What is looking like the most important issue in British Columbia right now is that of the housing market. We're in a crisis and it's having a wide array of effects. Rising prices of single-family homes have steadily risen over time.
Due to wide array of factors that include (but are not limited to) foreign investment, ineffective regulations, money laundering, shadow flipping and developer ties to governments, more and more people are finding it difficult to find and keep affordable housing in Metro Vancouver.
The results? Vanishing neighbourhoods, closing schools, escaping young people and market fragility. This is putting a large strain on working families throughout the province. Yet, we see a lack of action from our provincial government to tackle the areas they have the power to address.
The worst part is that B.C.'s economy is built on real estate and construction.
The Rise of Housing in B.C.
Housing and residential construction have been on the rise. Housing starts in B.C. are at a statistical 26-year-high. Even in the last five years, B.C. has gone from 26,000 new housing starts in 2011 to 31,000 in 2015. No province, with the small exception of Alberta, is experiencing this growth.
Anecdotally, depending on where in the region you live, you can see these new housing starts. You see new rezoning application signs all over the place. Where I live in Richmond, you have whole neighbourhoods being ripped apart by construction. Of these new homes, many appear to not have anyone living in them. I've talked to a lot of residents in the areas of Seafair that are hardest hit. They point at unkept lawns and unwatered gardens that are in front of these massive homes.
But stepping aside from anecdotes, B.C.'s economy is run by gains in new construction, specifically real estate. If you take a look at the booming month of April in B.C., the majority of gains were in construction, a.k.a. real estate, while areas like forestry, agriculture, fishing, warehousing and manufacturing all took hits.
Housing Prices
The average price for a single detached home in Vancouver is $1.4 million. In Richmond, it's $1.5 million. In Ladner, it's $971,500. Throughout the Fraser Valley, averages are at $776,500, according to the Fraser Valley Real Estate Board.
Vancouver's median home prices could top San Francisco's astronomical prices in short time. Putting the data into perspective, take a look at this chart:
new pinned tweet graph. #yvrre sets some kind of record. pic.twitter.com/5QljU52uHd
— Hilliard MacBeth (@hmacbe) July 14, 2016
Factoring in household debt and median after-tax income, median home prices, especially in comparison to Toronto are shooting up.
Given that incomes and wages have stagnated over the last 35 years, relative to profits, productivity and now housing prices, people are frustrated with the state of the housing market. Young people, our future taxpayers, are getting crunched out of the market. Baby boomers are cashing in on a life of hard work by selling and moving elsewhere.
Experts are even advising people to get out of the Vancouver housing market.
An influx of money has made a large footprint in Vancouver's housing market and it's having its effects on our communities and on families throughout the province. Where's the action to tackle this? Where's the leadership?
What Can Be Done
The province has taken some action. It's little and it's weak, but it's something. Now their action usually happens after the Official Opposition makes a call for a particular investigation or policy or after a damning independent report surfaces in the media. Our provincial government is constantly in reaction mode. No leadership.
On the list of things that could have been done a long time ago involve tackling shadow flipping of homes, strengthening regulatory powers over realtors, examining purchases of homes from people overseas and investigating money laundering schemes.
While some action has been taken on some of the above items, it's always the least that the government can do.
For example, Finance Minister Mike de Jong released 19 days of housing purchase data that revealed that five per cent of those sales in Metro Vancouver came from people overseas. However, just 19 days of data in the middle of summer indicate that these data collection efforts were extremely weak. The government has all the data. Why don't they just release a full year?
Another example: the City of Vancouver announced they would tax vacant homes. This is a no-brainer. While the details are yet to be released, the concept is simple. Don't live in your home most of the year? We're going to charge you for it. To enable this change, it requires provincial action to amend Vancouver's community charter.
Last year, Mike de Jong gave an absolute "no" to taxing vacant homes. Now that Mayor Gregor Robertson and the City of Vancouver are taking leadership, it now sounds like an OK idea to the finance minister.
That's all that Christy Clark and the B.C. Liberals have on their side -- an economy built on an expanding real estate bubble ready to burst.
The Absence of Real Action
Taking the data I referred to earlier into account, a slowdown in housing starts and drops in housing prices could have negative effects on B.C.'s economy -- because we're so dependent on housing activity. This is because Christy Clark has put all her eggs into the real estate basket. And that's all that Christy Clark and the B.C. Liberals have on their side -- an economy built on an expanding real estate bubble ready to burst.
Moreover, the revenue from the Property Transfer Tax in 2015 totalled $1.15 billion. 25% of that came from transactions in Vancouver alone. If that $1.15 billion was reduced significantly, it would blow a massive hole in the provincial budget.
Christy Clark's mantra is "Strong Economy, Secure Tomorrow." Yet, we have an economy that only works for developers, big construction companies and a provincial debt that is rapidly increasing. Her balanced budget relies on the Property Transfer Tax to remain balanced. So a slowdown in housing activity would affect the bank accounts of BC Liberal donors and eliminate the balanced budget - and subsequently, Christy Clark's re-election efforts.
Then, factor in that the B.C. Liberals fundraising chair is Metro Vancouver's wealthiest real estate marketer, Bob Rennie. Rennie, who makes a living (and a nice living at that) marketing real estate especially around transit stations, recently told the Urban Development Institute that more housing supply and more investment in public transit would tackle affordability. What he was really saying was "invest in the areas that make money for me and we'll solve the housing crisis."
My reaction:
When Bob Rennie tells us that the condos he sells are the only solution to affordability. #VanRE #bcpoli #demand pic.twitter.com/f3ZRpW4PCr
— Ramesh Ranjan (@Ramesh__Ranjan) June 2, 2016
Sure, we do need to build and densify. We do need larger investments in public transportation. But we also need to address the demand side of the economic equation, something the province and B.C. Liberal donors don't want to happen.
Keep in mind, a large portion of B.C. Liberal funds come from wealthy developers and construction companies. If real action entailed tackling the demand side of the economic equation, that would potentially hurt the pockets of those who fund the BC Liberal Party. So when you hear hesitance to take action from Christy Clark or Mike de Jong, it should come full circle.
Where's the Leadership?
What happened to governments that seized crises and showed real leadership to tackle them?
When Barack Obama was sworn in as president in 2009, he recognized that 50 million people without health insurance was not only a moral problem, but an economic one. He tackled it.
After greed and excess on Wall Street helped the U.S. economy bottom out in 2007-2008, Obama set up the Consumer Financial Protection Bureau and signed the Dodd-Frank law to help regulate and prevent bad activity.
We know many of the causes of this crisis and we know what can be done. When will we have a government that is willing to step up to the plate, show us a full picture of data and say, "Here's our full plan to tackle this"?
Some people say that you can't legislate affordability. I think that's a short-sighted view. Governments are here to serve people. They're here to address your concerns. They're here to advocate for you. So when an entire region says that this is an issue, it's an issue. When experts say it's an issue, it's an issue. But as Obama has said, the most important office is the office of citizen. It's me and you. It's us speaking up and speaking out.
We need action but it starts with us. Be active now and be active come election time. Take these issues to the polls and make your voice heard.
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