New Taxes and Higher Density Aren't Fixing Vancouver's Housing Problem
citylab.com
citylab.com
https://www.huffingtonpost.ca/2019/04/02/vancouver-house-pri...
And https://www.zolo.ca/vancouver-real-estate/trends shows overall trending downwards.
Seems like it's working.
It was really weird moving to the states and have people care which word I used.
(Extra) Fun Fact: Canadians do differentiate (a lot) between University and College. Something Americans do not do.
https://vallarino.ca/blog/downtown-vancouver-condo-price-gra...
Yes, Vancouver downtown apartments were $1200/sq feet. Apparently you need at least $1 million US dollars to have a family of four living in downtown Vancouver. Crazy huh.
The new taxes (coupled with stricter lending rules) have had a remarkable effect on land values. Detached home sales are at 20 year lows and we're seeing 25-30% declines in prices.
https://twitter.com/SteveSaretsky/status/1126176658816290816
Rents haven't plunged, but there's evidence that the rises in rent have stalled out. The amount of multi-unit developments under construction is unprecedented[1], with tons in the pipeline, so I'd expect the sub 1% vacancy rate to rise and rents to moderate.
[1] https://twitter.com/YVRHousing/status/1126269398606438400
- New supply in a desperate shortage situation will always be expensive. Interpreting that as new supply being bad is the dumbest thing you can do!! Yet it's extremely common in the housing debate.
No! The new supply is expensive because of the desperate shortage! There is no magical way to build cheap housing in a shortage, liked no one would notice it somehow... The old housing is just as expensive! Keep the supply up, and prices will come down!
- "This is all the fault of foreigners and speculators".
No! We all have the impulse to blame our problems on evil outsiders who are different from us and don't care about human values like we do. That's xenophobic bullshit 9 times out of10. Vancouver just has too few homes for too many people. There is no foreigner conspiracy. Just build and and it will be alright, alright?
Probably didn't change anyone's mind, but I honestly think those are the two biggest points.
But I really doubt that's the case. Normally prices rise because supply is strangled by legal restrictions, controlled by the local property owning elites looking out for their property values. That's definitely the case here in California. I don't know Vancouver enough to say.
When that happens the secondary effect is that housing in that area becomes a great investment. This attracts investment capital from all over the world, much of it foreign, since it's a big world. This in turn probably drives up prices even faster.
And... I guess it's not even exactly wrong to say that the foreign money is driving up prices in that scenario. But it's also not at all a root cause!! Trying to regulate it is attacking a symptom, not the real problem, and will solve nothing.
The real solution is to "legalize housing", as the slogan goes. Make it legal to massively build the housing that is demanded, and there will be housing for everyone.
And as always in these situations, getting to the real solution is much harder, because there is real power in the way who benefits from the status quo.
I've been saying this for years. It is scary. I used to live on the north shore. In my old neighborhood perhaps 70% of houses are dark, either empty or under some stage of reconstruction. My generation has moved away, leaving an aging population of parents. Most of those are moving away once they sell their family homes. My old neighbors who have stayed might all be living in 1/2/3 million-dollar houses, but they feel very alone at night.
https://www.amny.com/opinion/the-sad-story-behind-nyc-vacant...
But the only specifics I could find is that there is a tax on commercial retail rent in NYC on $250,000 a year or more rent, and now the rent has been pushed up so high that everyone is paying it, but ultimately landlords are just holding out for long term leases with big national brands, and many of them already have all the Manhattan locations they need. Apparently, there is a push to raise it to $500,000, or even put in a tax on empty retail to give landlords an incentive to take a chance renting on boutique or so-called "popup" stores.
https://cityandstateny.com/articles/opinion/commentary/reduc...
When the census is held in Australia the data is collected about where you were on the night that it is held - if you're in a hotel or a care home then you're counted as living there for the night. If you're visiting friends you're counted at their residence.
2016 was a while ago now, but it'll be interested to see how the population holds up at the next one:
https://www12.statcan.gc.ca/census-recensement/2016/dp-pd/pr...
I thought the spooky story was that these properties were owned by Chinese investment groups, not aging Canadian parents, and are empty for that reason.
Right now, the discussion we have is : socialize private buildings and make them state owned ( I kid you not!) No talk about new buildings, or law changes etc..
https://www.smartcitiesdive.com/ex/sustainablecitiescollecti...
I'd be interested to learn about other objective studies on this.
That is such the wrong question to ask. We live in a market economy, no single person decides what sort of thing gets built - the market does.
Today's luxury apartment is tomorrow's affordable one. It is unfair and unrealistic to expect the market to build brand new and cheap apartments. Those words to not go together.
We can't just build more houses in the same size of city - it needs to expand outward. Stuffing more apartments in the same square mile won't do much.
The bigger issue is that "higher density" compared to the old status quo still isn't producing enough new housing to moderate prices; if prices remain high, there are only two fundamental methods to deal with high prices: increase supply or reduce demand.
Legislative policies determine the type and terms of the "market economy" that is lived in.
If today's luxury apartment had a decent probability of being tomorrow's affordable one it would not have demand. Unless of course one assumes that luxury buyers are seeking to lose money.
Housing that becomes affordable by the time I am dead is not really "affordable" housing for me.
As a thought experiment, what if you doubled the supply of housing units in Manhattan? Or 10x? 20x? I have a hard time believing housing prices would remain high.
As long as that ratio is less than one, some people are excluded. Price is what that looks like in a market. Under central planning it’s typically lotteries and waiting lists.
Supply/demand balance in the region is much more important than the characteristics of any particular unit, and that’s what pro-growth activism is targeting.
Housing isn't like a car. It doesn't depreciate as soon as the first person moves in.
- Holding an asset until users become more desperate
- Taking an asset off the market in order to drive up the price of other assets in the category
- Buying an asset to hold, if reliable bonds aren't available in your locale, or there are limits to what assets you can book locally
Not to mention ulterior motives:
- Money laundering
- A vehicle for bribes
Money is quite complicated actually.
Supply & demand - it's the law.
--- Buying real estate to just hold is almost always a losing proposition because of taxes and the time value of money. It is not like a bond, because bonds have guaranteed payouts. Real estate fluctuates in value, quite a lot. It's very easy to lose pots of money in real estate.
Thinking that users will become more desperate is hoping that the government will prevent supply from increasing, or that customers don't simply find other solutions. I suggest looking up what happened when the Hunt Brothers tried to corner the silver market by buying up the supply. Buying up your competition to drive up prices pretty much never works unless the government makes entry of competitors illegal or very hard.
I got kicked out of my unit vancouver unit (3500$/month) because my landlord wanted to sell. In Vancouver's market a unit with a renter is worth LESS than a vacant property. Clearing it out to repaint and upgrade a few faucets is worth more than the rent income. That's how twisted the market has become.
Professional landlords like paying tenants. Investors see them as potential problems, irritants and impediments to redevelopment or construction.
Typically before and after the sale there is work being done on a unit that can’t be done while it’s occupied. Also the new buyer might have different screening they want to do for a prospective tenant, or may want a different lease term, etc.
It’s worth losing a couple months rent to be able to show the unit when you want, to have it cleared out so the buyer can inspect it, and sell it without a lease attached that they may not like. It also limits the buyer pool to sell it already leased to someone a prospective buyer doesn’t know and doesn’t want to know.
You're completely ignoring Econ 101.
Housing that is used as housing and housing that is a vehicle for speculation are not mutually exclusive. Rental properties produce rental income and appreciation for their owners. More people looking to make money from real estate investments results in more capital investment going into expanding housing stock, and thus more rental supply, which drives down rental rates.
The places which suffer the most from lack of affordable housing tend to be those that put in place the most impediments to profit-motivated investment. In other words, they ignore basic economics.
Housing ain’t exactly the same as the used car market. I don’t think there’s such thing as a house that was once going for $1M+ that is now “affordable” unless it’s in a horrible state of disrepair.
More to the point, there are plenty of homes that were affordable and in disrepair not long ago, that are now going for $1M+ in exactly the same physical shape. San Francisco’s problem is definitely not that its housing stock is too nice.
pick one
That isn't necessarily true. It is most obvious when a neighborhood is experiencing gentrification. For example, imagine a SRO hotel in which the rooms are no more than one or two hundred square feet. Buildings like this used to be incredibly common in the Skid Row neighborhood of Los Angeles and multiple neighborhoods in San Fransisco. Many of those buildings are being knocked down in order to replace them with high-rise luxury condos. Since the new buildings are high-rises replacing much smaller structures, the new units can have several times more space per unit and still increase the density of the lot. The problem is that a 1000 sqft unit with amenities like an in unit washer and dryer is never going to drop to the price of a 200 sqft SRO room that doesn't even have an in unit toilet and shower. The new and old homes are so far apart that they don't behave like they are part of the same market.
Case in point: The John Hancock Center in Chicago. 700 units of luxury living since 1969.
Apartments may depreciate, but in a good number of cases condos don't get any cheaper.
There's only two things I see that make sense as answers here.
One is regulation/zoning. Let's assume we could fix that.
The second would be if the sale price dropped below the nominal cost of constructing new units, with some wiggle room in there for opportunity cost to builders who might make more money by choosing to build elsewhere. Do you believe that's the case currently in NYC, Chicago, etc? Is the price so low that it's not even worth it for builders to bother creating new units, because they couldn't recoup their costs?
You also have to factor in the opportunity cost of the land/unit too which is where the argument starts to fall apart. Why build a unit that rents for $X when you can increase your build costs by Y% and charge a rent higher than $X + Y%. That is why new construction generally comes in at or near the top of the market. Construction costs generally don't make up most of the costs of new homes in places like San Francisco, Chicago, or Los Angeles.
But sure, if you want to create a world with no zoning laws and with 10000% increase in housing supply, I am sure it will solve all the problems with pure brute force.
Fixing zoning laws doesn't necessarily mean having no zoning laws.
Ok, building more housing is "brute force." The other option on the table seems to be a tiny sliver of poor people win the artificially low priced housing lottery. I understand why that might feel good, but I don't see how it actually solves the problem in the long run.
People aren't water. They don't flow to any available crevice. They go where the stuff they need and want is.
This effect cascades all the way down the price curve. In macroeconomic terms, increasing supply shifts the whole curve below that point.
This is true so long as the new supply isn’t itself causing new demand, e.g. foreign investors leaving the unit empty.
Which is where your argument falls apart. Cities aren't closed systems. The price reductions won't trickle down to the bottom of the market because at some point there is always going to be people who are willing to move in from neighboring neighborhoods, cities, or regions. It isn't like the only people who live in San Francisco are the only people who can afford it. There are plenty of people who could afford the worst possible home in San Francisco but decide not to move their because they can't afford a home they want. Once those middle of the market prices come down, people will move in to fill that new supply.
We have to consider the whole system - jobs, office space, etc. If more housing just makes a healthy job market grow even faster in a loop, you've changed a lot just to stand still affordability-wise.
Do we really need ever-growing city centers vs some more disperse way of working and living?
Who are you to tell people where and how they should work and live?
If you tax land to increase the cost of carry you will see prices fall. Taxes work.
Disclaimer: I am a landlord
Moreover, today's luxury apartment turns yesterday's luxury apartment into a less expensive one.
Markets are a product of a lot of rules that favor one thing or the other. It's not a natural law that markets and the rules have to be exactly the way they are now.
The reality is that many of these new condos are being marketed extensively in HK and other places where there are deep pocketed investors looking for good yields and which may not be able to participate in their own local market.
With this context, it's very appropriate to ask pointed questions about 'whom a development is for.' Is the development accessible by locals whose income is limited by the nature of the local economy, or is it intentionally developed for a global audience whose incomes a local may be incapable of reaching?
Look at Manhattan's most expensive buildings in terms of price per square foot (which can be north of $5000!). Some, like 15 Central Park West and One57 and some others on 57th Street, are new but many are not. Famously there's the San Remo building (which is ~100 years old), Walker Tower in Chelsea and a number of other buildings on Park Avenue and Fifth Avenue that are a century old, give or take, and not remotely affordable.
There are factors why these buildings will basically never be "affordable", namely:
- They may have ceilings in the order of 14-18'
- They may have floors and ceilings that are 1' thick or more;
- Land prices are extremely high.
So even though some of these apartments might be "only" 2000 square feet, they occupy the space of an apartment that might be as much as 2-4x as large due to the way the building is built. A stone's throw from Walker Tower you'll find postwars that sell for under $1500/sq ft, for example.
I'm actually a big fan of cities not becoming ghost towns of empty condos and houses that are nothing more than a place to park capital for the ultra-wealthy. Australia, for example, forbids foreign purchases of anything other than new builds.
Developers build ultra-luxury condos because it's way more profitable. Part of the reason is the demand but another part is the cost structure is wrong and New York City and state bear some of the blame for this eg [1]. That's just insurance. Construction itself has become unaffordable. Many capital projects exist in the US today that would simply be cost-prohibitive to build or replace now.
I'm all for an extreme measure here: the world's large urban centers should start taxing homeowners on worldwide income. No double taxation. There are already mechanisms for this. You want to own property in NYC or Vancouver or San Francisco? Great. You're now a resident taxpayer. You can always seize the property if they won't pay.
One thing about Vancouver in particular, and this probably applies to Canada in general: WTF is up with a median wage of C$50k? How is it the US can afford to pay US$350k+ for a SWE in NYC or SF that might earn less than C$100k in Vancouver? How did that happen?
In the developed world there basically hasn't been an increase in real wages since 1980 while the ultra-wealthy get richer and richer. With no wars or revolutions in sight to redistribute that wealth (which, historically, has been what's happened when wealth inequality gets too out of whack), something needs to be done to address that.
[1] https://www.constructiondive.com/news/critics-blame-nycs-sca...
I personally have seen new "luxury" condos in a major American city built in 2000 being devalued because since that time there have been many more "more luxury" condos built, to the point where the older condos lack features that make it difficult to compete with the newer buildings.
(That said, there does seem to be somewhat of a lack of higher-end developer jobs compared to parts of the US.)
The luxury -> affordable saying is super simplified, yes. But brand-new "cheap" housing will certainly never exist without subsidies. Cheap older housing stock certainly does.