Housing crisis is a failure of government, not the fault of investors

My name’s Pete Fry, and I’m the BC Green Party candidate in the provincial riding of Vancouver-Mount Pleasant—where we’ll be holding a special by-election to replace Jenny Kwan now that she is running in the federal election.

Last year, I ran for Vancouver City Council, and while I wasn’t elected: I did receive a lot of votes, especially considering it was a low budget and non-developer funded campaign. For those of you who aren’t familiar with the campaign—I ran on issues of community, environment, transparency, and affordability.

And it’s those same issues that bring us all here today.

We’ve all heard anecdotes about global capital and foreign ownership. I recently wrote about the market externalities affecting my own community of Strathcona. A well-financed west-side investor set about purchasing a number of homes in the neighbourhood: in cash, with no subjects or conditions, and always over the asking price.

Strathcona has a limited land base, maybe 350 detached homes in all, and this particular investor may have purchased a dozen of them—about 5 per cent.

Coincidentally, five per cent is about the same number that the BC Real Estate Association claim as the relatively insignificant amount of foreign ownership in Vancouver. A little higher at 5.8 per cent is the Canada Mortgage and Housing Corporation’s figure for percentage of foreign ownership in the downtown peninsula.

Back in Strathcona, the effect of that five per cent unfettered non-local capital was to drive up the median home value, to the point that locals were priced out and the average house price increased with each bidding war. In turn, the increased demand for the limited stock of housing led to more speculation, and higher asking prices.

A lot like Vancouver as a whole.

In that respect, our real estate market is like a closed ecosystem. Finite resources exist in a delicate equilibrium; and externalities—in this case the influx of non local capital—can profoundly upset that balance, and lead to unintended consequences.

Like that closed ecosystem analogy, the externalities are not unlike climate change, where even a few points of a degree of temperature increase can have catastrophic effects on weather, and aquaculture, and economic sustainability, and communities, and so on: a cascading litany of catastrophic consequences.

Also like climate change, many of our leaders and those who are profiting from the status quo remain in denial about what is happening.

That’s what we’re seeing today—externality driven housing prices profoundly out of synch with local incomes; the real threat of a generational brain drain and the inescapable conclusion that without intervention, our city is faced with severe social and economic consequences.

For several years, respected urbanists and researchers have been warning of global capital upsetting our housing equilibrium. In the last several months, the BC Chamber of Commerce and VanCity Credit Union have cautioned that our affordability crisis is leading us to a dangerous and unsustainable future. Yet still, some in our government, development and real estate industries dismiss these concerns as at best anecdotal, at worst racist and xenophobic.

Of course, racism, xenophobia and bigotry have no place in this important conversation, nor will they in the necessary solutions.

As for anecdotes; it could be said that the antidote for the anecdote is data, and that’s true—but we also need action.

Time is a luxury we do not have. We needed that data yesterday. Indeed a recent revelation in Douglas Todd’s Vancouver Sun blog: the former director of Land Titles revealed that we actually had that data yesterday—detailed information about corporate and foreign ownership in B.C. that was collected and stored for twenty years without any analysis. Even more shockingly, that data was apparently destroyed when they ran out of room to store it.

Global real estate managers Knight Frank have named Vancouver a top property investment, they refer to it as a “safe haven market” for migrating wealth from economic or political crisis situations. Fund managers around the world are advising Vancouver is a great place to park your money, superior to gold and other commodities. As urbanist Andy Yan aptly describes it, we have become a hedge city.

Around the Pacific Rim, similarly desirable global destinations have enacted protocols to leverage global investor capital and protect local populations: China, Hong Kong, Singapore, Australia, New Zealand—as of last month our region now stands virtually alone as an attractive target for the unfettered flow of global investment.

This isn’t the fault of global investors—it's the failure of local government.

British Columbia collects some $1billion annually in property transfer taxes—taxes that are largely borne by our astronomical real estate prices, and at the expense of our local affordability.

Those taxes go toward the province’s general revenue—when in fairness, they should be redirected back to the municipalities that are generating them. Let the municipalities determine how best to spend that revenue: in some cases it may be a rebate to encourage foreign investment, but in the case of Vancouver and our urban centres, I’d suggest it be channeled into affordable housing.

That’s just one solution, one of a several we should be employing on a provincial level. Mayor Gregor Robertson and Bob Rennie’s recent suggestions of a speculator tax will be helpful in addressing the issue of quick-sale house flipping for profit. We also should be including a foreign investment duty, as well as a luxury property purchase duty as part of a robust toolkit of measures to protect our local affordability.

If we look around at the pace of development in Vancouver, we see rezoning for more growth and densification as a means to extract Community Amenity Contributions. Increasingly as senior governments offload the responsibility of building housing, cities are turning to these contributions as a means to provide affordable housing. Last year in Vancouver, these CACs amounted to some $232 million—over half of which was directed to affordable housing, at the expense of things like parks and community centres.

In order to extract Community Amenity Contributions to build affordable housing, the city must rezone the land and in the process increase it’s value—and thereby increasing the value of the surrounding area. It’s a process referred to as “land-lift” and precipitates a vicious cycle of higher prices for property in order to subsidize affordable housing that can’t possibly be built fast enough. It’s clear our city can’t go it alone—we need senior government intervention.

Vancouver’s crisis of today is Victoria’s crisis of tomorrow, and quickly spreading to other regions of our province, particularly as Vancouverites are priced farther and farther out of the city. 

Some will argue that any sort of market intervention may have deleterious effects on existing homeowner equity.

I’d argue that gentle intervention now and on our terms is preferable to hard intervention that might come in the form of global collapse or rising interest rates that would find many Vancouverites dangerously overextended and risk a housing continuum that includes not just primary home ownership, but private rental stock as well. We don’t want to pop the bubble, just deflate it a little bit.

This is why we elect governments, to provide sound fiscal management and regulation—not to operate hands-off like the Wild West.

Today, gathering together, this movement is a good start, pressuring the political will to act and to respond. We need to keep up that pressure.

We have a federal election coming—talk to your prospective MP. We need a national housing strategy. Let’s get the Government of Canada back into building housing.

My by-election is in six months, but there will be a general provincial election in 2017. The province has the ability to leverage property taxes to protect and enhance affordable housing—we need to keep advocating for that.

I’ll add one final notion to consider; while the grim prospects for middle class home ownership have captivated the media, galvanized the public, and panicked the politicians—for a number of Vancouverites, affordable home ownership will never be an option. For a number of Vancouverites, even secure affordable rental housing will never be an option. We all need to come together united to ensure housing justice for all Vancouverites. As they say: a rising tide lifts all boats.

There’s a wonderfully pithy piece of public art just down the street, it was commissioned of artist Kathryn Walter by the Contemporary Art Gallery back in 1990. It’s a text-based work, fronting The Del Mar Hotel. The Del Mar is an affordable housing building that famously held out when BC Hydro was redeveloping that block in the 1980’s, and now sticks out like a quaint Edwardian brick anachronism, surrounded by glass and concrete towers. I use that image on my social media as a poignant reminder of what is at stake.

It reads simply “Unlimited Growth Increases the Divide”.

It was true then, it’s true now, and it will be true tomorrow—let’s not let it be our city’s epitaph.

Postscript: 

Originally published in the Georgia Straight, based on a speech prepared for rally at Library Square organized by Vancouverites for Affordable Housing.