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Vancouver foreign investment panel tackles 'safety deposit' condos for wealthy

Downtown Vancouver may have the equivalent of nearly two-dozen 30-storey condominium towers sitting empty, serving as merely oversized "safety deposit boxes" for the wealthy, according to researchers.

But blaming the city's severe housing prices on absentee foreign investors could just be "this decade's version of the Yellow Peril," a UBC business professor warned the audience at a panel titled Foreign Investment in Vancouver's Real Estate Market this week, raising questions about whether such fears are simply anti-Asian racism in disguise.

Foreign investment -- a heated debate topic in the city -- is a deeply uncomfortable conversation for many, but panelists agreed that more research is needed to address the city's affordability anxieties.

"I find it particularly striking that the emergence of concern about foreign investment started in about 2010, when all of a sudden the good people on the west side of Vancouver discovered that they could sell their houses for $3 million to people who spoke Mandarin, pocketed the money, and then were aghast that their kids couldn't move in," UBC Sauder School of Business's Tsur Somerville told a packed audience downtown on Wednesday. "There is a little bit of this that feels really manufactured very recently.

"This seems to be this decade's version of the 'Yellow Peril.' The reality is that we keep using 'foreign investment' as our new buzzword for Chinese investment. Obviously, there's a long history on the West Coast of North America of worrying about some problem -- whether it's low wages, venereal disease, the plague, whatever you want -- and blaming it on the Chinese."

One of the advocates best known for raising the controversial question of foreign investment and housing affordability in the media is Sandy Garossino, an independent candidate for city council in the 2011 civic election.

In response to Somerville's cautions about anti-Asian racism, Garossino told the panel audience that such accusations are not "very helpful," adding that her concern is actually about the emergence of "ghost cities" of empty condominium towers acting as financial "parking spaces" for the world's wealthiest -- and not about the nationalities of those investors.

"It's not like people made this up out of thin air," she insisted. "I don't think this is something that people in Dunbar thought up as a way to blame or point fingers at anybody.

"Until it started to become a problem, all the realtors were singing the praises of all this money flowing out of Asia. Suddenly, everybody's to blame and everybody's a racist because they believed what the media, the head of the Bank of Canada, and the realtors told them. That's not particularly fair... We need to track this, and we need to look at the effect of capital flow, regardless of where it comes from, on housing."

The three panelists agreed, however, that there is not enough data to fully answer questions of how many of Vancouver's empty homes are foreign-owned. Nor is there even an accepted method to measure how many units are in fact not lived-in at all here.

Somerville argued that the most important questions are not at all about where their owners are from -- in fact, many investor-owners are from other parts of Canada, or even the Lower Mainland.

"The whole notion of foreign investment is not what we should be talking about," he said. "Our issue here is really with unoccupied units. Our concern, if we're thinking about housing affordability, is really with units that have been built and purchased, but they're not occupied. 

"They're occupying land, which is our scarce resource, but they're not addressing occupancy issues for people who want to live here. If what it is that we're concerned about is empty units -- and I think that is a really reasonable concern to have, even if it is all luxury units -- it's still going to have upward pressure on housing markets, and affordability is clearly an issue."

For urban planner and research Andy Yan at Bing Thom Architects (BTA) Works, the conversation really boils down to what kind of city people want to build, and what for. He is among the few researchers attempting to figure out how many units are sitting empty in Vancouver, and if foreign investment is actually a significant concern.

On the panel, Yan explained various methods he has used in his quest to find answers -- from counting how many owners have their property tax assessment forms sent to an agency or manager instead of their home addresses, to how many homes use less energy than a single refrigerator, 75 kW hours a month (the answer: 5.5 per cent of the city's units). 

But given that the average household consumers 400 kW hours every month, he added that roughly 17 per cent of Vancouver's homes only use two fridges' worth of energy. Are they empty homes? Part-time residents living elsewhere? There are no clear answers to the mystery, he said.

He pointed to 2011 census data, which reveals that the number of units not owner-occupied in the city varies by geography. But in luxuriant Coal Harbour, for example, up to 23 per cent of condominiums may be sitting empty. In downtown Vancouver as a whole, he estimated that figure at 15 per cent unoccupied.

But one certainty is that investment from outside the city is a reality, and Yan suggests that policies around housing investment might need to be reformed or examined.

"We live in a remarkable urban global age," Yan explained. "While I'm not sure about foreign investment in Vancouver real estate, I really do think that when you look at other cities around the world, money flows. 

"Money in the world is coming to Vancouver just as much as it's coming to San Francisco or Singapore or Saudi Arabia. How it's parking -- where it's landing and where it ultimately parks in a city -- fundamentally provides challenges if we (are) to aspire to a sustainable, liveable and just city. And where it's parking in a city, perhaps, poses a challenge towards rethinking some of those parking rules."

Garossino pointed to what she sees as a disturbing trend in some world cities: "ghost cities" of investor-oriented buildings never even designed to be occupied -- some with bedrooms too small to even fit a bed. Additionally, apartment pre-sales have become a new terrain for speculative investment and global trade.

In Hong Kong, for instance, there are more more condominiums purchased than the actual supply of newly constructed units.

The paradox has resulted, Garossino argued, in there being a quarter-million empty condos in Hong Kong -- the equivalent of one thousands 30-storey towers.

"When we hear about 'ghost cities' in China, actually we're building 'ghost cities' in our cities," she told the panel audience. "We in Vancouver are participating in a global market which is affecting New York, it's affecting London, it's affecting Hong Kong, it's affecting many global cities. We're not building micro-suites; we've got a manufacturing business, and we're building really large safety deposit boxes... This is no way to build a community."

David P. Ball reports on affordable housing for The Tyee Solutions Society.

This series was produced by Tyee Solutions Society in collaboration with Tides Canada Initiatives Society. This series was made possible through the support of Real Estate Foundation, Vancity, and BC Non-Profit Housing Association. Support for this project does not necessarily imply Vancity's endorsement of the findings or contents of this report. TSS funders and Tides Canada Initiatives neither influence nor endorse the particular content of TSS' reporting. Other publications wishing to publish this story or other Tyee Solutions Society-produced articles, please see this website for contacts and information.

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