Metro Vancouverites are heading to the polls – or, in this case, their nearest post box – as mail-in voting continues for the emotionally charged Transportation and Transit Plebiscite – aka "the congestion tax".
Although the actual question is how to fund transit improvements, the debate has rapidly become about whether people believe TransLink can, or should, be trusted with more funds. The result of this narrow focus is that many issues such as impact on housing affordability have been largely ignored or simply swept under the carpet.
Even getting both sides to agree on how much the new tax would impact people’s disposable income – and, by implication, their ability to obtain a mortgage – has proved impossible. The Mayors’ Council and “Yes” supporters say the 0.5 per cent sales tax will take $125 per year out of the average household’s pocket. “No” supporters and the Canadian Taxpayers Federation say it will be more than double that amount – $258 per year.
Property Purchasing Power
So what would be the tax’s impact on ability to purchase a home – especially for often cash-strapped young and first time buyers? Since lenders scrutinize every expense when making the all-important decision of how much money they’re willing to lend for a mortgage, the new tax will reduce borrowing power – no matter which side’s estimate of the amount is correct.
“A quick calculation suggests that at today’s mortgage rates of 2.69 per cent, if we take the higher estimate of $258, it would reduce a person’s home buying power approximately $5,400,” acknowledges Mark Belling, CEO of Fifth Avenue Real Estate Marketing.
He stresses, however, this amount is very quickly offset by the many costs savings of living in close proximity to regular, reliable transit. “Vehicle ownership alone – gas, insurance, repairs, and possibly financing – typically costs more than $258 each and every month. So in reality, if better transit means a buyer no longer needs two cars – or in some cases any car at all – their purchasing power has gone up because they’ve eliminated that monthly expenditure.”
For the rapidly expanding demographic of urbanites who embrace the carless lifestyle choice, transit access also opens the possibility of an immediate bottom-line benefit.
“The average parking stall costs $25,000 to $30,000,” notes Robert Grimm, principal of Portrait Homes. “If you’re looking in the suburbs, that money could mean the difference between settling for a studio or being able to afford a one-bedroom or one-and-den.”
Will New Transit Push Up House Prices?
Over the long term, most industry watchers agree housing prices will continue to rise throughout Metro Vancouver due to its geographical constraints – there is simply nowhere to go except up. And there are plenty of precedents to suggest they rise more rapidly when improved transit arrives – good news for people who already own property or are looking at long-term investment value, problematic for first time buyers.
According to an Urban Analytics report commissioned by the Onni Group just after the Canada Line was built, land values along the Cambie Corridor rose 19 per cent – almost double what most people had predicted – in the months leading up to completion. They climbed an additional 14 per cent in the first six months after the Canada Line was operational – an astonishing 33 per cent increase in approximately one year.
The Evergreen Effect
Further east, where the Evergreen Line is under construction, the Tri-Cities have shown steady but more moderate price increases across all types of housing, according to the Real Estate Board of Greater Vancouver. The rapid spike in prices many predicted would accompany the new SkyTrain line has failed to materialize.
What has occurred is a construction boom that’s bringing neighbourhoods like Burquitlam into the limelight as a more desirable place to live. Howard Steiss, principal at Texor Homes, notes many buyers are attracted to the greater bang for their home buying buck that’s possible when transit makes commuting easier.
Although the new tax would add an additional cost to construction materials, David Podmore, chairman and CEO of Concert Properties, points out this may not be as severe as it appears.
“The higher density we see around transit nodes like Marine Gateway, Metrotown or Brentwood allows more efficient land use – which means developers have the cost savings associated with economy of scale,” he says.
In Surrey’s new downtown, this economy of scale has translated into one new tower, Evolve, offering apartments listed well below $100,000 – a price that’s attracting investors, first time buyers, and plenty of parents looking for a way to help out their children via the BMD (Bank of Mom and Dad).
In Vancouver proper, the 21-storey Independent at Main and Broadway offered prices starting below $300,000 – a price virtually unheard of in that location for new product. The project was three quarters sold in just two weeks, with buyers citing proximity to transit corridors, shopping and more parking for bicycles than cars as dealmakers.
What About Immigrant and Offshore Buyers?
Offshore immigration, a major driver in BC’s booming residential construction industry, considers proximity to transit a must have. “Offshore markets are light years ahead of us in the way they look at transit,” says Bill Szeto, president of Otezs Project Marketing. “In any major Asian or European city transit is the dominant way people move around. In London, England, you can’t even drive a private vehicle downtown [without paying a fee] unless you live or operate a business there.”
Proximity to transit, he notes, also helps attract a better quality tenant – an important factor for the investment market. “And consider student housing. If students can get to UBC easily using rapid transit, it opens up other, more affordable rental options which could, ultimately, make on-campus housing more affordable as well.”
However, Rolf Neufeld, managing director of credit structuring with Bank of Montreal, believes the vote will have little long-term impact on prices or appeal to new markets.
“Vancouver land values are going to keep rising regardless because it will always be a city that people want to live in,” he says. “And there will be some transit improvements coming even if the vote is no.”
So while Metro Vancouver awaits the results of the transit vote, Szeto makes a final comment. “Even 15 or 20 years ago, people often asked why anyone would want to live next to the SkyTrain… now they ask why wouldn’t you want to live there?”
