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  • NL - Is Oak Bay Protecting Our natural Assets?
We’re being sold a hous­ing myth
  • GARY MASON: The Globe and Mail 29 Apr 2022Home
More sup­ply alone won’t fix the hous­ing crisis – not if hous­ing remains an asset class for investors.
Fed­eral Con­ser­vat­ive lead­er­ship can­did­ates are get­ting a lot of atten­tion these days for their pro­posed solu­tions to Canada’s hous­ing crisis.

A couple of weeks ago, Con­ser­vat­ive MP Pierre Poil­ievre gained nation­wide plaudits for a slick video denoun­cing insane house prices across the coun­try. He blamed them on “gate­keep­ers” – muni­cipal politi­cians – who he said are adding hun­dreds of thou­sands of dol­lars to the cost of every new home built. Mr. Poil­ievre never says how he would get rid of these extraordin­ary (or, more accur­ately, ima­gin­ary) costs these “gate­keep­ers” are adding to the price of hous­ing – but hey, it’s the sound­bite that’s import­ant.

Mean­while, Scott Aitchison – the Parry Sound-Muskoka MP also seek­ing the Tory lead­er­ship – believes end­ing exclu­sion­ary zon­ing to get shovels in the ground faster is the solu­tion to things. And the Con­ser­vat­ives are not alone: The fed­eral Lib­er­als have said that get­ting muni­cip­al­it­ies to approve hous­ing faster is the answer to all that ails us.

But they’re all empty and simplistic words. In fact, not one thing these folks are recom­mend­ing is going to rein in house prices on their own.

A massive new con­domin­ium com­plex being built in the heart of Van­couver by the developer West­bank shows us why. The project will add 3,323 homes to the city – so it’s exactly the kind of boost in hous­ing sup­ply that every­one’s talk­ing about.

There’s only one prob­lem: Only 13 per cent of the homes for sale or rent are deemed “afford­able” – i.e. those that can be obtained on a low-to-middle-class fam­ily income. The rest are lux­ury units being sold between $2,000 and $2,500 per square foot. So, a two bed­room 1,000-square-foot condo built at $2,250 per square foot would go on the mar­ket at a min­imum of $2.25-mil­lion. The units are being mar­keted to the wealthy, even if they don’t live in Van­couver or even in Canada – and they’re going to sell.

Dozens of sim­ilar condo towers are being planned for Van­couver over the next few years. Does any­one think the developers behind them are going to decide to build their units at half the cost as West­bank? Not a chance. They’re in the game to make money, too.

All new hous­ing sup­ply is going to be priced at cur­rent mar­ket rates
at a min­imum, and most likely higher.
Politi­cians are lying to us all about hous­ing prices: Tam­ing the prob­lem will not exclus­ively entail adding sup­ply. So what should be done?

For starters, there needs to be a crack­down on indi­vidu­als and cor­por­a­tions buy­ing up real estate for their invest­ment port­fo­lios. In places like Toronto and Van­couver, this rep­res­ents as much as 30 per cent of the mar­ket. Put a hefty sur­charge on these pur­chases as they’ve done in other world cit­ies, and watch the demand soften.

So what if sev­eral of our fed­eral and pro­vin­cial politi­cians are among those investors who own mul­tiple prop­er­ties? They are also among those flip­ping homes, an activ­ity that is also con­trib­ut­ing to rising valu­ations. Yet, noth­ing gets done about it.

Real estate invest­ment trusts (REITs) are all the rage, too. These trusts, which have been mak­ing share­hold­ers very wealthy for years now, are also bene­fit­ing from favour­able tax treat­ment from Ott­awa. In other words, REITs are get­ting help to reap profits while fuel­ling the hous­ing emer­gency. Why are they even allowed?

Why aren’t Con­ser­vat­ive politi­cians talk­ing about this issue as a con­trib­utor to rising hous­ing costs? Well, it might hit a little close to home, and prove too con­tro­ver­sial with cer­tain seg­ments of the party. But that’s just another form of NIM­BY­ism: solve the hous­ing prob­lem, just so long as it doesn’t affect me or my fam­ily’s abil­ity to become even richer. (YIMBYism: Yes in my back yard - for profit)

The fed­eral gov­ern­ment recently announced a two-year ban on for­eign buy­ers, but there are more holes in the legis­la­tion than in a fash­ion­able pair of jeans. For instance, for­eign stu­dents can still buy real estate. We’ve seen this movie before in Van­couver, where kids at the Uni­versity of Brit­ish Columbia were buy­ing $30-mil­lion man­sions. Even if the per­cent­age of for­eign buy­ers in Canada is rel­at­ively small – 7.6 per cent in Van­couver proper, 8 per cent in Toronto – it’s still a com­plete joke.

There are other issues that aren’t eas­ily fix­able. More than 100,000 people poured into B.C. in the past year. You’re never going to build enough hous­ing quickly enough to sati­ate the soar­ing demand those kind of immig­ra­tion levels cre­ate.

Sup­ply issues do res­ult in rising prices. Immig­ra­tion is the lifeblood of this coun­try, but it will con­tinue to come at a cost, sur­ging house prices among them.

Canada’s politi­cians know that it will take vari­ous com­plex solu­tions to make real inroads in address­ing our hous­ing crisis.
But It seems they’re too gut­less to go there.