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Vancouver's House Price Crunch: Campaign Pledges and Pitfalls

On the trail as candidates tackle this election's hottest issue.

By Doug Ward 28 Oct 2014 | TheTyee.ca

Doug Ward is a veteran political journalist based in Vancouver. Find his previous Tyee stories here.

Early in the election campaign Mayor Gregor Robertson went to a park off Commercial Drive (turf previously owned by Vision Vancouver, perhaps not anymore) to unveil the heart of his affordable housing package -- 1,000 new rental units annually over the next four years.

Renting is typically cheaper than owning and centre-left Vision Vancouver has done more to create rental housing than any city administration in decades. But given that Vancouver is arguably North America's most unaffordable city, there was some skepticism among the media assembled for the good-news briefing.

One reporter questioned whether the units would be affordable for middle-income earners? And when Robertson announced he would demand that 35 per cent of units in large new developments have enough rooms for families, another journalist asked whether these units would require government subsidies.

The suspicious tone of the media left Vision councillor Geoff Meggs, who stood beside Robertson at the podium, piqued.

"I think people misunderstand how far we can actually go," Meggs told The Tyee afterwards. "It's like today. We are making an unprecedented commitment to build rental, which our opponents (two Non-Partisan Association councillors) have voted against. And the question is: Will we subsidize rents?

"You know, all of those things are beyond the city's powers or capacity."

Premier has far more power over housing: Yan

The Vision Vancouver majority on council consists mostly of former or current New Democrats, social democrats like Meggs who have spent decades arguing for greater government funding for social and rental market housing.

Now in power, these activists-turned-politicians find themselves presiding over a city marked by housing unaffordability and social inequality -- with few levers to do anything about it. The federal and provincial governments have far more tax dollars and jurisdictional heft. But Ottawa and Victoria have mostly withdrawn from funding housing programs aimed at middle-income earners.

"What a lot of folks don't realize are the limitations of that office," says Andy Yan, about Vancouver city council.

"In the Canadian system the most limited offices are municipal offices. If you really want change, it's got to include the provincial and federal levels of government," said Yan, a planner and social trends analyst frequently relied on by the media to explain what is happening to this city.

"Who is the most powerful city-shaper in Vancouver? Whoever the premier of British Columbia is. That's where the power and money is."

City hall's ability to influence affordability is especially constrained, added Yan, given Vancouver's new role as global "hedge city," a safe and secure place where house prices are partly high because some of the world's wealthiest people, many from mainland China, are parking some of their riches here.

Then there are all the other factors outside of the city's control -- the steady arrival of domestic and foreign newcomers since Expo 86, years of low interest rates and a marketplace where flipping and speculation are part of the culture.

"It's the culpability many of us have," said Yan. "If you were lucky enough to buy into real estate in the last few decades, you've probably made more money on real estate than in a lifetime of work.

"For some, housing is a necessity. For others, it's a revenue stream."

For civic leaders this means, said Yan, "you're damned if you do and damned if you don't. Think about his way: If Vision was able to decrease property values by 30 per cent, how fast would they be forced out?

"So you see the intractable position we put our political leaders in the production of affordable housing. It's really a no-win situation for a lot of governments until you have public consent on sacrificing current financial gains for the sake of future generations."

Tweaking what developers will build

Vision councillor Raymond Louie has encountered more than a few angry constituents who believe the city isn't doing enough to slow the upwards trajectory of housing prices. "I tell them that it's not within our ability to stop people from selling houses at a high price. Or to stop a person paying that high price."

Louie acknowledges that anger over housing unaffordability has hurt his party. But he said the Vision council has put more money into affordable housing than any council in memory "despite the fact that we only get eight cents of every tax dollar."

Vision's approach to affordability remains largely based on providing incentives, or relaxing rules, to encourage developers to increase the supply of market and rental housing aimed at middle-income and lower-income earners. The new units are at the high end -- maximums of $1,443 per month for a studio, $1,517 for a one-bedroom. But Vision's hope is that the new supply will slow the upward trajectory of rents for basement suites and older apartments.

Critics on the right and left argue that Vision isn't doing enough. But the solutions from the Non-Partisan Association and Coalition of Progressive Electors are so unspecific or improbable that they only highlight the lack of real-world options available to city government.

NPA mayoral candidate Kirk LaPointe, for instance, wants to punt the issue of housing affordability to some future "City Plan" discussion. "It would be our great conversation on the Vancouver we want," said the ex-newspaperman, referencing a similar process called City Plan during the 1990s in Vancouver.

When asked how he would create affordable housing without the traditional tools of rent subsidies or incentives such as bonus density for developers, LaPointe said: "I'd like to see what City Plan has to say about that."

Gordon Price, who served as a NPA councillor during City Plan, is skeptical about whether a return of such a planning process is feasible or warranted. The original City Plan, he said, set directions for how to accommodate growth "very gently" and did not include zoning changes, which are inevitably contentious. But even with such modest goals, there was still acrimony with neighbourhoods resistant to even minor changes. "Even when it came to a proposal for a single building or two, the blowback was intense -- and it always is.

"So I told one of the NPA candidates: C'mon guys, do you think you are going to be having a conversation for a city wide plan right across the city with all neighbourhoods to deal with growth? Really?

"And why?"

LaPointe rejects Vision's 4000-rental unit goal

Price, who now heads the City Program at Simon Fraser University, said the city already has the local community plan process to deal with growth.

"And it's tough to do even at that scale," he noted. "Vision was criticized, and I think justly, for trying to do too much with four community plans going simultaneously. So the NPA's idea that this could happen on a citywide scale is breathtaking."

LaPointe has also rejected Robertson's plan to build 4,000 new rental units, saying that Vision Vancouver's Rental 100 program (which has resulted in 3,000 new apartments over the past three years) doesn't work. "What it's done is permitted a great deal of speculation."

LaPointe's claim that apartments created under the program are being flipped appears questionable given that the program's units are secured as rental for 60 years. The NPA candidate has provided no data to back up his charge.

LaPointe has called for tax credits to stimulate rental housing. But he acknowledged that such credits would depend on the federal and provincial governments because "we don't have that capacity." Ottawa has been unwilling since the '70s to provide tax incentives to spur apartment construction.

Vancouver's slim social housing coffers

COPE mayoral candidate Meena Wong has called for a public housing authority along the lines of similar agencies in Hong Kong Vienna, Stockholm and Singapore.

But the ability of Vancouver to raise tax revenue to fund a serious public housing program is minuscule compared to these cities, which have far greater legislative and fiscal capacity -- and have been building public housing for several decades.

"The problem isn't just wanting more public housing. It's how to pay for it," said planner Yan.

"Hong Kong, Singapore, Vienna, even some of the American cities, are so different from Vancouver in terms of the taxation powers and revenues. Vancouver can't raise the kind of taxes these cities can, nor can it borrow money to the levels you would need.

"It's great to do these global surveys of solutions. But you have to be able to adapt the solution locally, and that is where things fall apart as cities in Canada face constraints other cities around the world do not have."

Yan said city governments in Europe have close linkages to other levels of government that simply don't exist in Canada, where municipalities can only do what provinces allow them to do.

"In Vancouver it's the city government that gets all the anger and pressure. But people don't realize that the housing mess is connected to federal and provincial actions and inactions in housing and finance."

Yan said a public housing authority in Vancouver, if it was permitted by Victoria, might generate a few hundred units. "But we are talking about a city in need of tens, if not hundreds, of thousands of units. I don't mean to diminish those who are looking for solutions. But the level of need is so much greater than what can be achieved at the municipal level."

SFU's Price similarly said that Wong's praise of public housing models elsewhere fails to recognize the differences between Vancouver and the other cities.

"In Europe, and in Vienna, in particular, there is a tradition of renting with secure tenure. There is a culture of renters. That is not our culture. In Hong Kong the state owns land, that's how they finance transportation, they sell the leases for the land."

What about 'empty homes'?

Wong also wants to slap an "empty home" tax or fee on foreign investors who buy Vancouver condos or houses but do not live here full-time. This tax revenue, suggests Wong, could be used to fund affordable and social housing.

But Yan, who is currently conducting a study of empty homes, said it is not easy determining what is an "empty home." Yan said such a tax may not generate as much money as its supporters believe and would probably require provincial approval.

"It's worth talking about because it's what hedge cities are facing around the world. But it's not a silver bullet.  If anything, it could be a red herring on other much more robust policy tools of creating affordable housing given the complexities of how residential real estate markets have become. 

"I'm not arguing that Vancouver become complacent about "empty homes", but rather make decisions and policies informed by evidence."

SFU's Price broke into laughter over Wong's proposal to compel property owners to "report usage information" to the city.

"My gosh, imagine if that was implemented. Fill out this form that tells the government what you've been doing for the last half year. That would blow back so fast. Again, I don't think anyone seriously believes it is implementable. But people like a politician who is offering some policy to deal with an unfair situation."

Like Yan, Price believes that it would be very difficult to determine how long a condo or home needs to be vacant before it is officially deemed "empty."

"And it would be pointless," added Price. "No one has demonstrated to me that the numbers are seriously high enough to warrant that degree of intrusion and cost."

Both Vision and the NPA have agreed the best approach is to collect data on the "empty home" phenomenon -- and then examine which regulatory tools could be effective without sparking a thousand lawsuits.

Does Whistler experiment apply?

Vision considered some kind of levy on speculation when it took office but decided it would pursue other avenues, such as rental housing construction, to reduce unaffordability. "In 2008 there were zero rental housing units being built. I can guarantee you that put more pressure on the marketplace than any empty home on the West Side," said Vision councillor Andrea Reimer.

Despite the legal complexity, the next council is bound to face public pressure for some measure, however symbolic, to address the impact of foreign investment on Vancouver's housing crisis.

The Green Party's key solution on affordability is inspired by a Whistler bylaw which requires developers in the resort municipality to either build resident housing or contribute to a housing fund. But Whistler is a single-industry town in need of housing for a relatively small group of employees. It's unclear how easily such a model could work in a huge city where developers would be far less willing to accept such a regulation.

The Whistler model is an interesting one -- and other jurisdictions are looking for similar ways to create affordable housing. Seattle, for example, is considering a tax on all commercial and apartment projects in the city's denser neighbourhoods to pay for more affordable housing.

It is uncertain how easily the Whistler program linked to workforce housing in a small single-industry town could be effective in large city.  And it's unclear how the Greens' proposal is different from the existing rules in Vancouver requiring that 20 per cent of all units in new neighbourhoods created as a result of rezoning be "affordable." Vancouver also uses community amenity contributions on large projects, plus density bonuses, to spur middle-to-lower income housing.

In the end, many voters will recognize that Vision has limited ability to influence an unhinged real estate market in which one generation owns million-dollar homes while its millennial children scramble to rent $1,000-a-month basement suites.

But others -- perhaps former Vision supporters -- won't be motivated by what city hall can actually achieve in the here-and-now.

These voters will make a political statement about what, they feel, the city should be.  [Tyee]

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