This article by reporter Ian Young appeared in the South China Morning Post in Hong Kong, dated December 31, 2015. We hope that Canadians take note. (Here is a link to an interview with Mike Smyth Jan 1 on CKNW radio in Vancouver.) Below are only excerpts. Bolding is by us. Please visit SCMP for the full article and web links.
Equity before affordability: Justin Trudeau’s vacuous response to Vancouver’s housing crisis (Ian Young, SCMP, 31-Dec-2015)
There is something deeply worrying about the recent response by Canada’s new prime minister to Vancouver’s housing affordability crisis.
Vancouverites are used to the apparent lack of interest from their leaders in challenging the forces that have driven prices into the stratosphere, regardless of their political inclinations, so Justin Trudeau’s following suit shouldn’t come as any great surprise. But his justification for this failure represents a new kind of logical contortion.
Because Trudeau suggests he’d love to tackle unaffordability — just as soon as he’s sure that doing so won’t bring down prices. It is an utterly vacuous position.
Prior to the election, his Liberal Party promised to “review escalating home prices in high-priced markets, like Toronto and Vancouver, and consider all policy tools that could keep home ownership within reach”. Then in an interview that aired on Global TV* on Christmas Day, Trudeau cited a lack of “concrete data” about foreign investment as a reason not to immediately impose curbs on these flows.
“It could well be that Vancouver has already attained the critical mass of foreign-earning millionaires required to sustain the runaway reactor that is the city’s housing market”
So far, so normal: the relative lack of data about the processes driving Vancouver’s real estate prices is a near-universal concern, since Canada (unusually) makes no attempt to track foreign money entering the market.
But this is where things get weird.
“You know you have to be cautious about decisions like that that are based on a single factor because at the same time that would potentially devalue the equity that a lot of people have in their homes right now,” Trudeau said, adding: “We have to be very, very cautious about restricting foreign investment in our country at a time where we know we need foreign investment in businesses, in resource development.”
WATCH: Justin Trudeau on housing affordability – Global TV
Eh? Citing a lack of data as a reason not to switch off the foreign money tap, because it might turn out that it doesn’t play a big role in Vancouver’s market, is a common refrain. But citing that same lack of data as a reason not to switch off the tap, because you are worried that foreign money might play TOO BIG a role, and that it might “potentially devalue equity”? It’s beginning to sound like the primary issue here isn’t a lack of data, it’s the lack of willingness to turn off the tap – regardless of what the data shows.
Sadly, you can’t have it both ways. You can’t dedicate yourself to protecting the equity of current owners as well as challenging home-price affordability in a meaningful way.
The lesser of two evils? Then just say so
The levers that control the market in Vancouver – where incomes are among the lowest in Canada, but prices are by far the highest – are likely in the hands of Trudeau, and not the provincial and city administrations (these have, however, shown no interest in pressing the case with federal authorities).
Because despite protestations to the contrary – Trudeau himself described the available information as “anecdotal stories” – there is quite a lot of rigorous data to support the contention that Vancouver’s market is being fuelled by foreign funds brought to the city via immigration. It doesn’t matter exactly where these foreign funds come from. What matters is that they are not being earned in Vancouver….
… “If politicians feel that current owners are more entitled to hang onto huge capital gains than their fellow Vancouverites are entitled to an affordable city, then they should just say so”
Anyone who doubts the scale of these money flows should note that Vancouver has historically been the world’s most popular destination for wealth-determined millionaire migrants. From 2002-2014, more than 60,000 such migrants (including family members) likely arrived in BC.
… in other words, their home-buying behaviour is fuelled by either undeclared foreign-earned income, or pre-existing foreign-earned wealth.
… It could well be that Vancouver has already attained the critical mass of foreign-earning millionaires required to sustain the runaway reactor that is the city’s housing market. But instead of at least attempting to cool things down, all levels of government seem content to see more plutonium plunged into the core.
If Vancouverites’ political leaders have genuinely concluded that unaffordability is the lesser of two evils, compared to the pain of a major price correction, then they should respect the intelligence of the city and just say so in plain language.
.. Vancouver deserves better.