Ian takes a quote from Sandy Garossino’s critique on real estate and race in the National Observer:
Little could be more symptomatic of Vancouver’s real estate derangement syndrome than journalist Ian Young’s report that the Canada Revenue Agency is nervous about being labeled racist over tax fraud investigations in Vancouver. Even our tax auditors are twitchy about checking on home buyers in Shaughnessy who claim tax credits for the working poor.
Gord Price: The leadership of this city, province and country has been exceedingly reluctant to address the interconnected dilemma of real estate, housing affordability, foreign capital and race – because initially they saw the problem as isolated to the affluent neighbourhoods of Vancouver, because they didn’t want to be seen to cause a crash in values, because they had justifiable fear of exacerbating racial animosity just under the surface and mainly because they really didn’t know what to do.
But they ran out the clock. The problem is just too big to ignore – and others (ironically many Chinese-Canadians) were providing too much documentation and data that couldn’t be ignored. Now there is a limited time left before the issue is fully politicized (likely the provincial election in May) – and they must have some response sufficient to convince a cynical and angry electorate that they are taking action that will make a difference.
Even if they’re not and it doesn’t.
Just in time for the Province’s release of foreign-ownership data, here’s an international story just today that makes it clear how volatile the issue is becoming – and waiting for a flashpoint.
After Canada’s ugly episode of racism in the early 20th century, Vancouverites feel uneasy talking about how this beautiful but unassuming city became one of the least affordable in the world: an unprecedented flood of Chinese capital. …
The lessons of the past go some way to explaining Vancouver’s almost religious embrace of multiculturalism, says David Ley, a UBC geography professor and wealth migration expert. “I think it’s very much part of the Canadian psyche to want to avoid these discussions,” he says. “We’re a polite and tolerant society that has been thoroughly schooled in the virtues of multiculturalism.”
Unfortunately, this also amplifies the uneasiness around the affordability discussion.“It’s frustrating,” says Justin Fung, an activist with Housing Action for Local Taxpayers, a local advocacy group. “[The crisis] is a policy issue, it’s a social justice issue, and up until now, everyone is saying, ‘We’re nice, we can’t talk about this.’ Well, if you can’t even talk about where the money is coming from, you can’t do anything about it.”
I leased a condo on the upper East Side of Manhattan through Craigslist while doing some work in New York City. It was in a building that allowed no rentals, and I agreed to stay there less than 29 days. I paid all cash to a lady that had a local cable cooking show, and who rode around New York City in a Rolls Royce.
That slightly illegal deal has now been formalized by the disruptive technology group Airbnb. As reported in the Vancouver Sun by Nick Eagland, the City of Vancouver is investigating the operation of 17 short-term rental units in a two storey building of 29 units located near Kitsilano Beach. The building’s name? The New York, of course.
So how does this happen? As reported in the Vancouver Sun “In Vancouver, all rental tenancies must be at least 30 days except in hotels and licensed bed and breakfasts, but the vast majority of Airbnb hosts violate this regulation. In online reviews, many users say they stayed at the New York for just a few days.”
If every building unit was leased out monthly for 30 days, there would be no short-term rentals which take valuable rental housing stock away from local renters, and provide higher net income to the landlord which may be undeclared for tax purposes.
A student at SCARP (School of Community and Regional Planning) at the University of British Columbia, Iain Marjoribanks has been studying the impacts of Airbnb on the rental market. His findings are telling. Airbnb has a centralized control of all listings and charges a 9 to 15 per cent service fee on all bookings. The company conceals the location and identity of the hosts offering rooms, making enforcement challenging for municipalities. He surmises that 99.3 per cent of all Airbnb Vancouver stays are less than 30 days.
Surprisingly the majority of bookings and revenue come from a minority of hosts-property managers who list several houses or units consistently over long time periods, using Airbnb’s anonymity to avoid municipal enforcement.
Marjoribanks estimates that one out of every 14 secondary suites in Vancouver have been converted from rental to Airbnb. In 2015, out of 4,728 December listings 3,529 had a review, suggesting that they had been leased. That is a lot of units in short-term rental in the city.
Marjoribanks points out that Airbnb as well as the owners of short-term rentals need to be accountable and suggests registering and tracking these units. He further notes that any attempt to regulate without clarity and accountability by web providers and landlords will exacerbate the current situation. Quite simply, just enforcing would “legitimize Airbnb’s operations and undermine municipalities’ authority to regulate zoning and business within their borders.” The challenge will be for local governments to band together to demand transparency from Airbnb which has been operating like a Manhattan maverick.
The Vancouver Sun has published Vancouver’s Million Dollar Map . This series of maps was produced by Acting Director of Simon Fraser University’s City Program Andy Yan, who wanted to understand when real estate prices for single-family homes started to skyrocket upward.
Andy found that in 2006, only 19 per cent of single-family homes in Vancouver were worth more than one million dollars. By 2016, 91 per cent of single-family homes in Vancouver were worth more than one million. And by the way, that figure includes land and improvement values and is based upon B.C. Assessment figures.
Andy Yan states “It’s a convergence of factors . There is a limited supply, low-interest rates, global capital. You also then have this both in Vancouver and outside of Vancouver, a rippling to places like Victoria and Kelowna. You have a real estate market that isn’t isolated, but that is spurring a (wider) land market.”
The map below shows the spread of million dollar residences eastward from 2010 to 2015. Those residences are in blue. It is interesting to see that residences along the commercial arterials were the last properties under one million dollars on the west side in the 2010 map. By 2015, most westside single-family properties were worth over one million dollars.
A new study of Vancouver’s real estate published in the Georgia Straight has preliminary results indicating that while investment from offshore is impacting home prices in Metro Vancouver, the impact is far less than many think.
The two researchers, Simon Fraser University’s Andrey Pavlov and University of British Columbia’s Tsur Sommerville analyzed price changes in certain Vancouver neighbourhoods for three months after the July 2012 end of the federal immigrant investors program.
This program which ran from 1986 to 2014 allowed immigrants to move to Canada in exchange for a five-year loan to the federal government of $800,000. Approximately 120,000 people used this program to move to British Columbia.
The researchers found that when the program closed, property prices in the neighbourhoods studied declined by 2.5 per cent. However, the benchmark price for all residential properties in the region increased by 48.3 per cent from 2012 to 2015
The Georgia Straight’s reporter Travis Lupick stated in the article “Pavlov listed a number of other factors he suggested are contributing to Metro Vancouver’s hot market. He said those forces include low mortgage rates, low property taxes, burdensome development-permit processes, and infrastructure shortcomings that slow the construction of housing throughout the larger region. He also did not discount the impact of foreign money, stating that it certainly has an effect, though exactly how great remains unknown. (On June 15, the Straight reported that speculative buyers also likely have an increasingly strong hand in the Vancouver market.)
An earlier March 2016 study by the City of Vancouver found that single-family and duplex homes have a vacancy rate of just one percent, suggesting that foreigners living abroad are not buying homes and leaving them empty, as some reports have suggested.”
We are now starting to get some well researched studies on what is going on in the single-family housing market and why. The conclusions of this research work will be published in academic journals and should be available in the next few months.
A comment in The Rabble by Michael Stewart – in response to the Walrus articles by Kerry Gold and Gregor Robertson – with an intriguing item from Vancouver’s past.
Vancouver’s homeowners made more money simply sitting on their assets than the combined wages of every single working person in the city. By a healthy margin too: $25 billion for minding a patch of dirt compared to $19 billion in actual labour.
It echoed Bing Thom’s comments in this widely shared New Yorker article from February: “By all accounts, I have done pretty well in my business, but I made more money from sitting on my Vancouver property than I made by working an entire lifetime.” This from a world-famous architect with buildings on three continents.
It also reminds me of this postcard, inspired by the ideas of nineteenth-century political economist Henry George, who believed that land and other resources should be commonly held and taxed to recapture its value as a shared inheritance. Another acolyte of George’s invented the game Monopoly in order to show the tyranny of untaxed land rent.
Henry George actually spent some time in Vancouver, trying his luck panning the Fraser River during the gold rush — back before he decided that natural resources and property belonged to everyone in common. His dismal failure as a prospector might have hastened his political conclusions, but nonetheless we live with their truths this very day: everybody works but the vacant lot, but the vacant lot will outearn us all.
After much dithering at the Provincial level this Globe and Mail Article states that Gregor Robertson, Mayor of Vancouver is proposing a tax on property owners that don’t live in their houses. The intent is to ensure that such properties are rented, and provide valuable housing stock to those that need it.
The challenge is that the Provincial government has already rejected previous attempts to tax vacant Vancouver houses.
While suspecting that 10,000 houses are vacant in Vancouver, a figure released by city staff in March, the Mayor proposes that the tax be high enough to encourage the property to be rented locally. The mayor said that the city wants access to an estimated 10,000 empty houses in Vancouver, a figure based on data that city staff released in March. But he didn’t say how high he thinks the tax would have to be to persuade those owners to rent out their houses.
There are now evidence-based studies suggesting that foreign buyers have completely distorted the local market making it unaffordable to citizens of Vancouver. Of course there are other protestations that such statements are akin to racism. The upshot is that people who work in Vancouver cannot afford to live here. The single family home dream is dead.
The intent is to tax all homeowners who do not live in their home, no matter their reasons or their homelands.
“We would love to have thousands of those homes in the rental market right now when there’s almost no vacancy and a real crunch on affordable housing,” the mayor said, “We’d like to see more supply created from the empty homes that are just sitting there in the city.”
Mayor Robertson is expecting a report in short order before Council’s summer break.You may remember that the Mayor had asked the Premier for jurisdiction for a luxury housing tax a year ago, and some remedies to penalize owners who did not live in their properties. These suggestions were rejected by the Province. It was suggested that the city could find “solutions in better land-use planning”.
Creating more density does not address the underlying problem of a lot of vacant houses in Vancouver neighbourhoods. There were two of these vacant foreign-owned houses on my street of nine houses. It would be great to see them occupied by families.
So far, Tsawwassen First Nation has had a pass on the Mills; it’s been too uncomfortable for most to criticize, given past relations and the need to promote economic opportunity. But the contradiction between word and deed is too glaring to ignore for much longer, given the precedent it sets.
They can say this:
Indigenous peoples are caretakers of Mother Earth and realize and respect her gifts of water, air and fire. First Nations peoples’ have a special relationship with the earth and all living things in it. This relationship is based on a profound spiritual connection to Mother Earth that guided indigenous peoples to practice reverence, humility and reciprocity.
It is also based on the subsistence needs and values extending back thousands of years. Hunting, gathering, and fishing to secure food includes harvesting food for self, family, the elderly, widows, the community, and for ceremonial purposes. Everything is taken and used with the understanding that we take only what we need, and we must use great care and be aware of how we take and how much of it so that future generations will not be put in peril.
Or do this:
As they say, location is everything. The Tsawwassen site is located far away from much of the population, where population density is nearly absent. It is in a rural/agricultural area with the ocean on one side, First Nation land on the other, and the small suburb of Tsawwassen to the south.
There are also no vital transportation routes to support such large commercial destinations that will likely only offer the same retail choices also found in shopping centres conveniently located elsewhere in the region. It is nowhere near SkyTrain, the area has sub-par bus service, and Highway 17 goes nowhere and is not a major road route except to the ferry terminal and Deltaport.
More importantly, for relatively little economic return, the developments waste a large section of some of the country’s best farmland. Its location and design (think: lots of asphalt) will also further encourage urban sprawl and car use in the region; it completely goes against the region’s aims of density and sustainability.
But not both.
In March I updated Price Taggers on the latest news from the “all things mega” mall development at Tsawwassen Mills, located on arable farming land and the flood plain east of the Tsawwassen Ferry Terminal. As you can see in the photo above, this thing is huge.
The Delta Optimist has just published this article when the local paper had a tour of the 1.2 million square foot mall, which will feature 200 stores and 16 anchor tenants. This mall is situated on land controlled by the Tsawwassen First Nation, and is located at the corner of Highway 17 and 52nd Street. The developer is Ivanhoe Cambridge of Oakridge Mall fame, and the intent is to have a “fashion-oriented” centre with a 1,100 seat food court area.
Over 2,000 construction jobs created the mall and 4,500 permanent jobs are anticipated upon mall completion. I spoke to one electrician who said the mall has supplied him with three years of work. Coast Salish art work by many of the Tsawwassen First Nations band members is also being installed.
The mall is based upon CrossIron Mills Mall in Calgary as well as Toronto’s Vaughn Mills. In both of these cases there is not very good transit and the malls are close to large populations. The difference here is that the Metro Vancouver population may just use the internet for their shopping, or drive another twenty minutes to the border to shop in the United States. Will people shop on their way to the ferry? Do you think this mall will be successful?
With a scheduled opening for October 5 planned, I have been watching the Walmart site which is still-well, a pile of sand. Let’s see what four months will bring.
If you own a house in Metro Vancouver, your property tax notice may have been a surprise. It is no secret that single-family housing in Vancouver and the Metro area is getting more expensive. And there are many people who have a suite in their basement, not for any extra cash, but as the way to pay for the property taxes, which are now approaching the north side of $10,000 a year in many places. There is tax relief for houses that are valued at under 1.2 million dollars, but the regional benchmark price is now 1.4 million as of May 2016. Most housing is worth more than 1.2 million dollars now.
Once you hit 55 years of age, you can defer your property taxes and pay a low rate of interest. The real problem is for folks who live in houses that are suddenly worth more than 1.2 million dollars, and are, well, young.
Stephen Quinn in the Globe and Mail describes this dilemma this tongue in cheek way:
Yes the owners of single-family houses…who disproportionately suck up municipal services, who encourage sprawl and who are essentially subsidized by condo dwellers and other people who live in more ecologically responsible homes, are under attack”.
Mayor Darrell Mussatto of the City of North Vancouver has asked the Province to separate single-family houses from condominiums and multiple-unit dwellings so owners of single-family homes could get a tax break. However, it is single-family residences that have received the large equity lift, not condominiums and multiple-unit dwellings. Since single-family homes consume more services such as roads, sidewalks and infrastructure, they should be paying more. Real estate guru and developer Michael Geller agrees.
Stephen Quinn does make one very good point though-if people are paying property tax for a single-family dwelling assessed at a certain value, they should be selling the house at that value. That would be one way to maintain affordability in an upward market.
This article in the Vancouver Sun written by Stephanie Ip confirms what many had surmised-instead of working for a living, own a house in Vancouver and just hold onto it.
A Vancouver mathematician Jens von Bergmann on his blog has written about Work vs. Twiddling Thumbs . Von Bergmann has compared wages earned with the equity gained by increasing Vancouver single family property values. Using data from the National Household Survey, the City of Vancouver and the B.C. Assessment Authority, Vancouverites take home $17.8 billion in after tax income (2010).
The average single family detached house in Vancouver rose $262,000 in value from 2015 to 2016, creating an equity lift of $24.6 billion. These numbers are not adjusted for inflation, don’t include property tax or property transfer tax, but you get the picture.
By taking the homeowners’ equity amount and dividing it with the average number of hours worked per household, the math revealed that houses on the east side earned $92.00 an hour in 2015, with houses on the west side (with Main Street as the divider) earning $173.00 an hour. By comparison, Von Bergman calculated that the average after tax income for regular nine-to-five work of people in Vancouver was a measly $26.00 an hour.
The data is crude, but it provides a very sobering glimpse on housing affordability.How do we ensure that those $26.00 an hour wage earners can live here too?
Bob Rennie of Bob Rennie Realty spoke to the Urban Development Institute (UDI) on Thursday, giving his professional and well thought out opinion on what is happening in Vancouver’s housing market. Bob and his family are what Malcolm Gladwell would call “early adapters”-they have renovated and restored a fabulous building in Chinatown way before that was fashionable, and share their love of good art and design with the community in their gallery. And Bob quite simply, loves Vancouver and has his finger on the pulse of what makes this town tick-real estate.
Bob’s annual UDI speech is the hot ticket in town. Journalist Frances Bula who attended the talk and was tweeting in real-time, noted “if you ever feel lonely, tweet out a Bob Rennie speech. It’s like going to a crowded bar, but in a cloud”. Even if folks are not there, they want to be.
You can read the article by Jeff Lee of the Vancouver Sun here. Jeff sums up Bob’s 2016 speech in five main points.
- Vancouver is not affordable. For cheap houses, 26 sold under $750,000 last year. This year, 26 homes sold for under one million. On the west side only THREE houses sold under 1.7 million.
2. Affordable housing is in the suburbs, not Vancouver.
3. Neighbourhood Groups in Vancouver involved in the planing process are male and old and set in their ways, and need diversity to embrace future generations.
4. A speculation tax aimed at buyers who flip houses would assist the entry-level part of the market.
5. There is no market and there is no supply of houses, so even with nearly 200 billion dollars held in properties by people over 55, they can’t give it to their kids to buy homes.
Bob Rennie stated that this would be the last time he would be speaking to the Urban Development Institute. He has been a tremendous thinker and doer in real estate in Vancouver, and passionate about doing the right thing. I will miss him.
How did Vancouver become the least affordable city in North America? Edwin Lane reports from the Canadian city where house prices have gone through the roof.
Affordability campaigner Eveline Xia and local politician David Eby outline the extent of the affordability crisis. Researcher David Ley from the University of British Columbia explains how a flood of Chinese money is fuelling price rises while and Cameron Muir, chief economist at the British Columbia Real Estate Association, questions whether foreign money is really to blame at all.
City planner Andy Yan asks why cities are failing their young people and housing economist Thomas Davidoff explains why better taxes are the solution.
From Metro Vancouver & TransLink Update
Concord Pacific Developments has purchased the Vancouver Molson Coors brewery and disclosed plans to transform one of the city’s last remaining industrial sites into a “mixed-use residential neighbourhood.” The developer bought the site for $185-million and the deal closed March 31, according to real estate information service RealNet.
The three-hectare property is assessed in documents at $49,019,400. The City of Vancouver, which has repeatedly said it has no plans to rezone the site for anything other than industrial use, sent an e-mail to the Globe & Mail stating it had not received a rezoning application for the site.
“Any change to that would require a regional amendment by Metro. The city’s policies for these lands are set and staff are not contemplating any changes to current policies,” it said.
Tom Davidoff, economics professor at the University of British Columbia’s Sauder School of Business, is in favour of the Concord Pacific plan, but not necessarily the approach. Davidoff told the Globe and Mail that “the city has to be careful. My understanding is that land prices are going nuts and developers buy assuming [there will be] upzoning. Arguably, the city shouldn’t reward such behaviour – it’s critical that paying a lot for land should not entitle the owner to demand city action.”
When the former Chief of Staff to Gordon Campbell writes an essay as scathing as this on the housing crisis, it’s another serious sign that a tide is turning. Worth reading in its entirety, but here are some selected quotes:
- Enough already. Metro Vancouver’s real estate frenzy is out of control. Like a virus, it is a killer concern that is spreading. Metro Vancouver’s affordability crisis is now Greater Victoria’s unfolding nightmare.
- Each level of government blames the others for failing to address the supply problem. Yet the provincial government is hardly in any position to point fingers at local governments. Its refusal to properly invest in desperately needed public transit infrastructure has clearly inhibited the densities and investments needed to rapidly liberate more affordable housing. Plus, the Clark government wants Metro’s governments to raise property taxes and community amenity “contributions” to finance critically needed TransLink investments. It wants to hike taxes that would only further add to the costs of new homes and existing homes alike. And now it has the gall to attack the NDP for its proposed new speculators’ tax? Spare me.
- … the province now collects about three times more in property transfer taxes than it receives from the natural gas royalties, despite Premier Christy Clark’s endless yattering about the wealth that sector generates. Arguably, the proportional benefit and impact of the money the B.C. Liberals receive from their paymasters in the property development and real estate sectors is even greater.
- In politics, money talks. And the cash the B.C. Liberals get from their wealthy benefactors in those sectors has made the NDP’s demonstrably sensible demand-side measures targeting foreign speculators and absentee owners a mute point for the Clark government.
- ….homeowners … have seen their property values soar with the offshore investment tide that supposedly “raises all boats”, as it also quietly drowns out hope for young families and swamps those most in need of affordable housing. Most homeowners want to stop the worst abuses and negative side effects of unwanted foreign investment, but only to the extent that it does not reduce the new market value of their most valuable investment.
- … unwanted demand, it must be noted, is also largely driving certain new supplies of new housing that is being built primarily to attract those wealthy foreign buyers and the higher prices their investments leverage. It is also hiving off huge portions of our existing housing supply to sell to those wealthy foreign buyers, who are typically wealthier than most Canadians and who enjoy a competitive edge over all domestic buyers by dint of the substantial premium they gain on our struggling currency. Contrary to what the Clark government maintains, we do need to address the demand side of the housing crisis. Because that unquenchable demand is arguably doing more harm than good.
- British Columbians are being inundated with story after story that rightly makes their blood boil. Stories about coercive pressure tactics, deceptive sales pitches, dishonest brokerage practices, and even threats of personal violence that paint an ugly picture of a Wild West real estate industry that is hurting British Columbian sellers and buyers.
- As the Globe and Mail reported, “An in-depth look at public data—including land titles, tax reporting and court records—revealed a distinct pattern, suggesting the typical wealthy foreign family buying Vancouver real estate pays little or no income or capital gain tax…
- Some of Vancouver’s wealthiest and most desirable neighborhoods are being alienated before our eyes, as wealthy absentee buyers and foreign investors scoop up those iconic properties, only to let them sit empty. It is happening in slow motion, as a crime against our culture.
- … none of those measures would fundamentally address the legal ability of those with deep enough pockets to buy whatever they want, wherever it is for sale in British Columbia. And therein lies the greater problem, in my view.
- I think it is time to say that here, in British Columbia, if you are not a citizen, a permanent resident, or otherwise demonstrably committed to living and/or working in our province, you cannot buy B.C. land or fee simple property that is specially designated for protection. Period.
- A good start might be to strike an independent expert advisory group that is charged with consulting British Columbians and assessing the many mechanisms now employed around the world for restricting foreign ownership of residential and agricultural properties.
- To be clear, I am not talking about in any way restricting or inhibiting immigration. Nor am I arguing to restrict foreign property investment or ownership specifically from China, per se. …It should be possible in this country, of all countries, to have a respectful, intelligent debate that is grounded in the principles of mutual tolerance and respect, which most of us consider defining hallmarks of Canada. We should talk about this issue openly and honestly, without fear of recrimination or being branded as “racists”.
- It is time to openly discuss the vision we hold as a society for the land beneath our feet and who should own it. If anything, we need to deal directly with that “elephant in the room” before it crushes Canadians’ welcoming attitudes towards immigration and much-needed foreign investment. Otherwise, I submit, public resentment and anger will build in ways that are anathema to Canada and to our multicultural society.
From the Vancouver Courier – North Shore real estate: The new gold rush
Some jurisdictions in other parts of the world don’t allow non-citizens to buy certain types of housing or place limits on that. Others levy hefty taxes on foreign capital entering the real estate market. Additional taxes on speculators who rapidly flip property and on purchases at the top end of the market have also been suggested.
But so far, “British Columbia has none of these things,” said David Eby, the NDP critic for housing, who has often lambasted the provincial government about inaction on the topic.
“I’m blown away that B.C. and Canada seem to be the only jurisdictions who are not taking the issue seriously.”
Such measures could have an impact, said Ley.
“In my perception, price increases enter the market through the top end and trickle outwards into lower priced areas,” he said. “If you can stop the rapid increase at the top, that’s a helpful thing to do.”
But not everyone — particularly in government — thinks that is a good idea.
“I don’t think the government’s planning to do anything to pull the rug out from under these prices,” said Ralph Sultan, MLA for West Vancouver – Capilano.
“One’s home is typically the biggest asset anybody has,” he said, adding government interferes with that value at its peril.
“Anything the government does is probably going to have an adverse financial impact on a lot of people and these people are constituents and they are voters.”
Cameron finds that argument disheartening. “What you’re saying is ‘I won the lottery. Don’t mess with my lottery winnings.’”
Vancouver, BC is a town built on real estate. And for seven years running, it has also been ranked as the least affordable city in North America. While some cities boast lively arts or hip-hop scenes, Vancouver is home to one of the most insane property markets in the world—a place where decades of global capital, lax regulations, and government indifference have transformed it into a city of displaced renters, empty condos, and multimillion-dollar teardowns.
Item from Ian:
Even one of the most seasoned veteran observers of the real estate industry has been shaken by this phenomenon. Economist Tsur Somerville, who holds UBC’s Real Estate Foundation professorship, admits he is in a quandary: “The world up to a year ago had a structure I understood,” he told me as he went on about a fixed supply and an excessive amount of demand. But not all prices should be escalating everywhere. It is “reflective of some kind of hysteria,” people panicking and rushing to get into the market — anywhere.
They’ve reached Port Moody:
This clip from The Sun is as interesting (and ironic) for the surrounding ads as for the video itself.