By Steve Lafleur
and Josef Filipowicz
The Fraser Institute
Housing prices in Vancouver have caused a frenzy, as analysts, pundits and activists wrestle with how to improve affordability. The discussion has fixated on foreign buyers, speculators and empty houses. Regardless of the policies implemented to address these factors, trying to increase affordability by sniffing out empty homes misses a forest for the trees.
Fundamentally, a tight housing market with high demand will push up prices. Without an equally strong push on the supply side (new homes), this dynamic is unlikely to change.
Steve
Lafleur
While taxing foreign buyers may have been politically popular, it isn’t clear it worked. Home sales began to decline before the tax and have since recovered. Even if foreign buyers represent up to 15 per cent of sales in some months, targeting this group does little to accommodate the vast majority of buyers living or planning to live in the city. These people need to live somewhere and the destination is increasingly outside of Vancouver, with Surrey projected to eventually overtake Vancouver as B.C.’s largest city.
To take pressure off the cost of living in Vancouver, the city should build more housing units on its limited geographic footprint.
But one of the chief barriers to increasing affordability in Vancouver is nostalgia. A recent video released by Mayor Gregor Robertson’s office portrays Vancouver as a small, dense downtown core surrounded by leafy 1960s-style suburbs. This portrayal is largely accurate, with the vast majority of the city zoned for single-detached dwellings. This is a big part of the problem – Vancouver can’t be both low-density and affordable. People from all over Canada and around the world want to live here, and since the city is hemmed in by mountains and the ocean, they can’t all inhabit detached houses.
Josef Filipowicz
Of course, many longtime residents enjoy living in tree-lined single-detached neighbourhoods with ample lot sizes. But there’s a limit to how many such homes can fit in Vancouver proper. Typically, residents of desirable, geographically constrained metropolitan areas face a trade-off between lawns and commuting. For those willing to make that trade in Metro Vancouver, Surrey and the interior offer plenty of single-detached homes.
To reduce the cost of housing in Vancouver, more units must be built. A lot more units. Rental prices will stay high so long as the vacancy rate remains vanishingly low. And the cost of owning will continue to rise so long as there are substantially more people bidding on houses than there are houses to buy.
Perversely, restricting development in the core, which has basically been city hall’s policy, increases home values for owners able to pay expensive Vancouver prices but pushes out lower-income renters. This means that some of the people who might benefit the most from living in walkable, transit accessible neighbourhoods must rely on sparse suburban public transit or incur the cost of driving. This is a harsh trade-off.
If city hall wants to fundamentally improve Vancouver’s housing situation, it should focus on building more housing units rather than attempting to sniff out unoccupied homes. The zero-sum mentality has to end.
The Vancouver of 2027 won’t look like the Vancouver of 2017. It will either be a denser, more dynamic city or a playground for the wealthy. The choice should be obvious.
Steve Lafleur and Josef Filipowicz are analysts at the Fraser Institute.
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