It's no secret that Vancouver has the country's most out-of-reach housing prices. And lately, its mayor and British Columbia's premier have been pointing fingers at one another over who is responsible for fixing it.
In fact, a Tyee Solutions Society investigation turned up plenty of things the two could do, some of them right away, to begin to rein in an affordability crisis that threatens the city's future.
Housing advocates routinely call for all three levels of government -- municipal, provincial and federal -- to come to the table to find answers to a housing affordability crisis that wears many faces across Canada. And as a constitutional dependent of the province, Vancouver shares a challenge with most other municipalities in that it can't create new kinds of property tax without that government's permission.
That divided jurisdiction provided the backdrop to a recent apparent standoff between Vancouver's Mayor Gregor Robertson and B.C. Premier Christy Clark.
This spring, Robertson wrote the premier to ask the province to raise his city's tax rate -- currently the lowest of any major Canadian city -- and to create a brand new tax on speculative real estate "flippers."
Clark, who represents the interior B.C. city of Kelowna, has previously expressed concern over Vancouver's housing affordability problem. Nonetheless, she turned Robertson's request down.
Higher property taxes, she argued, could hurt current homeowners. "Driving down the cost of housing by just 10 per cent would mean a family with a home currently worth $800,000 could lose $80,000 in equity in their home," the premier wrote back to the mayor. "That could put some homeowners with large mortgages into negative equity."
In the eyes of several experts who follow the options available to both office-holders closely, however, the exchange was a disappointing display of political "ping pong" between governments that could both do more.
The province could and should have released ownership data it holds on Vancouver properties that Robertson also requested, said Penny Gurstein, director of the University of British Columbia's School of Community and Regional Planning. Although extracting supposedly public information from either the province or city has been "a nightmare" in her experience, Gurstein said, she believes Vancouver is on the right track.
Worth looking down under
Gurstein points to Australia, which until recently lacked data to confirm a widely held suspicion that foreign investment was driving some of its cities' expensive housing markets. Earlier this year, Australia began forcing foreign real estate investors to register their purchases with government, though fines for not complying don't come into effect until December.
Australia already limits foreign investors to purchasing new buildings only, although some critics say approvals to do so are too easy to get.
Still, Gurstein said purchasing a new unit has positive impacts on the local economy, because "the construction industry is a huge part of the economy."
If that rule applied in British Columbia, she added, where construction makes up 7.9 per cent of provincial gross domestic product, "it would mean a greater emphasis on building new units, rather than flipping existing units."
Foreigners hoping to purchase real estate or businesses in Australia must also buy a permit just for the right to place an offer: $5,000 for properties priced up to $1 million, and $10,000 for every subsequent million in the asking price. Buyers who don't buy the permit face fines of 25 per cent of their investment in their Australian property, and could lose it entirely.
If they're trying to purchase real estate in the state of Victoria, it's even more expensive. That state recently introduced a three per cent tax on foreign real estate purchases.
Close the deferral loophole
But Gurstein said the province needn't look so far afield for improvements in its tax rules. She calls the provincial property tax deferral overdue for reforms that could put more family-size homes on the market, and more money in government coffers to fund social housing.
The deferral allows many property owners to defer property taxes more or less indefinitely until their death, when the bill is paid by their estate. The deferral is meant to help seniors remain in their homes (at the expense of their heirs), but it can be claimed by anyone over 55 who is a widow or widower, who is supporting children, or who has a disability. The province makes up the missing revenue to municipalities until a homeowner's estate can pay them back.
But beyond those qualifying conditions the deferral is open to anyone. There's no requirement to prove you can't afford your property taxes.
"So it can be anybody," notes Gurstein. "Your income can be really high and your taxes would be deferred. And the province is paying the municipality for those taxes that are deferred." That leaves less money in the province's hands for, among other things, investment in social housing.
Meanwhile, Gurstein said, the deferral encourages many empty-nesters over 55 to stay in homes larger than they need. "They're retired, they're not using [the extra space] in any purposeful way. And I do think if they couldn't defer, there might be some serious consideration about getting out of their units and relocating so that other people could live there."
Make transfer tax progressive
Another proposal competing for attention with a tax on property "flipping" is to raise transfer taxes due when luxury properties are sold. University of British Columbia geographer David Ley argues that such property transfer taxes should be raised for high-end real estate and perhaps even eliminated at the bottom end of the market.
The effect of adding a "surtax at the top end" of the housing sector, he said, would be felt further down the price ladder. "Cooling measures at the top end are important. It would help the market cool down if it were much more progressive -- so taxes at the top end were more punitive so speculation became less attractive."
That's exactly how several other global cities have attempted to control out-of-reach housing costs, with some success, Ley said. Hong Kong, London and Singapore have all introduced new taxes which are "significant at the top end," and have "cooled off investors coming in at that end of the market."
"It's useful to look at what other cities have done -- not that we would do exactly the same thing here, but it provides guidance," he said. "Cooling measures have been common in other cities because they recognize the pressure on the market comes from the top end."
But such a tax would need to be high enough to have a tangible effect -- 10 to 15 per cent of the selling price, Ley suggests.
Vancouver-based economic policy blogger Saeid Fard, a former analyst for Goldman Sachs and McKinsey & Co., recently floated another idea. In addition to echoing Ley's proposal of boosting property transfer taxes, Fard argued for boosting the annual property tax rate charged on properties worth $2 million and over.
Such a luxury property tax would favour middle- and lower-class homeowners, Fard argued, and encourage an increase in the supply of under $2-million properties in a market where they're increasingly considered mid-price.
Such taxes, he argued, "would disincentive[ize] luxury investment ownership while encouraging residency," and "generate additional revenues that could reduce or eliminate the need for taxes elsewhere to fund things like transit.
"No one loves taxes," Fard admitted on his blog, "however, property taxes are incredibly efficient and progressive."
In the works already
Other ideas have been sitting on the desks of Vancouver city councillors for more than two years. The Mayor's Task Force on Housing Affordability recommended in 2012 that the city create a new municipal authority to expand and operate social housing, that it turn over more city land for residential development, including the "creative use" of street space, and that staff fast track approvals for higher-density developments.
The city followed through a year ago with a Vancouver Affordable Housing Agency. It promises 2,500 newly built housing units, affordable to "all income groups," over the next six years. Last month, Vancouver announced that the nascent agency had selected seven properties for new housing and instructed staff to research models to encourage "entry-level homeownership" for young families working and living in the city.
Vancouver claims to have "leveraged" more than 10,000 new housing units for middle- and low-income households since the task force reported. But for critics, the three-year delay in seeing key recommendations realized has allowed a crisis that was acute then to boil over now.
Ley called the task force report "thoughtful," but faulted it for "not going outside the box in terms of significant tax changes."
With the fire under Vancouver's super-heated housing market showing no signs of cooling down, he suggested the city may be ready to consider the unconventional.
"There's a lot of ideas out there," Ley said. "What we need is some sort of task force not dominated by the real estate industry that looks at the range of options and comes up with some serious proposals."
What's clearly not true about the country's most expensive place to live, however, is that there's nothing to be done. Turns out there's rather a lot.
Read more: Housing, Municipal Politics
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