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BC Legislation Fails to Deal with Housing Crisis

There are few topics more sprawling, or of more importance, than the state of real estate in British Columbia.

This summer, the legislature was called back into session with two weeks’ notice for the last week of July to debate Bill 28, the Miscellaneous Statutes (Housing Priority Initiatives) Amendment Act, 2016. The bill had four main purposes:

  1. It added an additional 15% property transfer tax to residential real estate purchased by foreign nationals or foreign-controlled corporations. (‘Foreign nationals’ are individuals who are not Canadian citizens or permanent residents of Canadian.)
  2. It amended the Vancouver Charter to allow the City of Vancouver to implement a vacancy tax.
  3. It created a Housing Priority Initiatives Fund for provincial projects that will be seeded with $75 million and a portion of the new tax revenue. (It is worth noting that Public Accounts documents indicate that the government brought in $500 million more in property transfer tax revenue this year than anticipated, suggesting to me that the initial injection in the Housing Priority Initiatives Fund should be higher.)
  4. It implemented recommendations to re-regulate the real estate industry.

The bill also closed the Bare Trust loophole that I have been asking the government to address for a number of years. Unfortunately it is only being applied to the Vancouver market and only to purchases made by foreign buyers. The loophole is still open to allow wealthy Canadian individuals, corporations or real estate speculators wanting to avoid paying the property transfer tax.

The legislation passed unanimously with the 65 BC Liberal and BC NDP MLAs present on the day all voting in support of the legislation. While I had a prior commitment and so was unable to be present at the time the vote was taken, I would have voted against the legislation. Please let me explain why.

The bill is not without significant limitations.

First, its narrow geographic scope and wrongful inclusion of non-residents who pay taxes and contribute to our economy. The tax should not be applied to those who are deemed residents for income tax purposes, like Hamed Ahmadi who spoke to CBC about the difficult position Bill 28 has put him in. Mr. Ahmadi was hired by BC Hydro after receiving his PhD at UBC, his permanent residency application is complete but still being processed. Long before the new property transfer tax was announced, he had signed a contract to purchase a condo in Coquitlam for $360,000. Mr. Ahmadi now has the choice of paying the government an additional $54,000 or facing a potential law suit from the seller if he backs out of the contract. Our communities are enriched and strengthened by people like Mr. Ahmadi. A tax on foreign nationals and corporations should be used to target the global elite who are using B.C. homes as safety deposit boxes while living and paying taxes elsewhere, not those who are here to build a life for themselves and their families. And this would have been relatively simple to fix by ensuring that people possessed a social insurance number or were deemed Canadian residents for income tax purposes.

Second, the 15% surtax only applies in the Metro Vancouver area. What the BC Liberals did was take a policy measure that was introduced in Hong Kong in October 2012 and “has been especially effective in reducing speculation by wealthy Mainland Chinese” and simply applied it to Metro Vancouver. But unlike Hong Kong, which is a Special Administrative Region of the People’s Republic of China and acts like a nation in a nation, Metro Vancouver is a small part of a larger province in an even larger country. The surtax will likely only serve to punt the speculative housing market into neighbouring communities like Nanaimo, Greater Victoria and Kelowna. I can’t help but wonder if this is a tax we will end up apologizing for in the years ahead.

13631604_1014127635368749_8293002913320196171_nThird, the addition of the Vacancy Tax only into the Vancouver Charter and not the Community Charter as well (which other communities like Victoria and Oak Bay have been calling for) makes no sense at all. For example, on one side of Boundary Road (in Vancouver) a vacancy tax could be applied; on the other side of the street (in Burnaby), it would not. This doesn’t solve anything and in my view is nothing more than a political stunt aimed at pitting community against community without actually stepping up to show leadership.

While I am supportive of the creation of the Housing Priority Initiatives Fund and taking away the self-regulatory powers of the real estate council in the Real Estate Services Act, the piecemeal approach taken overall by the BC Liberals may well exacerbate and broaden, rather than effectively deal with the affordability problem in British Columbia.

I pointed out in February that I’d been raising the issue of affordability and speculation in the housing market for more than two years (long before it was even on the BC NDP or BC Liberal radar) and that there are at least three dimensions to the problem:

(1) incentivized government speculation;

(2) a preponderance of vacant homes, and

(3) non-enforcement of illegal realtor transactions.

The BC Liberal response, supported by the BC NDP was to only partially deal with (1) — closing the bare trust loophole for foreign nationals — and only dealing with (2) in the city of Vancouver. In addition, they botched the implementation of the contents of my Land Title Amendment Act. This was a bill that I introduced to the legislature in July 2015 whose purpose was to gather data on who was purchasing properties in British Columbia

Bill 28 aside, we are still lacking a comprehensive plan when it comes to the affordability crisis facing British Columbians. We needed the government to come to the table with practical and province-wide solutions, instead they held tight to their six talking points.

The provincial government’s arrogant refusal to take the affordability issue seriously until they were threatened by the polls has compromised a fundamental right by reducing people’s very ability to find a home. This is not just a “Point Grey” problem as the government previously joked. When I questioned the Minister of Finance about what he was doing to address the housing crises last July he said, “The average price of housing in Vancouver, is actually lower than many people think. You can still purchase a home in Vancouver for under $400,000.” This summer, the Premier said we need to protect the dream of home ownership for the middle class. Sounds nice, but in reality Vancouver has become the most unaffordable market ever recorded in Canadian history. Prices have been rising 30% year on year, the average house price sits at more than 1.8 million, and markets in multiple other jurisdictions are following suit. The divide between the housing reality in B.C. and the government’s understanding of the situation is staggering. We are long past “affordable.”

Rental Market

Skyrocketing real estate markets across the Lower Mainland and Southern Vancouver Island are dragging the rental market with them. Frances Bula recently wrote in The Globe and Mail, “as people are shut out of the housing market, more people have no choice but to remain as renters who are competing for a limited supply of housing in a system that has treated renters like second-class citizens for decades.” She’s right, and for people who are young, non-white, have mental health issues, unemployed, recent immigrants, poor, disabled, or have pets, finding a safe, affordable home can seem nearly impossible in markets with vacancy rates around 0.6% like Vancouver and Victoria.

With constrained real estate mobility, people have little choice but to stay in suites that would have previously been viewed as shorter-term student rentals and I am getting increasingly concerned about where the young people in my riding are going to live this upcoming school year. A representative from Camosun College told us that he too is very worried about the situation. He described it as a complete crisis with some students living in cars and others forced into over-crowed, expensive, shared suites.

We so desperately need more designated long term rentals and co-op housing in B.C. Spaces that people can make their home, places that welcome children and pets and have some outdoor space. Homes for people who will rent for large portions of their life, either by necessity or choice.

On that note, Gregory Henriquez, the architect who designed the Woodward’s building in Vancouver, is calling on young architects “to act as a bridge between the grassroots need of a community and the bottom-line demands of commerce” to build cities that are diverse, inclusive, and equitable. He believes more rental units are needed in Vancouver, citing that “we are so far past the threshold of affordability that the goal of providing home ownership for everyone is almost impossible. Right now, 50 per cent of people rent, and the others own. We have not had a huge rental supply in a generation.” Mr. Henriquez told The Globe and Mail’s Kerry Gold that he “believes civic intervention is necessary to incentivize the right kind of development”

Cooperative housing arrangements are another promising avenue, bridging the gap between the rental and homeownership markets. As B.C. Green Party housing critic Zarah Tinholt has said, “Cooperative housing provides shareholders a long-term, sustainable home.” The financing of co-ops involves a down payment or “membership share” for each unit. In B.C. the down payment is usually under $5,000 but they range between $900 and $15,000 with monthly rents and maintenance costs between $600 and $2500. Co-ops can make incredible homes and diverse communities, supporting multi-generational people with varying income levels.

In BC, few cooperative housing developments have been built since the 1990s when the federal government released its social housing responsibility to the province and existing units have many year wait lists. Given our current housing crisis, and the province’s new Housing Priority Initiatives Fund, I believe that the B.C. Liberals, in conjunction with municipalities and the federal government, need to step in to help housing cooperatives with land acquisition and planning costs. 

Data

Each level of government has various tools available to them that they can use to tackle the housing crisis from different angles. The Vancouver Charter, for example, allows the municipality to charge developers a ‘community amenity contribution’ – a percentage of the value that they receive through rezoning that can be put towards a new park, community centre, social housing, or artist studios.

metro vancouver graphTo guide these initiatives we need, and have needed for years, more comprehensive data about the trends impacting our housing market. The information about buyer nationality that the province began collecting this June is a start, but making major policy decisions based on five weeks of data – as they did with Bill 28 – is far from ideal. In fact it might be viewed as reckless.

The first set of data released by the province, collected over just 19 days in June, suggested foreign nations were involved in about 5% of overall real estate transactions. The second data set, collected over five weeks through June and into July, put that rate closer to 10%.

Capital region graphBetween June 10th and July 14th foreign nationals spent more than $1 billion on B.C. real estate. 86.5% of their investments were focused in the Metro Vancouver region and $886 million were invested in the Lower Mainland market – accounting for about a tenth of Metro Vancouver’s $8.8 billion in housing sales.

Knowing that we are going to be faced with challenging housing decisions for years to come, we ought to start collecting more data now so we can design informed policy. Determining who is purchasing homes, and how many, in BC would allow the government to identify the flow of foreign investments, the role corporations are playing, and whether we are seeing speculation in our market coming from other regions of Canada. Tracking house flipping, when investors buy a house to quickly resell it at higher price, is an important aspect of understanding an over-inflated market. Imposing a sales tax on homes sold within one or two years of purchase could be an effective way of curbing house flipping but, again, it is a policy that should be founded in comprehensive data.

richmond graphStudying the impact of Airbnbs, I suspect, would shed a lot of light on changes happening in the rental market. Anecdotally, we know of nearly a dozen people who have moved out of their rental suites for one reason or another only to see it pop up on Airbnb. For its part though, Airbnb has already said it’s open to some restrictions tailored to tight rental markets like Vancouver’s, including banning hosts from using the popular online platform to run a business renting out multiple units, but governments (municipal and provincial) will need solid data to move forward with such policies.

Long term and ongoing data collection is vital to the development of effective housing policy options in B.C.

International Markets

In the meantime, we can turn to other hot-market jurisdictions to analyze what they are doing to help their citizens find affordable homes.

The situation in the Lower Mainland mirrors that of New York where, as the New York Magazine put it, people with “garden-variety affluence – the kind of buyers who require mortgages – are facing disheartening price wars as they compete for scarce inventory with investors who may seldom even turn on a light switch.” Real estate in New York has been notoriously expensive for years. With a housing price-to-income ratio of 6.1 compared to Vancouver’s 10.6, however, it has actually become more affordable, relatively speaking, because residents have greater access to high paying employment and more job mobility. It also has an efficient transit system for workers to get to those jobs, something Vancouver continues to struggle with, and a considerable amount of social housing. The New York City Housing Authority is the largest public housing authority in North America and owns 178,557 apartments in 2,563 residential buildings. Co-op city alone provides affordable housing for some 35,000 people along the Hutchinson River. (It is important to note, however, that the strict limits on gross income  used in the New York model have been criticized for creating communities that are not socioeconomically diverse. And, despite the impressive number of affordable housing units by B.C. standards, more are needed.)

While New York’s affordable housing is reserved for those living under or near the poverty line, in Vienna 60% of residents live in subsidized suites. “There is a general political consensus that society should be responsible for housing supply, and that housing is a basic human need that should not be subject to free market mechanisms; rather, society should ensure that a sufficient number of dwellings are available,” wrote Christoph Reinprecht in Social Housing in Europe.

When it comes to navigating the presence and impact of non-resident ownership around the world, various policies are utilized to level the playing field between the world’s rich and local citizens. In Switzerland, for example, the government assigns quotas to the country’s 26 cantons, limiting the number of residential properties that can be sold to foreigners. Mexico takes a different approach by restricting foreigners from buying real estate within 50 kilometres of the coast or 100 kilometres from the borders. In Australia, the government collects information on the real estate bought by foreign investors, compiles it in an annual public report, and only allows them to purchase newly built homes. The Australian government also heavily taxes foreign purchasers and threatens non-compliance with significant fines and jail time. The UK charges a capital gains tax between 18 and 28 per cent on the sale of residential properties that are secondary homes or foreign-owned. A progressive tax is also applied to homes worth more than a million pounds. And Hong Kong, after which BC mirrored its foreign tax, has a 15% surcharge on homes purchased by non-permanent residents.

Community Vision

In the midst of all the differing opinions about root causes, bandaid fixes and competing data sets, however, we must not lose sight of the fundamental question that underpins everything — what do we want our communities to look like in coming years?

British Columbia faces a choice: Do we want our real estate market to provide homes for people who want to live in and contribute to the wonderful communities around our province? Or, should we continue to fuel a bubble economy propped up by the influx of foreign investment in our real estate sector?

Given the severity and reach of the housing crisis, a reactive piecemeal policy approach debated over four days in the summer amounts to little more than blowing out birthday candles in the midst of a house fire and to me the answer is clear.

British Columbia is more than just the playground for the wealthy. We need to ensure that our communities will be livable, that small businesses will thrive, and that the next generation will see opportunities to start families in our cities.

We need a province-wide, coordinated approach involving all levels of government and across all communities. We need a data-driven policy framework that will  close the loopholes being exploited by people with ultrahigh net worth, get tax cheaters out of our market, clamp down on questionable real estate practices, increase rental and co-op stocks and put regulatory and taxation frameworks in place for non-resident ownership – we need to build off Bill 28, think provincially, and focus on the future of our communities.

5 Comments

  1. August 6, 2016 at 6:51 pm

    Canada has become a Country of Capitalists where the rich become richer and the remainder provide the labour for the rich. These wealthy, greedy and corrupt people only look after themselves and as long as there are people to serve them, life is good for them and the labourers live in subsistence. What happens when there are no more labourers left ? European Countries found that for a Country to co-exist requires both to live together, a Socialistic approach, which in this Western culture is Communism. Using BC as an example, the Politicians appear to only look after like people and have no idea what the rest must put up with, pushing the labourers poorer, no chance for higher education or ladder climbing at their employment. We may as well put up a sign at the Alberta/BC border, only the wealthy may enter. You can tax housing all you want but foreign buyers or corporations who have the money don’t care they will still come.
    This is my story and I’m sticking to it. Sorry, now that I understand the situation here, I’m sorry I came. However it is only slightly less regressive and ensure to appease people may have some dignity, are given a luxury way of life that insults human dignity and drives them poorer.
    Who do the Greens represent ?

  2. Michael Haddon-Reply
    August 6, 2016 at 9:51 am

    Excellent article, Andrew. Well thought out and reasoned. Why can’t our provincial government put the same thought into its many bizzare and short-sighted decisions?

  3. Janet Hudgins-Reply
    August 6, 2016 at 9:34 am

    Considering that Clark has consistently and eagerly invited foreign investment, then watched her initiative turn into at least 60% overpriced and false valued real estate in BC to the exclusion of locals, it is fair to say she is totally responsible. All during this phenomenon over the last decade, she and her predecessors have refused to regulate, while proudly telling us what a great achievement this was on the part of this neoliberal government. By spring and the next election, it is unlikely that the new tax on the purchase of real estate will have done little to lower the price market to its real value, and will have directly impacted all the wrong buyers unless it is changed to absentee investors only. Overall, this astounding mess Clark created should be the end of her political career, and her party, the betrayal she has been to all women, and the misnomer of the name of the party which is not in the slightest liberal. We can do this!

  4. Clare Attwell-Reply
    August 4, 2016 at 11:51 pm

    Thank you Andrew & your amazing Green Team!

    Agreed! You have touched on most of my pet peeves. Yes, truly, what do we want our communities to look like in the future – certainly not hollowed out, dead neighbourhoods! There is such a disconnect between neighbourhood visioning/& planning and what is actually occurring. Yes we need more appropriate, quality data to connect the dots around the disconnect!! It is completely irresponsible to neglect the collection of this important data – unless of course, that neglect is deliberate, in which case, one would be able to name those in charge as untrustworthy and acting in bad faith – and certainly not in the interests of long term, community interests. This whole topic makes me so mad!!

    One area that is not being addressed, is the sale of businesses to foreign buyers. Living in Victoria, we have encountered too many of our favourite shopssuch as clothing stores; bike shop etc that have been sold to foreign buyers, and within a year or less are shells for those same businesses. It’s very worrying to see this trend all over Victoria. It takes years to build a business that becomes a community asset. IF, these businesses are just part of an immigration requirement for wealthy foreign nationals to buy their way into Canada – then Canada needs to WAKE UP quickly, because soon our wonderful, vibrant communities won’t look anything like we want!!

    Can’t help ranting about this important topic!!

    Thank you for your work on this!

    • August 5, 2016 at 12:45 am

      Clare, I’ve seen that happening too. Thanks for the comment.

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