How do high housing prices hurt our economy? That’s a question that has come into focus since I started looking at the implications of the “insanely hot” high-end residential real estate market driven in no small part by overseas investors, a market sector that’s restricted in many jurisdictions.
It puzzles me that the non-real-estate business community sits quietly by while Vancouver becomes a hollowed-out resort. Here’s how the Vancouver Economic Development Commission (VEDC) describes the city’s economy: “Vancouver has what might be called a ‘low value economy.’ Jobs in Metro Vancouver pay substantially less than jobs in other large Canadian cities. The region exports relatively little; labour productivity is low; household incomes are low (Metro Vancouver ranks 22nd out of 27 Canadian metropolitan areas) and the economic value created by recent employment growth is low.”
Go east, young person, go east.
In 2007 the VEDC interviewed 60 representatives from business, government, education, arts and industry associations to discover that their top-two concerns about Vancouver’s business climate were:
- availability of land for development and the competition for land between residential and commercial and industrial uses; and
- availability of labour and the difficulty of attracting experienced management and skilled employees to Vancouver given our high housing prices. Here are some letters I’ve received that back this up.
“In 1995, after two years of unemployment from downsizing in Edmonton, I was offered a professional job with the provincial government in Burnaby. When I compared the modest salary to the high cost of housing, I made one of the hardest decisions of my life – I turned down the job.
“Subsequently, the prospective employer sweetened the pot, I accepted, and my family moved.”
A young urban planner who works in the development industry writes: “I recently moved to Vancouver from Toronto and have fresh eyes on this issue here. I find it strangely appalling that for a city so very proud of itself for its standard of living, that this issue that poses such a threat to its future seems to be largely ignored.
“Interestingly, since moving here I have been astounded at the number of young, talented professionals who have engaged me to connect them with my professional network and contacts in Toronto so that they can consider employment in a market where home ownership is in fact a possibility.”
Another young person working for a large multinational corporation here writes: “My friend’s semiconductor company with a head office in Burnaby is a globally recognized company, but cannot grow to its full potential because they can’t hire talent from Ontario, the U.S. and overseas despite very attractive compensation packages. Most of the reasons they get from applicants rejecting offers are the same: they can’t buy a house for their family in Vancouver.
“Another friend’s BlackBerry mobile application developing company is a true local success story whose head office is here. They have been in growth mode for a decade and to take the company to the next level they need to hire more talent. Since their industry is very specific and we don’t have the talent pool locally, they have been flying people in from the U.K., U.S. and Ontario and offering very attractive compensation packages. They have had multiple offers go out and most were excited at the potential of living in such a beautiful city, but all decided to decline after looking into housing here for their families. If this trend continues, the company may have to relocate to Waterloo or a similar city where talent is abundant and there are affordable living standards.”
So who benefits the community more: real estate speculators or employers who could be generating productive, well-paying export jobs if housing costs weren’t so out of reach?