Less Focus on Vancouver’s Foreign Buyers, and More on Income, Please
The prime minister’s recent promise to collect data on foreign buyers of Canadian real estate has made housing affordability an election item. That would be good thing, if the parties did more than posture about widely acknowledged problems or make targets of overseas investors who may or may not be part of the problem.
This is true regardless of “foreign” real-estate purchases. Population growth creates pressure on available land, and immigration does increase population. But it is important to remember that the fastest-ever growth in Vancouver’s population (about eight times faster than anything since) happened in the first 50 years of the last century -- and occurred despite explicitly racist exclusion acts that blocked most immigration from Asia.
It is understandable that a generation of Vancouverites who grew up in single-family homes -- when far fewer people occupied our limited space -- now lament their inability to afford the same kind of housing for their own families. But they are not alone.
Growing up in Singapore, I lived in a “semi-detached” house in a middle-class district. Most of my friends had every expectation of owning similar “landed property” in adulthood. The vast majority of them today live in high-rise apartments. In fact, more than 80 per cent of the population lives in publicly built housing.
I remember the griping and grousing of a generation of Singaporeans who -- for a time -- could not come to terms with smaller homes, shared recreation spaces, and high-rise living. There is still a lot of griping and grousing in Singapore about the overall high cost of housing, but expectations about the type of housing have permanently altered and most residents do not feel any “entitlement” to single-family dwellings.
It is bemusing, therefore, to hear calls for a “Singapore solution” in Vancouver, specifically taxes and duties on foreign buyers and property speculators. These ideas may be worth pursuing, but any serious attempt at a Singapore solution must take into account other measures that the city-state has taken to address affordability, including mass public housing, a long-term commitment to public transit, and mandatory savings -- all non-starters here.
But the most important feature of a “Singapore solution” (or a “London” or “Sydney” or “Hong Kong” one) isn’t in city amenities or tax rules, it is in how Singaporeans (or Londoners, or...) understand affordability.
Here, we talk disproportionately about price. But that is only half of the affordability equation. We give much less focus to the other half -- income -- which affects affordability as much as price does.
While Singapore does indeed try to limit housing price increases through taxes and levies (with limited results, it should be said), the country is at least as focused on increasing incomes by presenting itself as a global city that welcomes international capital as well as foreign talent and ideas. Behind Singapore’s approach is an attitude of openness, an embrace of globalization, rather than an inward-looking parochialism.
Which attitude dominates in Vancouver is evident from media coverage on the issue. A front-page obsession with record-breaking real-estate transactions (and frequent innuendo about unidentified buyers), has generated a flood of commentary, much of it nasty, bitter, and racially-biased. The Globe and Mail, for one, ran a centre-spread on Chinese buyers of Vancouver mansions, but ignored other Chinese immigrants who announced their investment in a $100-million manufacturing facility in Surrey, B.C., and a North American head office in Vancouver.
The campaign for more data is likewise fixated on just half of the affordability equation, and poorly conceived in terms of what the findings might mean. Suppose we learn from the data that foreign buyers have in fact contributed to the price rise in some Vancouver housing segments.
One interpretation -- rarely discussed to date -- could be that there has been a massive transfer of wealth from outside Canada to residents of the Lower Mainland. Indeed, many owners of local properties have reaped huge capital gains. What have they done with these windfalls? Has it financed a more lavish lifestyle? A condo in Palm Springs? Investment in a local business? Help for offspring setting out in the property market?
The point is that a transaction requires at least two parties, and the flow of funds does not end with that transaction. Money goes somewhere. Focusing on only one side of a transaction, and asking no questions about resulting windfall gains, is a distorted and risky basis for public policy.
Raising incomes locally
Admittedly, increasing incomes isn’t simple. Vancouver’s hiring market, especially for younger workers, is dominated by relatively low-paying service industry jobs. The city has few head offices or high-value industry clusters that typically pay much higher salaries and offer greater security of employment. We should be giving as much attention to attracting those kinds of businesses to the province, as we do to real estate transactions in the Lower Mainland.
Vancouver compares very well to other North American cities as a head office location. Comparing key business costs such as labour, facilities, utilities, and taxes, a 2014 KPMG study found that Vancouver out-competes such U.S. cities such as Seattle, Portland, L.A., San Francisco, and San Diego. B.C.’s corporate tax rate is the lowest in Canada or the U.S. And labour turnover, a key consideration for tech investors, is much lower here than in Silicon Valley.
We need to reframe the affordability debate in the following ways: i) less focus on which buyers caused the escalation of property prices, and more on increasing housing supply; ii) less nostalgia about single-family dwellings, and more investment in community facilities to support higher density housing; and iii) more openness to international trade and head office investment to improve Vancouver incomes.
Above all, let’s put a stop to the insidious characterization of Chinese investors as villains in our affordability problems. On the contrary, let’s seize on the presence of so many well-heeled entrepreneur and investor immigrants, from everywhere, as an opportunity to attract new business capital to the province, create jobs and raise incomes.
Contributed to The Tyee