Don?t blame affordability crisis on just foreigners, CMHC says
Peter O’Neil
The Vancouver Sun
It is convenient but wrong to blame foreign buyers for Vancouver’s housing affordability crisis, the head of Canada’s housing authority said Wednesday.
Canada Mortgage and Housing Corp. President Evan Siddall, citing a year of research by the federal Crown corporation, pointed instead to several factors and actors responsible — including critics of federal housing policy like Vancouver Mayor Gregor Robertson.
“While it would be convenient to hang all of the blame for high prices on others — offshore buyers — it’s just not that simple,” Siddall told members of the Greater Vancouver Board of Trade.
“Sure, it makes for a tempting narrative: them, not us.”
Foreign investment, according to Siddall, is “clearly” a factor — but not the only one.
He cited new CMHC data on the condominium market showing that 2.2 per cent of condos in Metro Vancouver are currently owned by offshore buyers — roughly in line with the 2.3 per cent total in 2014, and down sharply from the 3.5 per cent in 2015.
The survey also showed that offshore ownership of newer condos built since 2010 was higher — at five per cent.
“The evidence tells us that the origin of investor activity in Canadian residential real estate is predominantly domestic,” Siddall said.
Other key factors include low interest rates, population and economic growth that is spurred by the heavy concentration of Canadian immigrants wanting to live in Vancouver, Canada’s tax regime, and “supply constraints” that are particularly apparent in Vancouver, according to Siddall.
Robertson, who has called for action against both foreign and domestic speculators, recently sent a letter to the federal government asking Ottawa to take action to ease the pressure.
Robertson echoed in his letter the Canadian Federation of Municipalities’ call for Ottawa to devote $12.6 billion to housing in the upcoming 2017 budget. Siddall said Ottawa is indeed planning on making new investments in housing, but said Vancouver city council needs to look in the mirror.
“Municipal leaders talk of a housing crisis and their primary solution is to demand $12.6 billion in urgent funding from the federal government,” he said.
“The weak and lagging supply response in Vancouver — rezoning restrictions, density limits, development fees, and the time it takes for approval of new supply, and not just for affordable housing — needs urgent attention.
“If there’s a crisis, we should all act like it.”
The CMHC housing market supply data indicate that supply in the resale market in Vancouver is near 10-year lows, with around four months’ supply of homes.
“The lack of supply of existing homes has caused demand to spill over into neighbouring communities, as well as the new home market, pushing down the stock of newly completed and unsold units to near 10-year lows,” Siddall said.
A key problem, he said, is the city’s aversion to replacing singlefamily homes with higher-density structures.
“Our attachment to low-density single-family housing in many neighbourhoods represents regressive urban planning and makes the problem worse,” he said.
“This is basic economics. The more we hold back supply, the faster prices will rise in response to increased demand. And Vancouver’s supply response is among the weakest in Canada.”
He said it isn’t clear what will be the impact of the B.C. government’s 15 per cent tax on foreign real estate investment.
“Some people have taken the recent slowdown in Vancouver as clear evidence of a foreign investment culprit,” he said.
“However, the slowdown in activity had started before the province announced the foreign investment tax. Heavy activity before the effective date, coupled with a marked slowdown after, is consistent with a temporary pull forward of demand.”
He cited evidence from Hong Kong and Sydney, Australia, that suggests the impact of these taxes is temporary.
“Meeting with Hong Kong authorities two weeks ago in London, I learned that foreign transactions actually increased following the introduction of their stamp duty. In fact the only impact may be psychological: a reduction in extrapolated expectations, or froth, because people believed the tax would work,” he said.
Siddall concluded by urging Vancouverites to be cautious on the foreign investment issue.
“We cannot allow it to become a wedge that divides us, separating neighbours and communities and creating tensions between newcomers and those that have been here longer,” he said.
A city spokesperson said city staff are finding ways to improve the building permitting process in the coming year.
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