The Urban Development Institute has a new slogan: “More homes for more people.” It’s a good one. Whether intentionally or not, it doesn’t say “more homes for more investors.”
I got to thinking about the distinction between people who live in homes and those who invest in homes after the new Demographia numbers came in showing Vancouver now ranked the second most unaffordable city of the 325 cities surveyed in Australia, Canada, Hong Kong, Ireland, New Zealand, the U.K. and the U.S. The Demographia survey measures the ratio of median house price to median income, with 3.0 being the outside edge of affordability. Vancouver clocked in at 10.6, behind Hong Kong at 12.6 and ahead of Sydney at 9.2. The authors dedicate the survey “to younger generations who have the right to expect they will live as well or better than their parents, but may not, in large part due to the higher cost of housing.”
That is certainly the case in Vancouver, where lack of affordability is a bad thing for many people, and a good thing for many others. Or, as the report says, “What is good for a given individual or family is not necessarily good for a society as a whole, and what is good for society as a whole is not necessarily good for any given individual or family.”
What is beyond dispute is that housing affordability is good for society as a whole. It gives average wage-earners access to this basic building block of personal wealth. It enables businesses and public institutions to hire those people, and it gives residents disposable income to spend on something other than food and shelter.
Yet the prevailing point of view here that because so many people want to live in this fabulously attractive geographically constrained city, the demand for housing will never keep up with supply, so housing prices will stay high. Younger people or salaried workers will never be able to afford to own homes here, so suck it up, people, and move on. Or rent. Those who benefit from high house prices are more important than those who don’t.
There are only two ways to make housing affordable: increase the supply of lower-priced homes or decrease the demand.
On February 2 to 3, the Canadian Homebuilders Association Housing Affordability Symposium will focus on lowering the cost of new buildings and adding to the supply. It will likely come up with the same excellent, thoughtful recommendations as its November 2010 Housing Affordability Symposium.
Expect similar outcomes from the City of Vancouver’s housing affordability task force under Olga Ilich.
In a similar vein, I am working with the SFU Centre for Dialogue and private, public and non-profit partners on ways to build pockets of affordable housing in selected Lower Mainland municipalities.
Increasing supply – especially getting rid of restrictive land-use regulations that prevent density – is essential to affordability, and all these initiatives will make marginal gains in lowering some home prices.
But what nobody is yet willing to do here is to tamper with demand from investors and speculators. When countries are really serious about affordability, they also dampen that demand. Austria, Japan, Indonesia, China, Switzerland, Australia and other countries curb foreign ownership. Because unaffordability in Canada is limited to a few cities, most notably Vancouver, we can’t expect a national solution. In Singapore, where some prices topped $4,700 per square foot last year, the government has made it more expensive to sell a property within four years of buying it – by putting a high tax on property flips. Some units can’t be sold until five years after they’re bought. Beijing has banned purchases of second homes. It has made policies that favour residents, not investors.
If we were really serious about affordability in Vancouver, we would be looking at more homes for more people and fewer homes for investors and speculators.
