Op-Ed: Dear L.A., Vancouver has a few things to tell you
Dear Los Angeles:
It has come to our attention up here in Vancouver — which you might know as “Hollywood North” — that Chinese investors are spending a torrent of money to build and buy large swaths of your downtown. Congratulations and sympathies.
Take it from us: When global capital is set loose on housing and land, things quickly stop making sense. What you thought was a home is suddenly a commodity. What you thought was a city is suddenly a pawn in an international finance chess game.
Does this sound familiar? Year after year home prices steadily increase even as economists confidently predict the bubble will burst. Well, after 15 years, those predictions still haven’t panned out. Real estate prices shot up nearly one-third in the last year alone. The typical home is $930,000 and the typical household income is about $70,000.
We can thank, or blame, how attractive we made our city to foreign investors. It all started about three decades ago when we staged a World Expo — you’re trying to crowdsource one of those too, we see. We also hosted the Olympic Games to hand out our business card to the planet — as you are trying to do in 2024. Like you, we just wanted people to visit.
Then, two decades ago, when our currency dropped against the U.S. dollar and the British Pound, money began to roll in from the United States and Europe. These days it’s investors from Asia, mainly China, seeking safe harbor for their money. So voracious is the demand that some property developers need only market their new condos abroad to sell out.
It is nearly impossible to find a suitable rental (that might also sound familiar to you) because the vacancy rate is below 1%.
It is difficult to pinpoint when Vancouverites realized the building boom was out of control. Our corner of British Columbia is, of course, smaller than Southern California. With only a couple of million people, it didn’t take a lot of foreign investment to distort the whole housing market. Although one limited study in June found that about 5% of metro Vancouver home sales were to offshore buyers, analysts disagree about the full extent of foreign ownership.
Perennially low interest rates haven’t helped, nor has the near-frictionless mobility of money today, nor Canada’s feeble oversight of tax evaders and money launderers.
Vancouver today is a curious paradox. The Economist magazine ranks it third on its index of the world’s most-livable cities, but residents guffaw at how such lists lack context. The average Vancouverite would need to save for a quarter-century to place a down payment on a typical property. It is nearly impossible to find a suitable rental (that might also sound familiar to you) because the vacancy rate is below 1%. Some point to the inadequate supply of new housing as a culprit, but prices and rents seem to rise no matter what gets built.
The CEO of the tech company Hootsuite has warned of a hollowing out of Vancouver because it’s unaffordable to the millennials he and others in the knowledge economy need as employees. When a technology executive complains about the pace of change, you know something is awry.
Politicians — rarely the first responders in a housing crisis — only recently stopped their denials and started throwing whatever policy they could at the problem.
A 15% tax on property purchases by foreigners was implemented so quickly that many contractual deals were suddenly overwritten and made that much more costly. (Offshore purchases immediately tanked in August, but that’s probably just a blip before the reboot.) A class-action suit has already been filed.
An “empty homes tax” is in the works. The city might charge up to 2% of a home’s appraised value annually if owners don’t occupy it or rent it out. A snitch line will potentially turn neighbors on one another.
Airbnb will face restrictions here soon to try to free up more rental units.
Federal tax auditors have been dispatched to review local real estate transactions because it appears some investment properties have been claimed as primary residences.
Your politicians may propose stuff like that, too, so you should know that even though it creates the appearance of action it doesn’t actually change very much. After all, politicians depend on developers to funds their campaigns. The city depends on the jobs, the province depends on the taxes, and the federal government depends on the foreign investment. And homeowners are counting on that inflated equity for their retirements.
No amount of soft protectionism is going to stop soft expansionism.
The overall effect has not been pretty. Vancouver today is not the city we anticipated. It is a politically and socially divisive and — even if we wish not to admit it — rather racialized moment in our city’s history. The news media have revealed how weakly the real estate industry has been regulated and documented examples of abuses. That’s as it should be, but a shameful bi-product has been resentment and vilification. Some commentary about our housing crisis has taken aim at the people more than the money. Civil discussions about what to do are difficult. I wouldn’t wish this on you.
It is possible you will find some way out, but the lesson of Vancouver is that when a temperate city nestled between mountains and ocean becomes the object of desire, not much can quell tempestuous market forces.
Kirk LaPointe, Vancouver
Kirk LaPointe, who ran for mayor of Vancouver in 2014, leads the editorial operation of the newspaper Business in Vancouver. He is also a host for Roundhouse Radio FM and teaches journalism at University of British Columbia.
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