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Real Estate ‘Growth coalition’ kept foreign money flowing into B.C. real estate, professor says

University of B.C. professor emeritus David Ley draws a direct line between the development industry and past governments that courted foreign investment.

Dept. of Geography, UBC

All levels of government have courted foreign money and actively encouraged it for decades, and we are seeing the consequences of that policy in Vancouver’s unaffordable housing market today.

That’s the general message from University of B.C. professor emeritus David Ley, who filed his expert opinion on behalf of the province in response to a lawsuit filed by young Lower Mainland property owner and Chinese citizen Jing Li.

The lawsuit launched against the government’s foreign-buyer transfer tax is a pivotal, potentially costly case for British Columbians. In the past few months, both sides have been requesting expert opinions to support their case.

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The province sought out a report from Dr. Ley, and affidavits from Simon Fraser University adjunct professor Andy Yan and citizen activist Justin Fung. The plaintiff’s lawyers also questioned Prof. Yan and Dr. Ley in recent examinations for discovery, which are part of the pretrial process. For many years, Prof. Yan and Dr. Ley have been sounding alarm bells about the impact of foreign capital pouring into the region’s housing market. They offer the Crown’s defence years of formidable research into the origins and scope of the crisis.

Ms. Li’s lawsuit could become a much bigger class action against the province. Her lawyer, Luciana Brasil, says there is a long list of foreign buyers backing her claim that the tax discriminates against Chinese nationals, and it’s a move that the province did not have the legal power to make. Ms. Li says she was forced to pay an additional $83,850 after the foreign-buyer transfer tax was introduced, when she purchased a townhouse in Langley. The Burnaby resident says her family and friends helped her buy the property.

Local experts have already submitted affidavits on behalf of the plaintiff and the crown as part of a summary trial scheduled for the weeks of June 25 and July 16.

In the second wave of affidavits, Dr. Ley and Prof. Yan were asked by the province’s lawyers to prepare responses to expert opinions submitted on behalf of the plaintiff. They responded to opinions given by University of B.C. professors Tom Davidoff, Henry Yu and Nathanael Lauster, and Jens von Bergmann, a mathematician and consultant. The plaintiff’s lawyers are setting out to prove that the tax is discriminatory, did not achieve the intended result of lowering property values and that it is not within the province’s power to implement such a tax.

UBC economist Tsur Somerville has already provided an affidavit on behalf of the crown, as did Simon Fraser University finance professor Andrey Pavlov.

Dr. Ley doesn’t mince words in his expert opinion. He draws a direct line between the development industry and past governments that courted foreign investment. Government enthusiastically invited foreign capital, he says, and today, we see the consequences.

He explains that B.C. governments, facing a declining resource-based economy, have sought out East Asian investment since the 1980s. Starting with the sale of the Expo 86 site in 1988, the province made it abundantly clear that it was open to doing business with Asia, particularly in residential-property development, says Dr. Ley.

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“This policy has been attractive to BC development and real estate companies, and they have formed an informal growth coalition with government,” he writes. “In the face of growing public criticism, the growth coalition has engaged in various discursive tactics to preserve capital flows to property and disqualify dissenting voices. One tactic has been to allude to racist motives when reference is made to East Asian sources of property capital in the Vancouver region.”

In regard to Dr. Lauster and Dr. Yu, who argue that the foreign-buyer transfer tax is part of a legacy of racism in Vancouver, Dr. Ley concurs with the historic part of their account. However, he says, “in Vancouver’s challenging housing market, Chinese Canadians are equally subject to acute affordability pressures and are among the leaders in urging solutions. Unlike the colonial period, there is no ethno-racial divide that neatly separates, homogenizes, and penalizes populations of East Asian origin.”

Dr. Ley has been a professor of urban geography at UBC since 1972, specializing in housing markets and immigration from Greater China. His research culminated in his 2010 book, Millionaire Migrants. He also studied housing bubbles in Vancouver, Hong Kong, Singapore, Sydney and London, and how global capital has shaped property markets in those cities. Dr. Ley had been asked by Crown attorney Karen Horsman to respond to expert reports prepared on behalf of the plaintiff by Dr. Lauster and Dr. Yu.

Dr. Ley also addressed government’s continuing desire to keep the foreign money flowing into the region, as part of the “growth coalition.” Dr. Ley explained in an email that sociologist Harvey Molotch had coined the term “growth machine” in 1976 to describe the alliance of politicians and developers.

“I’m using the term ‘growth coalition’ to describe that convergence of political and land development interests, both of them pursuing growth for overlapping but not identical reasons,” Dr. Ley says.

British Columbia, he says, has been particularly active in its trade tours to Hong Kong and China’s Mainland cities, “to prime the pump of economic relations.” The province has become dependent on the fees generated by the Business Immigrant Program (BIP) and real estate tax revenues. He cites the NDP opposition to the federal government’s effort to get tough with tax evasion in the 1990s, with tougher enforcement of the BIP. The development community also reacted.

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“It seemed that more important than accurate reporting of global income was the imperative to keep the money flowing into BC,” he writes.

Prof. Yan is director of the City Program at SFU, adjunct professor in Urban Studies and UBC’s School of Community and Regional Planning, and a registered planner and housing data analyst who regularly speaks on housing issues in the media and at conferences worldwide.

Andy Yan is a registered planner and housing data analyst who regularly speaks on housing issues.

DARRYL DYCK

The plaintiff’s lawyers questioned Prof. Yan on May 25 for about four hours. In his submission, he addressed reports already submitted by Professors Yu and Lauster and Dr. von Bergmann. He took the experts to task for failing to address the hyper-commodification of housing as well as immigrant-settlement patterns in the region, property type, period of construction and the impact of unaffordability on Chinese Canadians. He cited the first dataset provided by the federal government on non-resident ownership in Metro Vancouver, released in December, 2017. The National Housing Statistics program showed that foreign nationals had purchased 4.8 per cent of all property types in Metro Vancouver. But it depends how you closely you look at the statistics. For example, non-resident owners accounted for 7.6 per cent of all housing types in Vancouver, 10.9 per cent of condos in Richmond, and 23 per cent of condos built between 2016 and 2017 in Coquitlam.

“The lack of detail can greatly affect what is assumed as the state of non-resident ownership in Metro Vancouver,” he said in his submission. “Conclusions should not be drawn from the NHSP without careful consideration of the context and geographic scale of the details of the data.”

He critiqued Dr. Yu’s and Dr. Lauster’s reports for disregarding the vast documentation and media reports on the globalization of residential real estate.

“Governments around the world have implemented policies including taxes to limit the role of foreign nationals in [the] local residential real estate market,” he writes. “These reports also fail to acknowledge the agency of Chinese Canadians and other visible minorities as political and social actors who have actively and publicly advocated for policies to deal with foreign ownership and capital in Vancouver.”

In his examination for discovery, Prof. Yan cited Justin Fung and Eveline Xia, who launched the #donthave1million campaign, as some of the most vocal of that group.

Justin Fung helped launch the non-profit group Housing Action for Local Taxpayers.

DARRYL DYCK

Mr. Fung is a Vancouver-born Chinese Canadian who works in the tech industry. He helped launch the non-profit group, Housing Action for Local Taxpayers (HALT), which takes the position that the affordability crisis is due largely to offshore wealth buying into the region’s housing market. It’s wealth that has been “facilitated by a powerful property development and real estate lobby that have too long influenced government policy and have profited significantly off this foreign investment and housing affordability crisis,” Mr. Fung writes in his affidavit, on behalf of the crown.

HALT supports the foreign-buyers tax as a necessary measure to address the affordability crisis. The group has gone as far as supporting an outright ban on foreign ownership of residential property.

Many members of the group are visible minorities, including Asians, Mr. Fung said in an interview.

“One of the reasons why I personally became involved in HALT and started speaking out was because I saw that others who were publicly citing the role of foreign buyers in price escalation – in particular, the role of wealthy Chinese foreign buyers – were attracting accusations of racism… I considered that I was in a position to contribute usefully to the public discourse, without the fear that others might have of being labelled racist,” he says.

He says that public concern about Chinese wealth flowing into Metro Vancouver is not about race. Instead, he argues, “the concern is fundamentally about class and wealth inequality… if left unchecked, the inflow will create serious wealth inequity in Canadian society which in turn will exacerbate stereotyping and racism towards Chinese Canadians.”

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