Photo of Vancouver by Colleen Hardwick
Vancouver is in the throes of a real estate gold rush. While Australia, Hong Kong, Singapore and China have passed legal deterrents such as property speculation taxes on second homes, Vancouver (and all of British Columbia) have not. This has left us open to rampant real estate speculation, largely from buyers in Mainland China who, quite reasonably, want to invest in land and will do it wherever they can escape punitive taxes or other barriers. This land speculation has led to—and subsequently also results in—annual increases in property value of up to 15%, something local property flippers and developers are taking quick advantage of. An enormous number of properties is sitting empty, with foreign owners living (and paying income tax) elsewhere. This is having a distorting effect on our economy and our neighbourhoods. Locals are increasingly being edged out of the real estate market, and certain sectors that are key to city life, such as the creative community, are quickly up and moving elsewhere. Our region must quickly pass legislation against real estate speculation before we become a bland, fake resort town for the super-rich, one that quickly loses its character and livability. Former City Councillor and business publisher Peter Ladner recently wrote this column for Business in Vancouver magazine:
How does offshore investment make housing in Metro Vancouver less affordable to people who want to live, work and pay income taxes here? Since I first poked this hornet’s nest a couple of weeks ago I’ve been flooded with online comments, emails and requests for media interviews. Realtors and landed immigrants are particularly outspoken, knowing the scene more intimately than most. They’ve been telling me about the tour buses of buyers cruising Kerrisdale, brokers purchasing sight-unseen for offshore buyers, and the overseas owner with 300 local residential properties.
It’s becoming pretty clear that there is a deep undercurrent of resentment and anger about offshore investors pushing up residential real estate prices.
People are fearful of speaking out, not wanting to be labeled socialist or racist—or both.
Others wonder whether overseas investors are being scapegoated for soaring real estate prices caused more by the lack of new supply and easy low-cost borrowing. Others fear that restrictions would cause the decline of foreign-investor-funded rental condominium construction, or the ruin of recent first-time “Generation Debt” buyers if prices drop. (At least wait until the remaining units in the Olympic Village are sold!)
One real estate expert shrugged off the issue by saying we went through the same debate in the 1980s and “most people think this city is better off now than it was in 1987.” Really? How does being the third-most unaffordable city in the world, with average house prices more than 9 times average income, make “most people” better off? Homeowners certainly are; children of home-owning parents certainly are, but what about everyone else?
It makes businesses less well-off, since it’s harder for them to attract employees from out of town. Out of sight housing prices also discourage foreign investment in business and head offices here. They even drive up public sector costs: one senior provincial government employee wrote to say he agreed to move to Burnaby from Edmonton only after the government raised its salary offer to cover higher housing costs here.
Absentee foreign ownership makes neighbourhoods unattractive and unsafe, like the block in Kerrisdale where one resident told me five homes were unoccupied. It breaks up families, forcing younger members to live far away, while homes near parents and grandparents remain shuttered and empty.
“For the price of a home, on my income, you would need at least 10 adults working full time to pay the mortgage. I’m moving to Alberta,” wrote on online commentator. It forces us to spend billions on transportation so the people who make this city so livable and attractive can carry out their life-sentence of expensive commuting from far-flung suburbs.
It reserves big chunks of our city for people who only live here part-time if at all, contributing nothing to the community, often paying no income taxes. (“We stopped having block parties last year because there were so few people actually living in the neighbourhood,” wrote a homeowner from Point Grey). It widens the gap between rich and poor, then drives us to spend billions of tax dollars on subsidized housing and rent supplements to shore up the lives of the most desperate.
Restrictions on foreign ownership of real estate can be complicated, but they are widespread around the world. They exist in Alberta, Manitoba, Saskatchewan, Prince Edward Island, Switzerland, Austria, Indonesia, Laos, Thailand, China, Japan and Australia, among other jurisdictions.
Some jurisdictions simply extract higher taxes from foreign owners: in Florida, non-residents (Canadians!) pay higher property taxes. Among measure that have been suggested to me are a higher property transaction tax for non-resident buyers and sellers, or higher capital gains taxes on foreign-owned residences, or time restrictions on re-sales to prevent flipping.
If it weren’t for foreign ownership restrictions in Bali, the locals would be completely priced out of their own communities. Yes, friends, when facing new waves of overseas investment wealth paying cash for homes here, we are as Balinese.
Or Australians. In that country, foreign ownership restrictions were imposed, then relaxed, then re-imposed last year after Sydney shot up to the #2 most unaffordable city in the world. There, non-residents can only invest in new projects, and then only buy up to 50% of the units. If they purchase bare land, they have to start building within 12 months. Temporary residents have to sell their properties when they leave the country.
Solutions to unaffordable housing aren’t easy, but it’s distressing that a whole generation of young working families, native-born and immigrants, is being pushed out of this city. Just how much do offshore owners drive up prices? Just what are the options for making Canadian housing more accessible to people paying Canadian income taxes? Judging from the response I’m getting, people want answers.
And they want the benefits of living here to be accessible to the squeezed generation who are such an important part of the city we love.
This column originally appeared in Business in Vancouver, www.biv.com (subscription required for online reading).