Bob Rennie painting in downtown Vancouver - Bill Tieleman photo |
Drastic action needed to buy time to
implement tax changes, rules to slow runaway home prices.
Tuesday June 14, 2016
By Bill Tieleman
"A
foreign ownership tax of 10 per cent on a $5-million home will not stop a sale
or create
any affordability."
- Bob Rennie, real estate magnate, BC Liberal fundraiser.
Bob Rennie
is right. That's why the first step toward solving Metro Vancouver's
high-priced housing problem is simple -- though probably even more unwelcome to
Rennie.
The
government needs to ban all new foreign home ownership in British Columbia for
six months.
A six-month
ban would give us time to start finding longer term solutions and send a signal
to the world that Metro Vancouver is not for sale to the highest bidder as a
blue chip investment. It's our home and people with no commitment to B.C. have
no business buying residential property purely for speculation.
UPDATE: On July 25, the BC Liberal government surprised most by imposing a 15% foreign buyers property tax with one week's notice. The impact of the tax has not been fully measured but anecdotally realtors complained that it had immediately dampened the market for sales, to both foreign and Canadian buyers. The poll I quote in this column was no doubt similar to those conducted by the BC Liberals - leading to the flip-flop on taxes - but in my view a 6-month freeze would have been - and still could be - a better approach.
Even the
Bank of Canada is concerned,
saying foreign demand "does contribute to price increases that are driving
the rise in household indebtedness."
And the Bank
of Nova Scotia is restricting mortgage lending here because, its CEO Brian
Porter says, "We're a little concerned about housing prices in the greater
Vancouver area."
The Liberals
could recall the legislature and pass an act suspending the purchase of
residential property by foreign buyers for six months to stop the insane price
escalation and the wild speculation fuelled by wealthy investors who have no
plans to live here or make a contribution to our province.
During that
six months, the province could work with the federal and municipal governments,
realtors, developers, contractors, housing experts -- and most of all citizens
-- to gather data and formulate a long-term strategy to reduce ridiculous price
increases that are driving people into despair and out of their unaffordable
city.
There are
lots of good ideas being discussed -- lower property taxes for local workers
and higher taxes on vacant homes, a speculation tax, more co-op housing, higher
density incentives and many more.
And Josh
Gordon, a Simon Fraser University professor of public policy, says that
contrary to Rennie's view that lack of housing supply is the problem, record
prices are being driven ever higher by surging demand from foreign buyers. And,
says Gordon, there are solutions readily available to government.
"The
policy levers to curtail foreign investment exist, should we wish to use them.
Properly implemented, they will address the root cause of the recent price
surges without setting us up for an even worse price correction. It is simply a
matter of political will," Gordon argues in a Globe and Mail column.
Why no
Liberal action? Check their donor list
But the B.C.
government won't impose a temporary foreign ownership ban or do anything
substantial. It has turned a blind eye to the problem for more than a decade
and even now is only proposing measures that are meaningless, ineffective
window dressing.
The reasons
for the BC Liberals inaction are obvious. First, the provincial Property
Transfer Tax revenue of $1.1 billion helps balance their budget. (It's forecast
to bring in nine times as much as the $128 million in natural gas royalties'
revenue expected this fiscal year.)
And second,
developers and the real estate industry that dine out on foreign investors' mad
money contributed $12 million of the $70 million in donations
the BC Liberals received between 2005 and 2015 -- more than any other sector,
including mining and forestry.
Integrity
BC's study of Elections BC financial records show that Bosa Properties
contributed $726,000; Onni Contracting and linked firms gave $464,000; the
Aquilini Group Properties and affiliated companies contributed $582,000; K
& T Properties donated $618,000; Concord Pacific Development contributed
$666,000; Wesbild Holdings gave $685,000; Wall Financial contributed $459,000
and Polygon Homes donated $656,000.
That's a
whole lot of BC Liberal love from those who build and sell housing.
And who is
Premier Christy Clark's chief fundraiser and confidante?
Rennie, the
condo king who adamantly opposes restricting foreign sales. Rennie Marketing
Systems gave the BC Liberals over $329,000 during that period.
"China
buys $6 billion a year in British Columbia exports. Are we going to tamper with
those jobs and our economy?" Rennie told an Urban Development Institute
audience this month.
So exports
of resources and imports of Chinese produced goods is dependent on letting
foreign speculators buy residential land? Preposterous.
"The
city of Vancouver should get out of the affordable ownership business,"
Rennie added.
And so long
as Clark listens to Rennie there won't be any action.
But with a
new Insights West poll
showing 80 per cent of British Columbians would support a tax on absentee
owners, it's clear the public wants action, not more pontificating from those
who profit from out of control prices.
"The
level of animosity towards the provincial government is high," says
Insights West vice-president Mario Canseco.
Simple
solutions could slow runaway price increases
How bad have
Vancouver housing prices gotten? Vancouver mathematician Jens von Bergmann calculates
that soaring prices have brought gains to homeowners equivalent to working at a
$126-an-hour job. (The average wage is $26 an hour.)
"It's
another reminder of how disconnected the real estate is from the local market
and I think it's kind of a turning point where we have to ask ourselves, 'How
can we adapt our tax and regulations system to deal with these new
realities?'" said von Bergmann.
We can
adapt. And after the six-month freeze on foreign home purchases, B.C. could
restrict outside ownership in the way that many other countries like Australia,
England, Switzerland, Mexico -- and yes, China -- now do.
But first we
have to overcome the Rennie rhetoric that informs Clark's policies.
"If you
have a 'no tower' sign on your front lawn," Rennie says, referring to a
neighbourhood group opposing a 12-storey tower near Commercial Drive,
"then you have no right to talk to your children about
affordability."
Really? How
about -- "You have no right to talk about housing affordability if you are
selling out the province to foreign buyers while driving prices beyond the
reach of ordinary British Columbians?"
But Rennie's
comments are a symptom of the problem, and definitely not a solution.
The first
step -- just like with a life-threatening injury -- is to stop the bleeding
with a six-month ban on foreign home buying.
But until
the BC Liberals realize that skyrocketing housing prices are threatening our
way of life, there will only be more casualties.
.