An unavoidable narrative that permeates every B.C. election is whether government or the free market can best allocate resources to deliver a better life to British Columbians.
This election is no exception, with partisans on each side of that apparent divide coming up with different policies to deal with the issue that tops the polls: affordable housing. The crude themes are: “depend on the market to sort it out” and “depend on government to sort it out.”
Both of these miss a fundamental starting point: the housing “market” is not “free” at all. It is largely a creation of government. It is regulated, taxed, incentivized, restricted, defined, subsidized and driven by government policies. At the low end, housing is entirely dependent on government funding. Recent price explosions are the direct result of government policies of restrictive zoning, low interest rates and immigration increases. A lot of foreign capital comes here through the hundreds of thousands of Canadian citizens living abroad who “bought” their citizenship, quite legitimately, under federal government programs designed to attract rich immigrants. Restrictive single-family zoning is essentially “socialism for the rich” – restricting access to their lands for people who can’t afford a single-family home. Inept and complicated municipal government approvals add delays that cost new buyers tens of thousands of dollars on each purchase.
Government policies have tried to deliver home ownership to as many people as possible. (Sorry, renters.) Homeowners get grants. Senior homeowners get subsidized loans to let them defer taxes. Government-backed Canada Mortgage and Housing Corp. insures mortgage-lenders. First-time B.C. buyers get a five-year interest-free $37,500 loan. The federal government forgoes billions of dollars in capital gains tax revenue from owners who sell their homes tax-free. Apartments get pushed out by condos.
This jumble of government incentives and hindrances is failing. Young families are being priced out of their hometowns. Businesses are losing employees. Global capital investment is hiking prices to unheard-of levels – not just in Metro Vancouver, but in cities around the world, now including Toronto in a big, awkward way. Loopholes and lax law enforcement allowing anonymous ownership, money-laundering and surrogate student owners are creating a new class of free-riding investors and unfairness for local taxpayers. The foreign-buyers’ tax has moderated prices but few think they will stay on pause for long.
Where it’s free to work its magic, the market is responding to the highest-paying demand (think global, buy local), building what residents don’t need or can’t afford. Housing analyst Andy Yan describes the result as “too many Ferraris and not enough Hondas” – not what local-income-earning families need.
A recent housing conference asked the question: “How can we realign housing prices with local incomes?”
Of course we can try to raise those incomes, but ironically better jobs and stronger companies are hindered from growing because of our grotesquely high housing prices. One sure way to realign housing prices with local incomes is for government to limit access to the housing market – or a significant part of it – to people with local incomes.
Can government be trusted to make housing more affordable with this kind of restriction? Or with new taxes like the NDP’s proposal to add a 2% property tax to Metro Vancouver homeowners who don’t pay taxes in Canada? Or with Vancouver’s 1% tax on vacant or second homes?
Or do we just have to unleash the private market to build more housing units to get lower prices, as urged at the recent Greater Vancouver Board of Trade housing summit, where foreign capital and speculation were deemed by one speaker to be “on the margin”?
Of course, we’ll need a mix of government restrictions and free market supply. But the election outcome could depend on which approach voters think has the best chance of delivering housing affordability.
Unfortunately for the BC Liberals, they have to wear their record of mostly not interfering with the “free market”: record levels of unaffordability and voter anger. •
Peter Ladner ([email protected]) is a co-founder of Business in Vancouver. He is a former Vancouver city councillor and former fellow at the SFU Centre for Dialogue. He is chairman of the David Suzuki Foundation’s board of directors.