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BC Election 2017
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Christy Clark Isn’t Being Honest about the Housing Crisis

Speculation, not lack of supply, is driving home prices hopelessly out of reach.

Geoff Dembicki 5 May

Geoff Dembicki reports for The Tyee. His work also appears in Vice, Foreign Policy and the New York Times, and his book, Are We Screwed? How a New Generation is Fighting to Survive Climate Change, will be published internationally by Bloomsbury US later this year.

This report is part of The Tyee’s reader-funded B.C. 2017 election coverage. To learn more about becoming a Tyee Builder, go here.

Under Premier Christy Clark’s leadership, Vancouver has become one of the most unaffordable — and financially stratified — cities on the planet. And her BC Liberal government is still not being honest about the reasons for this crisis.

Clark seems comfortable misleading the public. She’s done it repeatedly on the campaign trail.

And Finance Minister Mike de Jong argued as recently as last July that foreign buyers only accounted for 3.3 per cent of real estate transactions in B.C., a claim that was met with laughter at the Asia Real Estate Association of America conference in Vancouver. “No. Absolutely not,” said one participant.  

Weeks later Clark abruptly changed position, introducing a 15 per cent tax on foreign buyers that temporarily cooled Vancouver’s housing market. She now uses it to portray herself as a defender of the middle class.

“I can tell you [Peter Wall] and every other major developer in B.C. was mighty upset with me,” Clark said.

Yet eight of the top 10 donors to the BC Liberals since Jan. 1, 2016, are involved in real estate and construction. And it remains in their best interests for Clark to win the election on Tuesday.

That’s because Clark refuses to address the true systemic cause of Vancouver’s extreme house prices — an industry that treats homes as instruments for private financial gain rather than public goods essential for a functioning society.

Not everyone in the industry is happy about it. “High house prices have severe side effects,” Richard Wozny, head of the Vancouver-based real estate consultancy Site Economics, told The Tyee.

Wozny, who’s worked on more than 1,200 real estate developments over the past three decades, recently wrote a report arguing that real estate speculation — both domestic and foreign — is creating enormous gains for a privileged few at the expense of everyone else. “The only group at fault are politicians who appear to want growth without paying the attendant and requisite cost of raising taxes on speculation and updating regulations,” Wozny said.

Wozny has worked with many developers. He believes that real estate has an “economic and ethical role in the creation of public infrastructure, the basis of quality of life and the middle class.”

But in recent years Wozny has become troubled by the increasingly wide mismatch between average incomes in the Lower Mainland and the price of houses. So he decided to look deeper into the issue. “I took as my client the middle class whose families bear the brunt of the damage,” Wozny explained. “They deserve some useful answers and objective comments.”

He found that across Metro Vancouver “average detached house prices can vary from the regional average by as much as 220 per cent, but incomes vary by only 25 per cent.”

If even higher income earners like doctors and lawyers can’t afford to buy a home, Wozny concluded, the housing market is no longer properly functioning. It can’t “support a proper supply and demand equation” between buyers and sellers.

His conclusions differ widely from those of the provincial government. Clark claims to have fixed the demand side of the equation with her foreign buyers tax, a policy she says has slowed “the tremendous growth in the cost of housing in the Lower Mainland.”

And with home prices once again on the rise, her government insists there are way too few homes on the market.

“The only way to really solve this problem is to address supply, and that is 100 per cent in the ballpark, on the side of the field, for the cities. They need to step up and do their job here,” Clark has said.

Wozny thinks the foreign buyers tax is a step in the right direction. He agrees there is a shortage of affordable homes on the market. But he doesn’t think politicians like Clark are being forthcoming about the true cause of unaffordability: a system that benefits investors more than regular people.

“Informal buyer surveys conducted by major condo developers regularly indicate that over half of the units in concrete condominiums downtown, at urban nodes and near rapid transit are purchased by investors, and that they are the driving force in that market,” Wozny wrote. “It is reasonable to conclude that housing prices are being impacted by investors who very effectively compete with those trying to buy a home they can live in.”

Leading voices in the real estate industry continue to deny that this is the case. In early April, Brad Henderson, CEO of Sotheby’s International Realty Canada, told BNN that the “statistics on who are buying are very difficult to come by, a lot of people think it’s foreign money, the reality is that it’s mostly domestic owners and buyers.” When asked about speculation driving up home prices in places like Toronto, Henderson replied, “We don’t see investor speculation in the market, we see people that are genuinely wanting to buy those properties and own them.”

Yet the evidence suggests otherwise. After some Vancouver residents expressed worry about a new West End tower designed by Japanese starchitect Kengo Kuma with studio apartments starting at $1 million, local developer Jon Stovell insisted that it was lack of housing supply, not speculation, that is to blame for the high prices. “If there were seven other high-rises marketing at the same time in the same area, the price wouldn’t be as high,” he told CBC.

But the developer building the tower, Westbank, has suggested many of its clients are Chinese investors looking for a place to park their money. Their buyers “tend to be more well-travelled, with higher education level probably and have a higher appreciation for fine arts,” its founder has observed.

Developers have a much lower view of the people who can’t afford their homes, particularly those fighting new development in Vancouver’s neighbourhoods. “The loudest group, NIMBYs, slow the creation of new supply and needed amenities, often creating a negative impact on the very municipalities they are trying to protect,” said Bob de Wit, CEO of the Greater Vancouver Home Builders’ Association. And Anne McMullin, head of the Urban Development Institute, which has frequently lobbied Clark’s government on behalf of real estate developers, says “we have come to expect locals to be resistant to change.”

This viewpoint appears to be shared by the BC Liberal government. At a recent housing debate in Vancouver, Liberal incumbent and former mayor Sam Sullivan said, “I look at this housing crisis, and it’s really got three important issues: supply, supply, supply.” Sullivan dismissed people who fight against new development as doing the “NIMBY shuffle.” Sullivan didn’t mention that much of this development, particularly in Vancouver, is sold to speculators instead of the city’s inhabitants.

Wozny believes that if governments were truly honest about the reasons for unaffordability in Vancouver, they would be forced to do something about them. “Higher taxes and fees on residential real estate being used for speculation and investment” would be a good place to start, he says.

“Politicians must be committed to the public realm,” he argues in his report. “Residential real estate, like food and water, is a necessity. Individual homes were never intended to be an investment vehicle to be hoarded, or to be subject to artificial, non-market-driven shortages.”

Yet under Clark’s Liberal leadership, that’s exactly what has happened.  [Tyee]

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