A new study finds Metro Vancouver’s growing housing affordability crisis is widening the gap between the rich and poor, and requires a multi-pronged response that would restrict absentee ownership, increase affordable housing supply for both new owners and renters, and make property taxes fair.
“The housing crisis is top of mind for most people,” says Marc Lee, an economist with the Canadian Centre for Policy Alternatives and author of Getting Serious About Affordable Housing. “The government has recommended some small measures to track foreign ownership and combat shadow flipping. But this will have little to no impact on the overall crisis. Simply put, the housing market is broken, and to fix it we need a comprehensive approach.”
Lee’s study finds that the top 20% of households hold 70% of the net worth of principal residences. He says the provincial government should move quickly to restrict outside money that is distorting the local housing market. “Vancouver is just one of the global cities where investors are using real estate to park their wealth – not as a place to live. We need to make sure that our housing supply is for people who live in and contribute to our local economy.”
In addition to cooling external demand, Lee calls for public investments of $1.25 to $2.5 billion per year to build 5,000 to 10,000 units of affordable housing, with a focus on cooperative and social housing. Most of this upfront cost would be repaid over time through rent. He also recommends exploring affordable ownership models, where there are limits on resale prices. Whistler has greatly increased housing availability and affordability for local workers with such measures.
“We need about 5,000 new units of affordable non-market housing per year just to keep pace with demand. And more if we want to address the backlog, from thousands of homeless people to the estimated 145,000 households who spend more than 30% of their gross income on housing.”
Lee outlines a series of proposed reforms to the current property tax and property transfer tax to cool speculation, reduce inequality and provide funds for the recommended investments in housing. He points to models like London, England, where the government has made its property transfer tax steeply progressive and added an additional transfer tax on purchases by non-resident buyers and of second homes and rental properties. Combined, these reforms could raise significant new revenues to finance an ambitious social housing built-out, while also making the property tax system more progressive.
"The surge in real estate prices has further increased the gap between rich and poor, creating profits for homeowners that are more like lottery winnings than a reward for hard work," says Lee. "For those at the higher end of the real estate market, those winnings should be taxed so we can build the affordable housing we need."