With the furore about overseas buyers of Vancouver housing continuing to heat up, the people (at least, those who believe they can’t afford a home, plus apparently the Vancouver Sun) are clamouring for hard data on foreign ownership.
This week saw the latest affordable housing rally organized by the #DontHave1Million protest team, this one focusing on the generally accepted gaping need for information about exactly how many of our local homes are being snapped up by overseas investors.
The rally speakers offered many genuinely good points about the need for a national housing strategy, more innovative affordable housing solutions to be implemented here in Vancouver, and the idea of giving property transfer tax back to the municipalities it comes from, to be reinvested in affordable housing.
But on the subject of the need for data, the message was muddled. Some speakers called for all buyers of Metro Vancouver homes to declare whether they are a “Canadian resident for tax purposes” (ie, it’s fine to buy here if you’re Canadian, but not if you’re not). Another speaker said that “foreign investment” can come from anywhere, even a wealthy Canadian investor in Toronto. And none really said what any data that might be collected would be used for.
However, all agreed that foreign investment data was needed to “inform future policy”.
Even the British Columbia Real Estate Association, which recently released a report saying it believed foreign ownership had an “insignificant impact” on the Vancouver housing market, conceded that there was not much data on the subject. It ended its report with a footnote suggestion that the province monitor foreign investment in housing “by attaching a residency declaration somewhere in the land transfer form process, or other practical approach …[in order] to gain further insight into this market segment.”
So it’s generally agreed, from most sides of the argument, that more data is required if we’re going to enter into a debate about this hot topic. And certainly, debate is only helpful if it is informed. At the moment, much of the discussion is getting us nowhere.
However, if we’re going to spend government resources and taxpayers’ money on collating this kind of information, we need to think it through first. The protestors cry, “We need data! Because when we have data on how many homes are being bought by foreign buyers, we’ll be able to… erm…” Yes? We’ll be able to do what, exactly? What kind of policy will this data inform?
Say, just for the sake of argument, we find out 80 per cent of Vancouver homes listed for over $5 million are being bought by overseas buyers. And that 50 per cent of $3-5 million homes are. And 25 per cent of $1-3 million homes, 10 per cent of $700K-$1 million, and 5 per cent of sub-$700K. (Anecdotally, this is not an unrealistic picture, from the general consensus of real estate agents reporting on the topic. But it's just an illustrative example.)
Some argue that this information could be used to assess how much a tax on overseas buyers entering the Vancouver market would raise – money that could be put to funding affordable housing schemes. Well, maybe.
But considering that nearly 70 per cent of all Metro Vancouver residential real estate transactions in 2014 were for less than $700,000 and 82 per cent below $1 million, you’re likely looking at a taxing a pretty small proportion of the market (which was the point BCREA was making). Just 18 per cent are above $1 million, so you’d have to put a pretty hefty tax on foreign buyers to make any real money. Perhaps it would only be worthwhile doing so on home purchases by overseas buyers over $3 million, say. But then you’re just taxing the wealthy on high-end home purchases, and if you’re doing that, why not increase property transfer tax on all those properties, whomever the buyer? Does it really matter at that point where the money comes from?
Even more importantly, there’s the thorny issue of what “foreign buyer” actually means, and what happens to you if you check that box. Is it OK to be a Canadian living elsewhere in Canada, who “parks their money” in a detached Vancouver home, or flips the property for a profit? Is that practice only frowned upon, and open to taxation, if you’re not Canadian? That seems like a double standard to me.
Then there are a myriad other grey areas to navigate, such as what happens with:
- people living abroad buying the property for a Canadian resident to live in, whether family or as an investment;
- Canadian nationals living abroad who want to buy a Vancouver home for their family or for investment;
- people who live in Canada part-time, whether Canadian or not;
- and many more complicated circumstances.
Are we trying to keep those people out of the Vancouver market too? If so, is that right, or fair?
These kinds of politically sensitive questions reveal the true intentions of the kind of data collection being proposed: whether it’s a veiled attempt to keep non-Canadians out of the market – or just their money – and exactly what kind of policy approach we are trying to inform here. (And I don't believe that statistics on the proportion of foreign buyers in a niche sector of the Vancouver market is necessary to inform a national housing policy.)
I'm not saying data shouldn't be collected. But before we undergo any kind of rigorous data collection, those tough questions must be asked – and answered.