent controls only make it worse.

    1. More rental suites would be available if (1 ) it was easier to evict bad tenants (2) Larger damage deposits permitted The best form of rent control is a landlord with to many empty suites. = SUPPLY

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