Mayor Gregor Robertson has been urging the B.C. government to enact tax measures to raise funds for affordable housing and discourage the quick resale of new housing.DARRYL DYCK/The Globe and Mail
B.C. Premier Christy Clark says the City of Vancouver could do more to deal with the shortage in affordable housing that has prompted Mayor Gregor Robertson to call for urgent talks with the province.
In a Thursday letter to the mayor in response to his calls for provincial action on the issue, Ms. Clark acknowledges she shares some of his concerns about affordability, especially for first-time home buyers.
But she noted an Urban Development Institute report last year found Vancouver's civic fees and levies add $76,144 to the price of a new condo unit worth about $450,000.
"Beyond any new taxes to curb demand, there is also the option of increasing supply through better land-use planning," she said in response to the mayor's May 22 letter raising alarms about the issue.
Mr. Robertson has been urging the B.C. government to enact tax measures to raise funds for affordable housing and discourage the quick resale of new housing.
Specifically he has suggested the province increase its property-transfer tax on the most expensive properties in the city and invest the proceeds into affordable housing. Mr. Robertson also proposes a tax to curb housing speculation – an idea that Finance Minister Mike de Jong has rejected.
In his May 22 letter, released this week, the mayor says Vancouver's rapidly escalating housing prices are causing "despair" among middle-income citizens and families, creating a challenge for elected leaders at all levels.
In Vancouver, the average price of new and existing detached properties last year reached $1.9-million. And a recent Vancouver City Savings Credit Union study predicts the average price of new and existing detached houses could reach $4.4-million in 2030.
But in her Thursday letter, obtained by The Globe and Mail, Ms. Clark warns new tax measures to drive down housing prices "could have the unintended effect of hurting current homeowners across the region."
As an example, she said driving down the cost of housing by 10 per cent would mean a family with a home now worth $800,000 could lose $80,000 in equity, putting homeowners with large mortgages into negative equity.
A Finance Ministry analysis the Premier sent Mr. Robertson along with her letter warns that a 10-per-cent cut in housing prices due to policy measures could cost $60-billion in home equity in the Greater Vancouver area, averaging about $85,000 per homeowner.
Ms. Clark said her government is "actively" looking at options but wants to protect existing homeowners' equity – "not just simply raising more taxes for government."
The undated Finance Ministry analysis says ministry data do not support the perception that foreign investors are driving an affordability crisis in residential real estate in Greater Vancouver, estimating that foreign buyers likely comprise less than 5 per cent of home-sales activity in the region.
Measures to drastically reduce foreign investment could cost $1-billion in residential real-estate sales, representing about 1,400 units, and cost 3,800 total jobs, mainly in the construction and real-estate sector, the analysis says.
Also, the analysis says measures would have to target residents and non-residents because the demand for housing and housing prices are driven by varied factors including demographics, interest rates, geographic restrictions and the health of the broader economy.
"In particular, a tax on foreign buyers would not address the long-term issue of a limited supply of land servicing an ever growing population in Greater Vancouver," it says.
Options that could be pursued, says the analysis, include ensuring property speculators pay their "fair share" of tax and encouraging densification.
The analysis also says the province could encourage local governments to take measures such as encouraging affordable housing units, a "housing-friendly" regulatory environment that also encourages density and property tax incentives to build or renovate affordable housing.
In an interview, acting mayor Raymond Louie conceded the city had not costed or otherwise calculated the numbers underpinning its proposed tax measures to deal with affordability.
"We have not concluded on specific details on the mechanisms or the thresholds," he said in an interview, calling for talks with the province ahead of crunching the numbers on the proposals.
Ian Bailey