Vancouver housing issues

A tale of greed, class division, entitlement and lack of compassion and humanity in Vancouver

If you spend a few minutes on twitter looking through posts tagged #VanRe, you’d notice two groups of people. One group clearly likes to protect the interests of the wealthy, fight for them while they themselves are either pro-conservative in political spectrum or/and are pro-realstate development industry. A significant portion of them are wealthy home owners. Build and build and build more homes to attain affordability are their main mantra* (some of them give themselves attractive names like “Abundant housing Vancouver” and YIMBY) even though

  1. It’s very well known how speculative activities around realstate is a significant contributor to Vancouver’s housing prices (hence ignoring policy measures needed to curb toxic fake demand).
  2. The realstate industry has been building and building and building lot of condos and tearing down even relatively newer homes in order to build more luxurious mansions. None of them help affordability.
  3. Lastly when people leave their homes empty, they create scarcity which is artificial. No amount of “abundant new building” will help.

This group think they entitled to do whatever they want with their property, including living it empty even though there’s an acute shortage of rental properties in the market. Renter, go fuck off. It’s my home and I can do what I want.

The other group, mostly of centre left ideology and those who support redistribution of wealth for the greater good of the society. They are those homeowners and renters who are perfectly happy paying extra tax if that meant bringing sanity to the housing market, allowing millennial to thrive and have a future in the city and bringing overall equanimity in the social fabric of the city. They recognize the reasons to tame toxic demand, kick foreign wealth out of the economy and in general are appalled by what has happened to the city.

The gap between these two groups has increasingly widened in the last several years. There’s several factors to this. One major factor is the 16 long years of conservative right wing governance. 16 long years is way to long for any political party to be in power. 16 years back, the conservatives rode to power by their popular mantra of creating more jobs and growing the economy, reducing debt. 16 years back, the New Democrats, the center left party, had gained a bad reputation of killing the job market and pushing British Columbia more into debt burdening the future generation. Well all that talk around creating jobs sounded really great for the conservative supporters for a long time. Unfortunately for everyone, the BC Liberal party, as the conservative right wings are called, were too naive to make Vancouver an attractive city for the worlds wealthiest, at the same time had no plans what so ever to protect the local economy and local worker’s interest while they did so. Coupled with the fact that Canada has extremely large tax loopholes, immigration loopholes, laid back Canada revenue agency, poor law enforcement for while dollar crimes and serious lack of regulations to track money and realstate ownership, as it turns out, BC became a safe heaven for people (particularly those coming in from now defunct IIP program) to park money without paying taxes on local income and falsifying their global income in tax returns and speculate on realstate assets while at the same time pushing out locals from having any kind of future in the province. The BC Liberals did not intervene in this nightmare for various reasons. Some reasons are that they got too greedy by making money through realstate investment themselves, that they received large sums of money as donations from the realstate industry to keep the speculative machine churning so that developers can keep building more assets for the speculators and foreign money, because property transfer tax was turning out to be a good source of revenue from the speculation, because killing the realstate market would also tank the economy since increasingly BC’s job market and the economy was largely being dominated by the construction and realstate. The BC Liberals also did something obnoxious which deserves mentioning. They showed zero initiatives towards collecting any data regarding foreign ownership of realstate, realstate asset sales to Asian investors and how much that was impacting the housing market. People like Andy Yan derived this information indirectly from other sources but there was no official finding undertaken. This was evil and this was deliberate. It was a deliberate attempt to obfuscate the question of the impact of foreign ownership in the realstate market. This obfuscation meant, more foreign investors could simply buy into the already expensive Vancouver market without anyone raising any eyebrows. This also meant that the real state industry could build more luxury condos and detached properties tailor made for these foreign investors and reap their commission and profits. This meant without locals knowing, the entire real state and construction industry was gradually pushing out local hard working population out of the property market.

In the process of all this, many baby boomers became out of the earth wealthy. Their property assessment went off the roof as the gap between them and the renters widened. The cost of all this was largely borne out by the poor renter and those who tried to chase foreign money with their limited means of income just to get into this crazy realstate market. Those who had enough means and were lucky enough to be positioned comfortably to dive in into this craziness saw their property valuation rise to significant values within a short period of time, without them having to do anything at all. The banks and financial institutions helped them by keeping the interest rate very low for very long. Anyone who “owned” property were now on the other side of this, perfectly willing to keep the speculative machine going. Why would other sectors of the economy be any different? The banks helped the foreigners and the speculators by not asking where and how a student or a housewife were getting a million dollars for their down payment. They even designed special attractive loan scheme for “new immigrants”, meaning foreign investors, thus putting local taxpayers at an disadvantage against them. The realtors, the lawyers and other parts of the economy all jumped into the bandwagon, all worked towards keeping this machine going.

The above graph says it all. During 16 years of BC Liberal rule, the home owners came out like bandits. Anyone who jumped into the bandwagon of home ownership had lots of reasons to celebrate. Construction and realestate industry boomed.

Home prices in Vancouver are pretty extreme compared to anywhere else in the country.

Income required to purchase property after the stress test was implemented.
Canadian household debt at record high

For a while, the fun continued. The homeowners felt entitled that this is how the world should work. They have worked hard enough to see this tremendous windfall, they are the success story of this city and who ever could no longer afford to live here should simply fuck off to make space of those who were smart enough to thrive. Survival of the fittest, right? Wealth not obtained through hard work and sacrifice often leads to cockiness and lack of empathy and perspective. This was no different. For a long time, kids of wealthy parents were cocky too. After all when their parents downsized they would inherit a large portion of this wealth trapped in their parent’s realstate asset. Since everyone was having fun, the voices of those on the other side of this, those who saw a collapsing city, a city with acute class division, widening gap between the middle class and the rich, constant outflow of talented workers, closing businesses, suffering people, drug overdose crisis, were drowned. Sometimes they were accused of racial slurring when they correctly pointed out that Asian wealth was largely responsible for this disaster. They were told to shut up. Andy Yan, currently the director of city program at SFU university correctly points out ,

“So you had these whispers about racism being used to shut down a dialogue about affordability and the kind of city we want to build here,” Andy Yan explained. “It’s a kind of moral signalling to camouflage immoral actions. It’s opportunism, and it’s a cover for the tremendous injustices that are emerging in the City of Vancouver and across the region. It’s a weird Vancouver thing. It’s very annoying. It’s kale in the smoothies or something.”

If you can’t afford here, move elsewhere. That’s what the ‘elites’ kept telling us. A realstate investor, a recruiter, founder and managing partner of a local recruiting company working out of Vancouver had no hesitation in putting this out openly and publicly on a LinkedIn thread:

One does not need much intelligence to spot his elitist and self centred attitude. When I went to Christmas lunches, some of my friends told me to shut up with my complaining because “we don’t revolve around your world” (that’s an exact quote from a text I received) . That meant, “we were smart enough to buy into realstate and you were an idiot – you didn’t and now you have no right to complain”.

Everything was good until it wasn’t anymore. As more people suffered, more people started leaving Vancouver. “I left Vancouver because Vancouver left me” was a common outcry among many who started leaving. Many home owners realized that their kids has no future in the city ( they couldn’t find jobs which paid high enough commensurating with the cost of living plus their own friends left town leaving them community less and friendless ) and so they were running the risk of permanently getting separated from their kids. Things got so out of whack that two high earning couple couldn’t afford to make their mortgage payments and average couples struggled to pay their rent. Several citizen activist groups came into existence which started advocating policy measures to ease the pain of the middle class Canadian and fix the multi headed crises. These vigilante groups started fighting battles against the status quo, organizing rallies and protests, on social media and on main stream media. The organized resistance resulted in more people becoming aware of what was happening around them and more and more people got involved in the discussion. The affordability issues in Vancouver became worse and worse until it couldn’t be hidden anymore.

Everything lined up for a change and in 2017 provincial elections, the left wing New Democrats came back from the dead to form the government through a coalition with the BC Green Party.

When the public policies went only one way, to benefit the wealthiest, for the last 16 years, any change from this status quo becomes painful and bloody. Today Vancouver is no different. It’s messy, bloody and ugly. Battles are being fought every day on social media and on the ground.

For example, when the leftist government introduced the “speculation tax” on home owners, Twitter was fast to respond with attacking this tax as “wealth tax” or “success tax”. Success? You get success through hard work and sacrifice. Most people who owns secondary properties have wealth far above the wealth of common working population, much of it gained due to uncontrolled runaway realstate industry in the province. The only thing they did while speculators run rampant in the economy was to sit on their asses and keep mum. I don’t define that to be success, more like luck. Secondly, since Vancouver has one of the lowest vacancy in rental units in Canada, having a secondary property within the city and keeping it unoccupied entails a much higher cost on the economy. If they rented it out, it could mean a whole lot of difference to a struggling working family trying to stay in the city. It’s called compassion and understanding and sacrifice for the greater good. Yet there’s been a lot of complain from the wealthiest that they should be entitled to do whatever they want with their home, including leaving it vacant if they want to. Screw the struggling population. Some Albertans found it inconvenient that now their nice little vacation home in BC will be taxed extra. Some had their family homes which they inherited. Some had a dedicated generational property. Still others found having a vacation home in BC was a great deal. Up until now BC was a great place to retire to after spending a lifetime working in Alberta. They don’t pay tax in BC but derive all the benefits of temperate weather and natural beauty after the retirement. This adds additional cost to the economy. Many of these Albertans could rent out their home if they wanted. There could also be a special exemption for the tax arranged between the government of BC and the government of Alberta for legitimate generational home owners. In my estimate most of them are either in Kelowna or in the Vancouver island area. The number of families affected are few. Unfortunately, without any constructive debate, the Albertans struck a class action lawsuit against the speculation tax.

A similar response came with the extra school tax imposed on homes worth more than 3 million. This article clearly explains the lack of empathy and perspective when people complain they are being hurt by this extra tax. Need more example? The response from the north shore residents are equally appalling.

The NDP should be shot,” he said, before being interrupted by applause and shouts of “hear, hear!”

“We’re losing money galore,” Angell continued. “My house has dropped $1.5 million in five months.”

I most cases the tax is nominal compared to their wealth which is trapped inside their asset. Most people who will pay the tax don’t have a mortgage and many of these people enjoy the benefits of a rich country club membership. The 3 mil threshold is twice the assessment value of an average price of a detached property in Vancouver. When average working class population in the city is struggling to pay rent which has sky rocketed to almost 2 grand per month for a one bedroom apartment, an extra 2 grand in property tax per year for a 4million dollar house does not certainly hurt the “working class”. It does not even hurt the wealthiest, those who can afford to pay. Those who can’t, there’s always the option to defer this tax until they sell the house. Most will or should either sell their high valued property now and cash in the windfall for the posterity or take advantage of this deferral program. This applies even if the property assessment depreciates (very unlikely in the long term) as long as you have at least 25% equity in your home.

You must have and maintain a minimum of 25% equity in your property to qualify for this tax deferment program. This means that all charges registered against your property plus the amount of taxes you want to defer can’t be more than 75% of the BC Assessment value of your property in the year that you apply.

We should all be so lucky. A 4 or 5 million dollars tax free from the sale of primary residence is a huge buying power and it can buy a lot of things in lot of places around the world. One can safely secure a retirement in Europe or elsewhere using just a portion of that wealth leaving the rest for their kids. At the minimum, it gives people with so much wealth lots of options to consider.

Its shocking how toxic and selfish Vancouver has become. The entitled attitude was allowed to thrive for too long and the needs of the middle class ignored. The toxic wealth which created the class division has torn apart the social fabric of this town. It has created a generational injustice. Josh Gordon, a prof from SFU’s School of Public Policy in his paper has appropriately summarized the issue,

“To put it bluntly, in return for subsidizing wealthy foreign owners and fostering an intergenerational wealth transfer, we have ripped apart the meritocratic social contract. Among the primary determinants of personal wealth in Toronto and Vancouver today are your date of birth, whether your parents own (or owned) and whether you have siblings. Working hard, getting trained and playing by the rules doesn’t get you very far any more, absent a gift from parents. No wonder younger people are furious – wealth is being transferred to those who have already hit the equity jackpot, while debt and stress are transferred to them. Not by coincidence, Vancouver had the lowest level of reported life satisfaction among all Canadian urban areas in a recent survey. The current framework is terrible public policy, and socially toxic.”

“Me first, everyone else later” attitude has screwed up this province. Lack of proper public policies that are framed for the greater good of the society has been lacking for too long. Some people got it too easy for too long. They had it their way. Now they are forced to make sacrifices for others. It isn’t easy after so many years. Will this city ever recover from this disaster? Will greater good prevail in this town? I wish I were more hopeful. Some days I am. Some days not so much. For now, I’ve left Vancouver and watching the drama as it unfolds from the sidelines. In the coming days we shall know what comes of the city. May this city redeem itself eventually. To end, let me quote Andy Yan one more time,

“We need to talk about the sacrifices we are willing and we need to make for the greater good of the community. We need to have a discussion about what the public good is, and what we are willing to sacrifice to make it happen.”

* we do need new supply specially affordable non market rental units and housing and in general, we need rezoning efforts towards higher density but not at the cost of curbing harmful speculative demand.

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