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Let's Create Housing Policies Young People Can Afford

A developer offers proven paths to cheaper rentals.

Howard Rotberg 12 Jun

Howard Rotberg is author of Exploring Vancouverism: The Political Culture of Canada’s Lotus Land. He is a former lawyer who develops affordable rental housing for low income working people across Southern Ontario, mainly in converted heritage buildings.

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Young renters: system stacked against them.

In less than a year, we in British Columbia have participated in federal, municipal and provincial elections. Why haven't housing policy and housing affordability been major themes in any of those contests?

Housing prices in Greater Vancouver are down a bit, but there still remains a crisis in affordability for both owned and rental housing.  Young people, those aged 35 and under, are the ones most disadvantaged in our present housing system. Yet few understand how the system is stacked against them, and why politicians from all levels of government are mostly silent about an issue that is so important for their quality of life.  

Allow me then to explain the perverted priorities of our housing system at every level of government. And then to offer a few proven policies that could make renting in the Vancouver region far more affordable -- if the political will is there to do it.  

City hall: Benefiting owners over renters

Let's start with the fact that various levels of government give far more financial benefits to higher income owners of housing, rather than to lower income renters.  There is no good reason for this and such housing analysts as Professor David Halchinski (formerly of UBC and now of University of Toronto) have argued the case for tenure neutrality in government benefits -- between owners and renters.

Accordingly, to the extent that young people are over-represented in the rental market, and middle aged and older people are over-represented in the owned housing sector, then our young people are losing out, and should be told precisely how such programs operate to their detriment and to the benefit of older, wealthier landowners.

In my recent book, Exploring Vancouverism: The Political Culture of Canada's Lotus Land (CanadianValuesPress), I outlined a number of the ways that our municipality acts to keep up property values for the benefit of the baby boomers owning houses and keep low the taxes on those houses.  For the little known fact is that for a $1 million house in Vancouver the property taxes are 40 per cent less than the same value house in Toronto.

Local politicians have dutifully served their masters in Kitsilano, Dunbar, and Shaughnessy by obligating new developments to assume a whole array of costs -- for planning studies, infrastructure, amenities such as libraries, parks, and day care centres, and now "green" features -- where the costs of these are added to the purchase price.  The existing residents are happy that this imposition of costs on the buyers of one bedroom condos not only helps keep their property taxes low, but increases the value of their homes to keep pace with the elevated price per square foot of the new condo units.

Province: Windfalls for wealthy seniors

The next time provincial politicians ask for the votes of young people, they should be asked why they give financial benefits to wealthy older people without a means test, rather than help younger people.  I refer, firstly, to the provincial Seniors' Property Tax Deferral Program, where anyone over 55, with no income limitation, can defer their property taxes until death or sale of the house, with a nominal interest charge, and the province compensates the municipality in the interim.  Surely, we can see the advisability of not forcing indigent seniors out of their homes, but, without a means test, we have benefits flowing to seniors with million dollar incomes and $5 million oceanfront homes. 

In addition, the province has a Homeowners' Tax Assistance Program, where homeowners, of any income level, who have homes worth up to $1,050,000, are getting provincial benefits to offset cost of property taxes.  Why aren't these programs being discussed?

The provincial government collects a lot of money from property transfer taxes each time a home is purchased; but there is a provincial First Time Home Buyers' Program that exempts the tax from homes costing under $425,000.  Is this done to benefit young people getting into an inflated market, or rather to benefit large developers to assist them in their sales?

Feds: Discriminating against renters

And what about the Federal Government?   Again, there is a history of benefitting homeowners more than renters.  Firstly, there is the whole CMHC mortgage insurance program, which makes it possible for homebuyers to get a bank mortgage with less than 25 per cent down.  Until recently, the Government was so keen to induce young people into an inflated housing market, that CMHC was giving 40 year amortizations to people putting as little as 5 per cent down on their properties. It was not only in the United States where people who should have been renting were induced into buying at the top of the real estate bubble, but here in Canada as well.

A lesson we should be learning from the American sub-prime fiasco is that there are some people who should be renting and should not be induced to get in over their heads in pricey owned housing, where interest rate increases combined with volatility in prices can result in financial tragedy.

Then there are a variety of federal programs, some lapsed, such as the Assisted Homeownership Program or the Home Ownership Stimulation Plan, and some current such as the Home Buyers' Plan, administered by the Canada Revenue Agency.  This allows each spouse to withdraw, tax free, up to $20,000 out of their Registered Retirement Savings Plans, to be used towards the purchase of a home and repaid to the RRSP within 15 years.   Of course, the last mentioned amounts to a tax subsidy to homebuyers by the general tax base, which of course includes renters.

In addition, the last federal budget gave homeowners a tax credit up to $1350 towards their cost of home renovations.

Moreover, the largest single federal government benefit bestowed on home owners as opposed to renters is the exemption from income tax of the billions of dollars of capital gains tax that would be collected had not the government made the decision to exempt principal residences from capital gains tax.   In the United States the tax system helps out with affordable housing -- there is a system of affordable housing tax credits issues to developers of affordable housing, which can be sold to high income individuals and thus generate funds to the developers for early stage soft costs and construction costs.

Supply and demand out of whack

So what does this all have to do with affordability?  The answer is that government funds are not unlimited, and benefits given to home owners mean there is insufficient money to subsidize the rental market.  

Of course in B.C. there is a Rental Assistance Program providing assistance up to $9,200 a year for families making less than $35,000 per year, and a program called SAFER -- Shelter Aid For Elderly Renters.  These programs help towards the cost of rent, but do nothing for the acknowledged major problem in the rental market -- the lack of construction of new purpose-built rental units since the income tax changes in the early '70s.   With the benefit of inducements on the cost side, developers can be induced to build what young people including young families need -- decent yet inexpensive rental housing.

To have affordable rental units, we need to have a healthy balance between supply and demand.  The cost of owned housing is prohibitive. Recent studies peg the family income needed for an average house in Vancouver at $120,000 while the average mean income is only $60,000. So, there is a problem for Vancouverites with an income under $100,000, and not just a problem building social housing for the disabled and the homeless.

How to fix the problem

I live in Vancouver but spend seven to ten days in Ontario each month where my private sector company has developed six affordable rental properties in the last six years, utilizing a variety of Ontario programs.  Generally, we obtain a forgivable loan per unit constructed, forgivable over 15 years, provided we adhere to the terms of an operating agreement, specifying the maximum rents per unit, and the maximum income of the tenants.

In my recent book, Exploring Vancouverism, I canvas the variety of policies that can be implemented to create both affordable rental housing and affordable owned workforce housing (with resale price restrictions).

There are numerous ways for a municipality to set up and finance Affordable Housing Funds.  There should be a demolition tax of $20,000 per unit demolished which can go into the Fund.  Like Victoria, the city should pay all of its GST refund into the Fund.  The City can institute preferential development charges and property tax rates on rental properties.  There are numerous models for programs called Brownfield Remediation Tax Assistance Programs, wherein the costs of environmental remediation of a contaminated lot can be offset against the future property taxes.

I have written extensively about the Community Housing Trust model, where buyers buy townhomes that have been subsidized by government at a lower than market price with a resale price restriction registered on the deed that they have to sell at the same percentage reduction from market value as they did when they purchased.

There is no shortage of model programs working well elsewhere.   But there is a shortage of political will to help young people with their real housing needs, which may for the short term, or even the long term, include renting, or buying in a Community Housing Trust.  

The fact that in our three recent election campaigns there has been very little talk about the issues raised here is a slap in the face to younger voters.  Perhaps, once they understand how the system has been operating to their detriment, they will stand up and make their voices heard, and demand that politicians address these issues.

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