People before profits: Flipping Vancouver’s real estate market on its head
Code Red: Adopting the simple premise of 'homes first, investments second' in Vancouver’s housing crisis could have radical ramifications
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Raza Mirza still considers Vancouver home even after he made the decision to leave to get away from the city’s housing crunch.
Newlywed and expecting his first child in July 2015, the 31-year-old tech worker knew his tiny one-bedroom downtown apartment was no longer sufficient, despite the sizable $1,515 rent.
“When we found out my daughter was coming, we decided that we need to find a bigger place,” Mirza said. “We don’t have enough room for our stuff, how do I put a crib in a tiny bedroom, or a baby chair and all these things that you have to worry about?”
So, naturally, Mirza started looking around Metro Vancouver for a home to meet his needs before coming to a daunting realization.
“Every time I would save money, the prices would keep on rising,” he said. “It was not enough that I was saving, that I had a good job. I would constantly be priced out of the market.”
Frustrated that the only realistic options seemed further out in the region, far from his Vancouver workplace with hour-long commutes that would steal precious time from his young family and bring with it a new set of transportation-related costs, Mirza ended up taking a job for a start-up in Victoria and buying a home five minutes from work.
The city he fought to make his home, amid demand from other industry hubs like Seattle, had turned its back on him.
The shocking thing isn’t that Mirza’s story is unique. It’s that it isn’t.
Vancouver’s housing crisis has hit “Code Red”, according to Paul Kershaw, a University of British Columbia professor at the School of Population and Health and founder of Generation Squeeze, a coalition of young Canadians tackling generational inequality.
Kershaw says it takes today’s 20-, 30-, and early-40-year-olds 23 years to save for a down payment on the average Metro Vancouver home based on their average salaries.
It took their parents just five a generation ago.
“Something urgent needs to be done to respond to this problem,” Kershaw said. “We are increasingly on life support. You can’t actually attract people to the region and get them to take decently paying jobs if those wages are out of step to what the cost of housing is today. We’re losing people to other parts of the province and, increasingly, to other places altogether.”
Vancouver is already feeling the pinch.
Hootsuite CEO Ryan Holmes has been vocal about the difficulties the Vancouver-based social media company has recruiting talent.
“The current housing crisis risks emptying British Columbia of one of its most valuable assets – young people who grew up in the city and who are invested in it,” Holmes said in a statement to Metro.
Vancouver-Point Grey MLA David Eby, one of the most outspoken politicians on the housing crisis, has already seen the exodus in his riding.
Young renters and university students who still insist on living there (in close proximity to UBC) then line-up for hours and compete over a limited supply of basement suites available.
“What we’re building here in Vancouver, and we’ve achieved it to a large degree, is a resort city,” Eby said. “I think people have a right to a reasonable lifestyle, which means they can get to work in a reasonably short amount of time and to have a decent home for themselves and their family.”
That’s why the very first recommendation contained in Generation Squeeze’s recent Code Red report on the housing market is for all levels of government to adopt a “homes first, investments second” philosophy.
The B.C. Liberal’s 15 per cent foreign ownership tax was a recognition that something needed to be done, but doesn’t address the decade-plus of irreversible real estate gains made by investors at home and abroad while wages remained stagnant.
“What we have is an outdated system where we fail to recognize that what we used to have, a system that provided homes to local residents, has grown over time to a market where foreigners and locals have become quite addicted to that investment return,” said Kershaw.
That’s great for older generations that have cashed in on the housing lottery, but leaves disenfranchised youth on the outside looking in.
Generation Squeeze proposes an incremental capital gains tax (depending on how quickly a home is bought and sold) to fend off speculation and home flipping, a more equitable tax system that takes the value of homeowners’ accumulated wealth into account and purpose-built rental projects to address the problem.
The very idea of a housing market that first and foremost serves people who need homes seems simple, but Kershaw says implementing it would create a radical shift.
“It sounds all mom and apple pie but if we get all political parties and leaders to acknowledge [homes first], it has big implications in how we would organize our housing market going forward,” he said.
Crisis tends to spur creativity and innovation, he said.
Over the coming weeks, Metro will highlight some of the Generation Squeeze recommendations and invite readers to share their thoughts directly with experts shaping housing policy on the civic, provincial and federal levels.
Big idea: Why tax incomes when housing generated wealth?
One of the recommendations proposed by Generation Squeeze to address generational inequality in the housing market is a radical rethink of Canada’s tax system.
Paul Kershaw explains that taxing housing wealth, especially off the back of the massive returns made by homeowners in the past decade, may be more fair than taxing people’s income.
“High housing prices aren’t uniformly bad. For the people who got into the housing market a long time ago, the real estate market is absolutely golden,” said Kershaw. “Which is why we propose a shift towards increasing the wealth they have in their home in our measurement of people’s ability to pay for health care and the services we need.
“Say we have two people who make $45,000. One is a renter, one owns outright a $800,000 home and has added wealth at a rate of 10 per cent over the years. They’re not the same but we still tax them largely the same.
“We need to increasingly factor in the reality that in the new world where economies don’t grow like they did in the 50s and 60s, real estate and other kinds of capital are larger these days than the increase in wages. And now we have to adapt our approach to taxation. We need ways of raising revenues and housing is at the center of that.”
That kind of shift could take financial pressure off youth, allow them to save for a home and simultaneously raise public funds for affordable housing projects, Kershaw believes.
A call to action:
What do you think? Read more at gensqueeze.ca and let us know what you think by emailing Vancouver@metronews.ca, commenting on this article on our Facebook page, facebook.com/vancouvermetro, or tweet us with the hashtag: #CodeRed. You can also text JOIN to 604-337-0945 to get involved with the Code Red campaign.