When developers, renters, tenants’ rights advocates, local governments and apartment owners can all agree on something, you know it needs attention.
Congratulations to Metro Vancouver for rounding up the energy for another run at implementing off-the-shelf solutions to Vancouver’s world-class housing affordability crisis through the Rental Housing Supply Coalition (RHSC) (www.rentersspeakup.org).
We may be the world’s No. 1 most livable city for business executives, but we’re the third-most-unaffordable city for housing costs, second only to Hong Kong and Sydney. That has a huge business impact. Head offices don’t want to be here because even managers can’t afford our high housing costs.
The cost of the average Vancouver house is now 9.5 times the region’s average income. So instead of the average detached home in Metro Vancouver selling for $675,000, if it were priced based on what’s affordable on the average ($63,000) household income it would be at $295,000. That’s a crazy gap.
With 40,000 people moving into the region every year, we need 6,500 new units of rental housing a year. Only about 600 are being built. The predictable result is the highest rental costs in the country, with 31,000 households paying so much of their monthly income on rent that they are one paycheque away from homelessness. A quarter of low-end renters pay more than 50% of their income on rent. Only so much can be done with basement suites, laneway homes and high-end condo rentals. The private sector needs to get back into the rental housing market the way it used to be. The reason so much of our apartment housing stock is overdue for an overhaul is that it was built in the post-war era when the federal government viewed housing as essential infrastructure.
Then in 1971, the federal government got rid of the rules that encouraged rental housing investment and construction, piled on new taxes and killed the apartment construction industry. According to public policy consultant Tex Enemark, until 1971, half of all new housing units were built for rental.
“Prior to 1972, wood-frame rental buildings were allowed a 10% depreciation rate, and any ‘paper losses’ could be written off against other [non-rental] income, creating a generous tax shelter. So if a taxpayer [landlord] purchased another rental property within a year of the sale of a property, [s]he could postpone paying taxes on the capital gain or the recaptured depreciation.”
Without that liquidity, rental property owners since 1972 have been reluctant to sell and re-invest as a result of the huge tax penalty on the sale.
Enemark calculated that a renter paying $608 a month for a one-bedroom apartment pays $113 of that rent as taxation in excess of what would be paid if rental apartments had the same tax treatment as motels, hotels or family farms. Homeowners pay no capital gains tax, he points out, but tenants pay it as part of their rent.
It’s time to cut taxes on rental housing.
The RHSC, co-chaired by Metro Vancouver Housing Committee chairman Wayne Wright, has been endorsed by B.C. Housing Minister Rich Coleman and is on its way to Ottawa, where the biggest changes have to be made.
“Something has to be done at every level of government,” said Maureen Enser, RHSC co-chair and Urban Development Institute executive director, “but the biggest challenge is that we haven’t had a federal housing strategy in this country for many decades.”
Vancouver will remain socially and economically dysfunctional until that happens.
In last week’s column, I attributed high costs at the Coal Harbour float plane terminal to B.C. PavCo. In fact, PavCo inherited lease terms from the Vancouver Convention Centre expansion project. Tenant Vancouver Harbour Flight Centre is responsible for costs.