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Where Does the New BC Liberal Leader Stand on Housing?

From rent control to the speculation tax, Kevin Falcon opens up. Our Hot, Hot Housing interview.

Jen St. Denis 1 Jul 2022TheTyee.ca

Jen St. Denis is The Tyee’s Downtown Eastside reporter. Find her on Twitter @JenStDen.

The BC Liberals have a new leader, but Kevin Falcon isn’t new to B.C. politics. Voters will remember Falcon as a cabinet minister for files like transportation, health and finance in the governments of former premiers Gordon Campbell and Christy Clark. After a disappointing loss to Christy Clark for the party leadership in 2011, Falcon left politics in 2013 for a job in the real estate industry, becoming an executive vice-president at Anthem Capital Corp.

Falcon has always been a proponent of private industry and small government: as a Young Socred in the 1990s, he cited Margaret Thatcher and Ronald Reagan as political heroes. And after the BC Liberals swept to power in 2001, he was named minister of deregulation.

(A reminder to readers new to B.C. or outside the province: the BC Liberals aren’t affiliated with the federal Liberals, and are a big-tent, business-friendly party whose members fall along various points of the centre-right to right-wing spectrum.)

As we watched Falcon’s return to politics from our perch at the Hot, Hot Housing desk, we had to wonder: What’s his take on housing?

The first thing we wanted to know is whether Falcon actually lives in Vancouver-Quilchena, the Vancouver westside riding he won in a byelection this spring, where homes are commonly valued at $3 million to $5 million. No, Falcon said, he can’t afford to live in the neighbourhood he represents: he remains in his home in North Vancouver.

As you might have guessed, Falcon believes strongly that government should mostly get out of the way of real estate developers, and that building more housing — lots more — is the answer to high home and rent prices.

If that message seems familiar, it is. It’s the same thing the real estate industry was saying in 2016, and BC Liberal politicians were echoing, after a historic real estate price spike put homes far out of reach for many people in Metro Vancouver.

With the BC NDP now in power for the past five years, Falcon is taking aim at the numerous taxes the NDP put in place aimed at real estate speculation, and he’s calling out the NDP’s shortfalls when it comes to a promise to build 114,000 units of affordable housing. Much of that criticism is aimed squarely at David Eby, the BC NDP minister who was a particularly probing and harsh critic of the BC Liberals’ track record, and is now the province’s minister responsible for housing.

Falcon is also pointing out that housing prices are higher than ever before: while prices did level off and even fell somewhat in the years after the NDP took power in 2017, they went right back up again in 2020 as demand spurred by the COVID-19 pandemic took hold across the country.

Here’s our conversation with BC Liberal Leader Kevin Falcon. This interview has been edited for brevity and clarity.

The Tyee: You’ve been pretty clear that you think the BC NDP have been going in the wrong direction when it comes to housing policy. Where have they gone wrong and what would you do differently?

Kevin Falcon: Well, first of all, they diagnosed the problem improperly and because they diagnosed the problem improperly, they came forward with solutions that weren't going to do anything to address the problem.

I've said this in the past, even way back when I was in the private sector, that the blizzard of new taxes that they introduced were the wrong policy to address the underlying challenges in the housing market.

If results matter to anyone, then the results that we've seen under this two-term NDP government are that B.C. now has the highest housing prices in North America, and the third-highest on the planet. So from a policy point of view, it's a total face-plant.

They said that the problem was foreign Chinese buyers and evil developers. That essentially was what their blame on the housing market was. And so their focus was entirely on the demand side of the equation, by just adding more costs to housing, and not surprisingly they have discovered too late that just adding a whole bunch of costs onto housing doesn't make housing more affordable.

The other part is they made just outlandish commitments, like that they were going to build 114,000 affordable homes in 10 years. Anyone that knew anything about housing in the private sector just laughed, knowing there wasn't a chance they'd be able to do that.

Sure enough, David Eby [has] acknowledged that halfway through the 10-year period, they committed to build 114,000 affordable housing units. They’ve reached the grand total of 7,200, of which over 2,000 started under the BC Liberals.

I just wanted to go back to what you said about misdiagnosing the problem and blaming foreign buyers. Your own party was the one who switched direction and introduced the foreign buyers tax in July 2016. Do you think that was the wrong move?

No, I think it was the right move. But to try and suggest, as David Eby did, based on an incomplete ridiculous study of some 75* homes on the westside of Vancouver that had non-anglicized [Chinese] names and then making the leap that that means all the buyers are Chinese foreign buyers was, I think, really irresponsible and frankly helped fuel a lot of the anti-Asian racism that we’re trying to deal with today.

The fact of the matter is, we've got generations of Asian Canadians that live in British Columbia that also buy homes and they're not foreigners. They are locally based, Canadian British Columbians who live here who buy real estate. And I just think that we've got all the statistics for foreign buyers. I can tell you every developer, for every single unit of real estate that they sell, they have to do a complete search to make sure that the buyers are foreign, they have to know that because there are different rules and tax rules that apply to foreign purchasers all that has to be carefully disclosed. All of it is reported to government and it has always been less than five per cent of of the buyers out there.

*Editor’s note: The study Falcon is referring to examined 172 homes.

So in your mind, the problem with the extra taxes like the speculation and vacancy tax, the school tax on homes worth over $3 million — was it that the BC NDP kept on piling on those taxes?

Yeah, they just kept on piling on more costs on housing and the reality is any cost you continue to layer onto housing just gets passed along to buyers ultimately. The developers certainly aren't going to pay that and eat it. They just pass that along into the cost of housing.

Would you get rid of the speculation tax and the school tax?

No. I've been very clear about the fact that I wouldn't single out any one of those taxes specifically to get rid of. What I would do is look at all of the taxes that are imposed at all levels of government onto housing, through the lens of a first-time buyer.

I would strip out those costs that are getting in the way of young people in particular being able to get into the housing market. That's the one thing I have said, but that means looking at all of the taxes and costs, because to look at any of them on a singular basis is just not adequate.

A review of the speculation and vacancy tax just came out, and it found that the tax led to 20,000 condos being rented out that hadn't been in the rental market before. I was just wondering if you had seen that report, or if you had any thoughts about some beneficial things that might be coming from the taxes.

I haven't read the report but I did hear about it and it rings true to me. I think that for those people that do own second homes, it is an incentive to ensure that they’re rented out and that is a good thing. I think the challenge with it is that most of [the speculation and vacancy tax] is being paid by British Columbians.

And it also was dinging people that often have family cottages or cabins that have been in their families for generations.

I think there is still a lot of suspicion of the development industry for various reasons. In 2016 and 2017, when there was that huge price spike, it was perceived that the real estate industry really had the ear of government — not just the BC Liberals, but there were big donations being made to local government parties as well. How do you think the development industry can win back that public confidence?

I think that [with] developers, like anyone else, there are good ones and they're not so good ones. But for the most part, it is really important to understand that the only way that we are going to get out of this housing challenge is through doing everything we can to incentivize the private sector to build.

The best example of that is to look at all our rental housing stock throughout the Lower Mainland. You will notice that most of it is from a certain vintage, [built] between the late 1970s and the early 1980s when the federal government introduced a program called the MURB [Multi-Unit Residential Building] program. That was a program [that] offered tax incentives… and encouraged a huge amount of rental building construction across the country.

When they cut off that incentive, it ended most rental building construction because the economic returns were so minuscule. Most developers moved off to other areas where they could make a more reasonable return, like condos.

The thing to understand about housing is it's not something that gets fixed overnight, but you absolutely have to harness all the genius of the private sector to help you get out of the problem.

And that's what has been ignored by this [BC NDP] government. And that is one of the big reasons why we are facing such a huge shortage of housing options for British Columbians today, and why prices are so high.

I read an interview with you where you said that you wanted to create a MURB-like program in B.C. Can you give me any sense of how that would work?

What I would like to do is work with the federal government and say: Rather than have the huge bureaucracies [like Canada Mortgage and Housing Corp. or BC Housing] with these big budgets that are very slow at getting dollars out to the development community… why don't we see if we can't work together to provide a much simpler [way] to just have the private sector do everything we want? If you get the carrots and sticks approach, if you have the right incentives and disincentives, you can get the private sector doing almost anything you want.

This idea that it's all got to be done through BC Housing, and government is somehow going to build 114,000 units of housing, it’s just ridiculous. It's never going to happen and we're never going to get anywhere close to solving the challenges we face.

I have a ton of ideas on what we can do, especially for first-time buyers. I'm not prepared to disclose all of those now, but I can tell you as we get closer to an election I will talk about the policies that we will put forward that will really create new opportunities for first-time buyers.

Governments have been focusing on first-time homeowners for decades, with all sorts of incentives and tax credits. A lot of housing experts say that approach is actually a problem: it doesn't really help renters and it pushes prices up higher by increasing demand for homeownership. What would you say to those criticisms?

I’m always frankly skeptical about a lot of the academics who talk about housing because they've never been in the housing market, they’ve never risked capital, they've never built anything. That's not to say they don't have interesting thoughts once in a while. Having spent over 10 years in the capital side of the real estate business, I can tell you it's a lot more complex and yet simple at the same time, in terms of solutions.

In terms of rental, I agree. I don't think nearly enough has been done to look after the interests of renters. We've got a government that has promised on multiple occasions a renters’ rebate of $400 [a year]. As inadequate and poorly thought-out as that is, at least it was something, but they haven’t done it yet.

The NDP brought in some more rent control measures: they lowered the annual allowable rent increase from inflation to two per cent, to just the rate of inflation. Would you keep that in place?

I probably would for now, but the concern I have is that: show me the studies that demonstrate that rent controls have ever actually achieved their objectives. They are startingly few.

But in the short-term, I think we do have to protect the interests of tenants. In a very tight market, whether there’s very limited supply, the last thing you want to do is be taking off those rent controls, because you are going to then victimize tenants further with significant increases. So we need to keep those in place while we work on flooding the market with a lot more supply.

What is your definition of affordable housing?

My definition from a buying point of view is, I want to make sure that if you're a firefighter or a teacher that you've got a credible option to get into housing in the Lower Mainland. Now, it may not be in Vancouver, we have to be realistic; it may be in Surrey or Langley or Chilliwack, but I want to make sure that those folks that are earning good incomes still have the opportunity to get into the housing market.

From a rental point of view… the only way we're going to deal with that is to aggressively get out there and be doing everything we can, working with the federal government, local government, the provincial government and providing the leadership that's needed to actually get a whole ton of money for affordable housing supply into the marketplace. Especially affordable rentals, because that's often where people start out. I don't pretend to know exactly what that affordable rent should be.

🔥🔥🏠

We hope you continue to follow along with our column!

Remember, if you’ve got housing stories of your own — whether it’s market hijinks, tenancy horrors or survival tips — you can email us at housing@thetyee.ca. We’d love to hear from you.

One final thing. You may have noticed that you can read all of our journalism without a paywall. The Tyee is grateful to our monthly Builders, who keep the publication accessible to everyone. If you feel like chipping in, you can learn more at support.thetyee.ca.  [Tyee]

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