Comforting as it may have been for Premier Christy Clark to announce that her government planned to more tightly regulate “shadow flipping,” it is really a side show when it comes to the problem of housing affordability.
Curious, you might think, for this move to be made in the midst of an investigation, called for by the premier to look at this very matter among a number of other sleazy practices carried out by realtors to improve their bottom line.
But Clark did have NDP MLA David Eby nipping at her heels, offering up his own legislative solution. She just had to get ahead of all that.
The other troubling matter, though not central to the problem of soaring real estate prices either, is the matter of the significant number of vacant houses and condominiums that might otherwise be used to relieve Vancouver’s near-zero rental vacancy rate.
It was less than comforting to see the reception given to a study commissioned by the City of Vancouver to look at those vacancies. Ecotagious, the consultants commissioned to do the work, concluded that the rate of empty homes had barely shifted in the last decade. But the author of the report also conceded how his mandate from the city meant the study conducted was extremely limited in scope due to the tools used and the time period covered.
Nonetheless council and many in the media leapt to the conclusion, as we saw in the Globe and Mail: “A new report has popped the bubble on the prevailing myth that
Vancouver’s real estate problems are a result of a wave of non-local investors buying homes and leaving them empty.”
It actually did nothing of the sort. University of B.C. geographer David Ley, who has studied the issue of housing affordability both here and around the globe for the past 15 years, noted that conclusion was simply “over the top.”
But for Ley, the main problem Vancouver and other cities face has been, and will continue to be, foreign investment — trillions of dollars coming now primarily from mainland China. It is virtually out of control and it’s undeniably the driving force in pushing up property values to obscene levels in every corner of Vancouver and causing a whole generation of people to consider leaving town if they haven’t already.
How out of control is it? Well, FINTRAC is the federal agency setting regulations and monitoring large sums of money coming from abroad as a way of uncovering money laundering. It relies on the real estate industry, among others, to report back on transactions. But following FINTRAC’s audit last summer, it found the real estate industry compliance in reporting was “significantly” below standards. And as bad as it was in the past, FINTRAC spokesperson Darren Gibb said the latest poor results mark a “significant increase from previous years.”
In a peer reviewed paper David Ley published a few months back in the International Journal of Housing Policy entitled, “Global China and the making of Vancouver’s residential property market,” he explains that we are our own worst enemy.
He writes: “Most important is the claim that the question of foreign ownership had nothing to do with government. Yet it most certainly did, for [Canadian federal, provincial and municipal] governments had for 30 years led trade and investment missions to Asia and had used the tool of business immigration to draw in entrepreneurs and their capital.”
In Vancouver that was highlighted most notably with the sale of the Expo land to Hong Kong entrepreneur Li Ka-shing in the ’80s. Many smaller Chinese investors from Hong Kong and Taiwan would follow. Now the main flow of capital is from mainland China.
The consequence, whether intended or not, as Asian money flowed primarily into real estate, is the lack of affordability we face today.
Of course when Christy Clark was asked about the impact of Chinese money on real estate, she first said the province had not collected any data. Then, as Ley observed, she drew on a “flimsy analysis, quickly debunked.” It was a short government report based on data from the B.C. Real Estate Association, which has been in denial since the first sharp housing price increases after 1988.
Ley concluded: “The premier’s source of authoritative data, the vested interest of the BCREA, revealed a convergence of institutional objectives.”
That should bring you no comfort at all.