Yuen Pau Woo is president of HQ Vancouver, a public-private partnership that promotes British Columbia as a location for head offices.
For all the ink that has been spilled on the issue of housing affordability in Vancouver, relatively little insight has been advanced, with even less written on practical solutions to the problem. Much of the commentary has had a breathless quality to it – as if the discovery of sky-high housing prices in Vancouver was tantamount to an exposé of high crimes and grave injustices.
Don't get me wrong: The affordability of housing in Vancouver is a serious issue that needs to be addressed. But the mob hunt for villains has resulted in earnest reporting of dubious facts to fit the crime scene, and equally dodgy answers to a problem that resists quick fixes. All of which caters to a public that loves reducing complex social issues to simple morality plays.
Take, for example, the recent citation in a number of media outlets of a National Bank of Canada study which suggests that a third of all Metro Vancouver house purchases were made by Chinese buyers. It is bad enough that this conclusion was reached by extrapolation solely from U.S. data (described by the authors as "a back of the envelope" attempt). But even if this account is credible, why was there no reflection on the overwhelming majority of (non-Chinese) buyers in Metro Vancouver who by definition must have also contributed to higher housing prices?
In the same way, the recent controversy over "flipping" has revealed unethical behaviour on the part of some real estate agents, but it is not a reason as such for the rise in house prices and it is certainly not a problem that is unique to Chinese buyers.
The reality is that demand for single-family housing in Metro Vancouver exceeds supply. Any addition to demand will add further pressure to prices. There is a case for surcharges on real estate purchases by foreigners and against speculators, but the underlying demand for Vancouver real estate from natural increases in the population, as well as from migration (domestic and international), will keep prices high for the foreseeable future.
In the search for blame, the easiest targets are the "outsiders" who have purchased properties. But these buyers have, in effect, transferred massive amounts of capital into the hands of local residents who sold their properties and, in many cases, reaped large capital gains. What have the locals done with these windfalls? Bought second properties in Palm Springs? Invested in a local startup? Put the money aside as an inheritance for their offspring? The short answer is that it is none of our business.
Herein lies the hypocrisy: We are critical of outsiders who part with millions to buy homes in Vancouver but indifferent about the local residents who have pocketed the proceeds.
Any solution to the affordability problem will have to include a sharp increase in housing stock, especially higher-density residences. A drift to the suburbs is inevitable, and it can be made to work if housing development in outlying areas of Vancouver is coupled with the development of community amenities and, importantly, investment in efficient and affordable public transit. I am bemused by advocates of surcharges on foreign ownership of residential property who cite Singapore as an example of how to deal with housing affordability, but fail to understand that these measures are only part of a much larger package of massive investments by the Singaporean government in public transit and public housing. For our part, residents of Greater Vancouver voted against a proposal to use an additional 0.5 percentage points in sales tax for investments to improve public transit for the region. As for public housing – it is a political non-starter in this country if there ever was one.
A fundamental problem in much of the writing to date is the conflation of house prices and affordability. In fact, affordability is a function of prices and income. Vancouver's problem is not simply that house prices are sky-high; it is also that average incomes are low compared to other major metropolitan areas. For example, the average earnings of university graduates in the Metropolitan Vancouver area in 2005 was $52,000, compared with $53,000 in Winnipeg, $62,000 in Hamilton, $64,000 in Toronto and $77,000 in Calgary.
A realistic solution to the housing-affordability problem will have to address both sides of the equation. Workers in the Lower Mainland are underpaid. That they are willing to stay nonetheless is a testament to the extraordinary livability and attractiveness of the region. But self-exploitation is not a sustainable human-resource development strategy, and wages have to rise, especially for fresh entrants to the work force.
Tackling the affordability problem also means finding ways to encourage high-net-worth immigrants to invest in wealth-generating and job-creating activities locally rather than excoriating them for pushing up house prices.
Many commentators write – damningly – that recent migrants from China have come to our shores for the greater security and livability that Canada offers, rather than for business purposes. But what is so damning about wanting to have greater security and better living conditions for your family? And if business opportunities in China or elsewhere in the world are superior to those in Canada, why would we discourage these individuals from pursuing those opportunities from a Vancouver base? There is more than a whiff of ugly resentment in complaints about Chinese migrants who simply "use" Vancouver as a base for their families while pursuing business interests elsewhere. And yes, if some of them are evading taxes, loopholes should be closed and the law better enforced.
In fact, a growing trend I have observed among immigrants from China is the desire for greater alignment of family and business interests, which translates into a quest for business-investment opportunities in Vancouver and surrounding regions. Of the many Chinese corporate head-office prospects that HQ Vancouver is working on, the vast majority have an immigrant connection. Most of the principals involved in these deals came to Canada between five and 20 years ago, which provides an indication of the time lag involved.
We should not be surprised that the first priority of high-net-worth immigrants is to buy a house, settle the children in school and get to know the lay of the land. That these individuals continue to pursue their business interests in China or elsewhere during the transition period is only natural. But after a period of time, many of them want to spend more time with their families and to enjoy the livability that brought them to Canada in the first place – hence the search for local business opportunities.
There is no guarantee that these immigrants will be successful in finding business opportunities in Canada, but we owe it to them – and to ourselves – to not judge their motivations or to cast aspersions on their legitimate desire to buy a house in a highly attractive and livable city. They too have an interest in keeping Vancouver affordable.