Oak Bay Watch Article of the Week: April 28–May 4, 2024: Experts: Foreign Investor Housing Ban Full of Holes Please share Link - See oakbaywatch.com
British Columbia: CBC News · Posted: Feb 09, 2023
One in Five properties across much of Canada are owned by investors. That makes it harder for 1st-time buyers
Please Note: This article’s statistics, however, indicate that for British Colombians and new arrivals, the picture for buying a new home is far worse. The CBC News article’s data shows, in BC, that investor-owned housing stock is 52.8%. See more information - Oak Bay Watch Perspective.
CBC News Chart
Experts say recently-released data, which covers 5 provinces, has major implications for housing policy
Statistics Canada data shows that more than a fifth of all houses in British Columbia, New Brunswick, Nova Scotia and Ontario were owned by investors in 2020. And A third of all condos in B.C. were owned by investors in 2020, according to recent Statistics Canada data. (Ben Nelms/CBC).
It’s the first time the Canadian Housing Statistics Program (CHSP) is publishing data related to housing investors, defined as homeowners that own at least one property that is not their primary residence.
The data shows that condominiums in particular - which constitute a majority of newly-built houses in B.C. and Ontario, are held by investors in high numbers. Over a third of all condos in B.C. are investor-owned, with the number jumping to 41.2 per cent in Ontario.
Experts say the figures raise questions about whom new houses are being built for, and how capital may be distorting the housing market across a country in the grips of an affordable housing crisis.
"What this dataset does is that it shows a competition to get on that [housing] ladder," said Andy Yan, director of Simon Fraser University's City Program.
"For Canadian public policy at the federal, provincial and local levels, who should have priority in trying to get on that ladder?"
"Somebody … who is a first-time homeowner, who is a young or new Canadian, how do they fit in versus somebody who was wanting a residential piece of real estate as an investment?"
Yan says the data, collected at the end of a decade with significantly low interest rates, provides a useful snapshot of the housing market before the pandemic and subsequent rate hikes began to significantly take hold.
Data shows regional differences
The data released by the CHSP shows a variety of regional differences, which Yan describes as a "profound challenge" when it comes to designing national housing policies.
B.C. has the highest rate of "investor occupants" which refers to someone who lives in a single property with multiple residential units - such as "mortgage helpers" or Vancouver specials.
"In that case, it has provided a stock of what is relatively well-sized affordable family rental, through which the market rental system isn't necessarily ready to provide," Yan said.
Business-owned condos: Marc Lee, senior economist at the Canadian Centre for Policy Alternatives, says changes in tax codes in the late 1980s and early '90s incentivized developers to build condos over detached homes.
Statistics Canada found that, from 2019 to 2020, 54.4 per cent of all new houses in B.C. were condos. In Toronto alone, that figure is 59 per cent.
"In Ontario, businesses owned 74,485 condominium apartments for investment purposes," Statistics Canada says in its release. "Most condominium apartments used as an investment in both Ontario and Manitoba were owned by in-province investors."
(Note: Many businesses are offshore companies with subsidiary companies in Canada.)
Lee says the data raises an "overarching issue" of whether housing was increasingly becoming an investment vehicle rather than a human right.
"So much of the wealth ladder in Canada has been based around real estate," he said. "I think it's come at the detriment of quality affordable housing for the majority of folks who are renters."
What is the impact on people?
Yan says his research has found that the median size of an investor-owned property is around a quarter smaller than owner-occupied units, another finding he says raises implications for marginalized people seeking a place to live.
He's also found that a third of all new properties built since the 2000s in Metro Vancouver were specifically for investment — a trend he notes is also taking off in the Greater Toronto Area, which historically has had a high number of owner-occupied condos.
"[In] the last 10 years, you really begin seeing the Vancouverization of Toronto," the professor said. "What does this mean for, really, the central city of Canada?"
Yan says that, if policymakers (politicians) have to accept the reality of investment driving housing availability, they should consider a different, progressive taxation system for those investors.
Lee says any public housing programs, which he wants to see more of, can be funded by using levers like higher property transfer taxes for those who buy multiple properties, especially for domestic investors. Note: Public housing is currently funded by taxpayers.
"Locking in affordability for the long-term is going to need to think outside the box", he said, "We should, if anything, be putting more speed bumps around this type of investor behaviour".
Oak Bay Watch Perspective
A Globel News April 2023 Article reported that one-third of the Liberal cabinet owns rental or investment real estate assets while at least 20 per cent of MPs from all parties do as well.
Mike Moffat of the University of Ottawa’s Smart Prosperity Institute said both Prime Minister Justin Trudeau and Conservative leadership candidate Pierre Poilievre - own rental or investment property.
Oak Bay Watch comment: Hummmm - In addition to this conflict, perhaps another factor that further reduced the effectiveness of the Foreign Investor Housing ban, is because Real Estate & Development is one of the four main drivers of Canada’s economy.
Canada’s Foreign Investor Housing Ban
The change of “gears” by the real estate and development industries was both opprobrious and ironic. These industries have consistently reported offshore investment in housing as minimal. They repeatedly claimed that foreign investment in housing is very low. Four or five percent figures were often cited as having little impact on Canadian housing prices.
These low estimates were “aided and abetted” by CMHC ahead of the implementation of the January 1, 2023 two-year, Foreign Investor Housing Ban. According to Canada’s National Housing Agency (CMHC) the housing investment ban was only expected to affect around two percent of home purchases each year.
However, the Industry News on April 23, 2023, just a few months after the Bill C-19 legislation’s enactment, that aimed to prevent residential property prices being further inflated by foreign buyers, reported: “Canadian government partially backtracks over foreign home buyers ban”. “Since the publication of the regulations in December 2022, stakeholders have lobbied and sought clarification from the federal government"
“On, March 27,2023 the Minister of Housing announced amendments to the regulations to address the Objections. The host of new amendments, read exemptions, were in addition to all the existing amendments. Th objections were made even before all the new exemptions were enacted on December 26, 2022.
A CBC article stated, “Critics say the foreign buyers ban, which was aimed at making housing affordable for Canadians, had many exemptions and was more of a political manoeuvre. They say it's clear housing remains out of reach for too many in Canada”.
https://www.cbc.ca/news/canada/british-columbia/canada-foreign-buyer-ban-housing-affordability-1.7058154
The CBC’s article also reported: “CMHC said Ottawa is working to ensure every Canadian … has an affordable place to call home", and also “A few months after the ban was put into place more exemptions were added. These included students, first-time buyers and properties under $500,000.”
Other notable comments were:
“Canada's ban 'full of holes,' critics say”.
"There were so many exemptions to the foreign buyer ban that it really didn't make any difference at all," said Tim Sabitov of Team 3000 Realty Ltd., in Vancouver.
Any impacts of the ban were short-lived, according to Brendon Ogmundson, the chief economist for the B.C. Real Estate Association said: "The foreign buyer ban was more political than economic policy or housing policy,".
"Canada's ban was full of holes," said Andy Yan, director of the City Program, a continuing education program focusing on urban planning and development at Simon Fraser University: "I would tell people it was more like cheesecloth than duct tape."
"So much of the wealth ladder in Canada has been based around real estate," Yan said: "I think it's come at the detriment of quality affordable housing for the majority of folks who are renters."
Mike Stewart, a realtor with Vancouver New Condos, said: "the ban was maybe a way for certain federal politicians to do better at the next election as opposed to trying to help housing affordability."
Nevertheless:
“Ottawa, Ontario - Today, the Honourable Chrystia Freeland, Deputy Prime Minister and Minister of Finance, announced the federal government’s intent to extend by an additional two years the existing ban on foreign ownership of Canadian housing.”“For years, foreign money has been coming into Canada to buy up residential real estate, increasing housing affordability concerns in cities across the country, and particularly in major urban centres. Foreign ownership has also fueled worries about Canadians being priced out of housing markets in cities and towns across the country.”
“By extending the foreign buyer ban, we will ensure houses are used as homes for Canadian families to live in and do not become a speculative financial asset class. The government is intent on using all possible tools to make housing more affordable for Canadians across the country.”
Oak Bay Watch Conclusion:
While it is “heartwarming” to have our government's, Deputy Prime Minster express there are concerns and worries about the impact of years of foreign money buying up real estate increasing affordability and pricing Canadians out of their own housing markets, However, it is obvious her Government has not recognized that since the Ban was enacted in January 2023 there has been no decrease in housing costs.
In fact, a recent February 2024 Canadian Imperial Bank of Commerce poll showed 76% of Canadians feel home ownership is out of reach for them. The Public Sector Opinion Polling Institute, a world-renowned market research and consulting firm with expertise in consumer insights, public opinion, and social research. With a presence in over 90 countries that provides clients with innovative research solutions and actionable insights to help them make better-informed strategic decisions, on April 26, 2024 reported:
“Among Canadians who do not own a home, over seven in ten (72%) say they have given up on ever owning a home (up 9 points since March 2023)”.
It was also noticeable, that although the Deputy Prime Minister recognized there are housing crisis concerns and worries, she doesn’t identify who is experiencing them. However, the fact the Government is extending their, what many experts have called in so many words a, “pretend Foreign Ownership Housing Ban”, indicates the Government has no intention of enacting any significant, useful prohibition on offshore housing investment.
“By extending the foreign buyer ban, we will ensure houses are used as homes for Canadian families to live in and do not become a speculative financial asset class. The government is intent on using all possible tools to make housing more affordable for Canadians across the country.”
Oak Bay Watch Conclusion:
While it is “heartwarming” to have our government's, Deputy Prime Minster express there are concerns and worries about the impact of years of foreign money buying up real estate increasing affordability and pricing Canadians out of their own housing markets, However, it is obvious her Government has not recognized that since the Ban was enacted in January 2023 there has been no decrease in housing costs.
In fact, a recent February 2024 Canadian Imperial Bank of Commerce poll showed 76% of Canadians feel home ownership is out of reach for them. The Public Sector Opinion Polling Institute, a world-renowned market research and consulting firm with expertise in consumer insights, public opinion, and social research. With a presence in over 90 countries that provides clients with innovative research solutions and actionable insights to help them make better-informed strategic decisions, on April 26, 2024 reported:
“Among Canadians who do not own a home, over seven in ten (72%) say they have given up on ever owning a home (up 9 points since March 2023)”.
It was also noticeable, that although the Deputy Prime Minister recognized there are housing crisis concerns and worries, she doesn’t identify who is experiencing them. However, the fact the Government is extending their, what many experts have called in so many words a, “pretend Foreign Ownership Housing Ban”, indicates the Government has no intention of enacting any significant, useful prohibition on offshore housing investment.