The Lower Mainland isn’t the only jurisdiction in the world wresting with the problem of a hot real estate market that’s caused an affordability crunch.
In a new study, economist Marc Lee of the Canadian Centre for Policy Alternatives suggests a multi-pronged approach that would “restrict absentee ownership, increase affordable housing supply, and make property taxes fair.”
He said London, New York and Hong Kong are dealing with similar issues. Studying the actions those cities have taken, and how effective those steps have been, could give the Lower Mainland some valuable insight into how to proceed.
“I don’t know if we know the answer of the ideal solution yet,” Lee said.
In the United Kingdom, a property transfer tax regime was introduced at the tail end of 2014, and that seems to have had a positive impact as “crazy spectacular gains” are no longer being seen.
“We should be looking at that in B.C.,” he said.
Talks need to begin now about outright restrictions of foreign ownership, so that local housing is owned by local residents, Lee said.
“There is a danger right now that Vancouver’s market is a bubble,” he said.
But steps could be taken to “stabilize” prices and “engineer a soft landing.”
Lee is calling for a public investment of between $1.25 and $2.5 billion annually to build 5,000 to 10,000 units of affordable housing.
Where would that money come from?
B.C. could institute a property transfer tax that’s steeply progressive, while creating a new transfer tax for purchases by non-resident buyers, and of purchases made of second homes and rental properties.
“Combined, these reforms could raise significant new revenues to finance an ambitious social housing build-out, while also making the property tax system more progressive,” Lee said. “The surge in real estate process has further increased the gap between rich and poor, creating profits for homeowners that are more like lottery winnings than a reward for hard work. For those at the higher end of the real estate market, those winnings should be taxed so we can build the affordable housing we need.”
And the upfront cost of construction could be recouped over time via rent.
Asked why the discussion about real estate prices and affordability didn’t happen in years past, Lee suggests that perhaps the situation has “reached a tipping point.”
There’s now evidence that young people are considering leaving the region, and businesses are having a hard time attracting workers, he said.
“The housing crisis is top of mind for most people. The government has recommended some small measures to track foreign ownership and combat shadow flipping. But this will have little to no impact on the overall crisis. Simply put, the housing market is broken, and to fix it, we need a comprehensive approach.”