Much ado has been made this week about UBC prof David Ley taking a stand on housing affordability in Vancouver. Ley has studied policies in other key global real estate markets, and says that our lack of government intervention in controlling house prices is at odds with comparable international cities, which are being much more hands-on.
He’s mostly talking about the effect of foreign ownership on prices, of course, and how countries such as Australia are clamping down on overseas buyers to try to keep a lid on rocketing prices in cities such as Sydney. There, the government recently announced that foreign buyers will be prosecuted if they purchase homes illegally, and in the state of Victoria they will have to pay an additional tax of about 3 per cent of the purchase price. That’s in addition to the fact that overseas buyers are only allowed to invest in new developments, not resale homes.
Australia is not alone in taking an interventionist stance. In Hong Kong there are tax penalties for mainland Chinese buyers, in Singapore there are higher purchase taxes for overseas buyers and in London, UK, foreign buyers are subject to elevated capital gains taxes as well as increased property taxes for vacant homes in some areas.
“In other countries there is a much more active attempt to respond to the shelter needs of citizens,” Ley told CBC.
He says the problem here in Vancouver is lack of data on foreign ownership – a problem that the City is attempting to tackle with its planned vacant home registry website. The City plans to then monitor the recorded properties using BC Hydro data to confirm whether or not they are truly vacant, before taking as-yet-unspecified further steps.
Ley also, rightly, points out that overseas investment in Vancouver homes shows no sign of abating, especially with the low loonie effectively putting a 20 per cent discount on Canadian property investment. And with the latest real estate board figures showing record prices for Vancouver homes, there is indeed no sign that house prices will drop any time soon.
But what Ley doesn’t tackle is whether the kinds of policies and measures employed in the countries he studied – primarily higher purchase levies and vacant home taxes – would actually work here in Vancouver, and/or ultimately benefit the average Joe Vancouverite who is hoping to buy a home.
For example, even if the City successfully creates its vacant home website, there are huge holes in the proposed system. For one thing, it relies on neighbours reporting vacant homes on their lots, so some would be reported, and others wouldn’t. Of the vacant homes that are reported, the system relies on BC Hydro data, which is very easily manipulated even in a vacant home, by use of output timers or diligent property managers. And then there’s the issue of partially occupied homes, such as those owned by snowbirds. What qualifies as vacant – only 50 per cent in use? The list of flaws goes on.
And then what? Would the city impose vacant home taxes on just those owners whose properties make it past all those filters? They would be relatively few, if so – surely not enough to make that tax a dealbreaker for foreign investment in general.
As for upfront purchase taxes, it’s hard to imagine a tax as low as the 3 per cent additional duty imposed in Australia’s Victoria would deter many foreign buyers here in Vancouver, who generally have very deep pockets. Especially with that 20 per cent discount they are currently enjoying. It’s much more likely that it would only be true deterrent if a very high property transfer tax was imposed on overseas buyers, and that raises a whole other set of problems.
All that said, there are affordability programs and policies other international cities that Vancouver and Canada in general could learn from and successfully adapt for use here. BC Housing put out an excellent report citing many global examples recently (more on this here). There are also important steps the City can take in rezoning for additional low-level density to improve the flow of housing into the market (see links in Related Stories, below).
The crucial difference is that these solutions focus on making the low- to medium-priced sections of the market more accessible to those who cannot currently afford to get on the property ladder, rather than obsessing over the inaccessibility of the high-end home market.
If there are solutions to be found and policies to be put into place, let’s work on how to get hard-working but struggling Vancouverites into the market so that they can start to enjoy all those price rises. Then, along with the majority of Greater Vancouverites who already own their homes, we will all benefit from increasing activity in market – no matter where the buyers come from.