Whatever happened to the “speculation tax”?

This week, Taiwan implemented a “luxury tax” on housing properties lying dormant due to speculation (as reported by the BBC). This begs the question: why not take action in Vancouver, where the affordability crisis is similarly severe?

During his 2008 campaign, Gregor Robertson proposed such a “empty condo tax” to get more housing onto the market and cool-down prices. But as with other promises, he has failed to deliver or take responsibility. (BC law allows strata councils to ban renting-out condos – whereas Ontario law, for example, does not – and this partly explains the high condo vacancy rates. Armed with this excuse, and under pressure from developers, Robertson grew content to blame the provincial government instead of using tools at his disposal to slow speculation.)

Another reason for lack of action on speculation is that the real estate lobby has been spinning the numbers. In May 2009, Andy Yan of Bing Thom Architects published a study estimating the percentage of “empty condos” (identified by low hydro usage) at 5-8%. Real Estate interests who were against the “empty condo tax” suggested that Yan’s work disproved the empty condo “theory.” But even this “low” estimate suggests that the condo vacancy rate is 250-400% that of the 2010 rental vacancy rate. With 80 thousand condos in Vancouver, there are about 5000 empty condos, many of these downtown.

The City’s Housing Centre Director Cameron Grey estimates that, in total, there are about 20,000 empty housing units in Vancouver (including all condos, houses, duplexes, etc). For comparison, that number is roughly equivalent to the total number of social housing units in the city (21,500, according to City numbers).

Andy Yan told The Mainlander that the ’empty condo’ phenomenon is only one driver of Vancouver’s spiraling housing prices. “The point of our story is that even if you make 5,000-10,000 available through an ’empty condo’ tax, it might not make a big difference. Other behaviours of property owners, such as ‘flipping’, might be also contributing to skyrocketing housing prices.” He suggested that while an ’empty condo’ tax might be difficult to enforce, regulations on speculation such as property transfer fees are relatively simple to implement. Yan also emphasized that Vancouver is in desperate need of affordable rental, while empty condos rented-out at market price would not fill this need.

Whereas the real estate lobby saw Yan’s study as a vindication of unregulated speculation, on the contrary we at The Mainlander propose an inverse take-home-message: that a multi-pronged approach will be required to regulate the market. Penalizing owners of empty condos is not a silver bullet for the speculation spiral driving up housing prices in the Lower Mainland. But it is a start.

Community paints Pantages to protest condo development

This week, Downtown Eastside residents rallied at the abandoned Pantages Theatre on the 100 block of East Hastings, and painted its facade with slogans like “100% social housing here.”

The Pantages Theatre and adjacent properties (158, 138, 134, 132, 130 East Hastings) have been bought up by developer Marc Williams, of Worthington Properties (for the company’s *interesting* history, read this and this). Last month, the City granted Williams’ request to begin demolition of the heritage building. Development permits have been issued, and Williams will be presenting his plans for a condominium complex to the Development Permit Board on August 22nd 2011.

Downtown Eastside housing advocate Wendy Pederson says a condo development next to the Carnegie Centre would be “like a bomb in the middle of the low-income community.” The Downtown Eastside Neighbourhood Council has identified the Pantages as one of ten sites to be bought by the City for social housing before the 2011 municipal elections.

It should never have come to this. Williams and the City failed twice to come to an agreement on saving the Pantages Theatre and to bring in other partners to create social housing in the surrounding abandoned buildings.

In 2008, Williams, the City, and the Province devised a plan to save the theatre and build social housing. But the deal fell through at the last minute on Sept 30 2008, shortly before the municipal election.

The preservation project languished under Vision Vancouver’s leadership. In Dec 2009, a disillusioned Heritage Vancouver, which had identified the Pantages as the city’s most important threatened heritage site, announced it would abandon its campaign to save the building.

On Mar 22 2010, City Council met in camera, to discuss purchasing the site. City staff recommended not purchasing the site, and Vision caucus supported this decision.

The “strategic” rationale for another Vision-COPE slate

Last week Sean Antrim outlined how the past three years of a Vision government has been anything but progressive. For reasons of principle and policy, he argued, COPE should not enter into another coalition with Vision. In addition to principles and policy, there are also strategic questions to consider.

What, then, are some of the strategic reasons COPE’s executive has negotiated a proposal with Vision to run a joint slate in the upcoming municipal elections? There are several possible strategic reasons, all of which don’t hold up under analysis.

1. At least COPE will have a “voice” on Council.

In the 2008 election, COPE and Vision made a coalition agreement. Vision ran 8 and COPE ran 2 candidates for City Council. Both of COPE’s candidates won seats, and yet have wielded no decision making power on Council. Vision holds a majority of seats, and all decisions are made in private by Vision’s caucus, without consulting COPE.

Although powerless in terms of voting, COPE Councillors could theoretically use their position to voice opposition. NPA Councilor Suzanne Anton has used her position to criticize from the reactionary right. But COPE has been an ineffective opposition voice. COPE often votes against Vision, but quietly. You have to follow the live audio-visual feed of Council meetings to hear about it.

COPE’s role has been as “conscience” of Council. Unfortunately, COPE’s alliance with Vision only makes them the fig leaf for Vision’s aggressive pro-developer, anti-resident agenda. There is nothing noble in propping up that status quo.

2. If COPE and Vision run separate slates, they will split the progressive vote, allowing the NPA to come up the middle.

As discussed, Vision is not a progressive party. Although Vision ran on a progressive platform in 2008, its actions have proven otherwise. Lack of consultation has alienated community after community; pro-gentrification policies are undermining affordability; and instead of implementing the homeless action plan, Vision has resorted to evicting the homeless from shelters. Even apparently positive positions, such as Vision’s pseudo-opposition to the Casino expansion, turned out to be all spin. There is no excuse for being fooled this time around.

Should COPE publicly criticize Vision’s policies, and clearly distinguish itself from Vision, there is no reason it wouldn’t be capable of securing the loyalty of progressive voters throughout the City, especially East Van. Criticism from the left would help properly characterize Vision as anti-progressive, forcing vote-splitting on the right, not the left.

3. Vision is identified strongly with its popular leader Gregor Robertson. It is too difficult to defeat Robertson, but after a leadership change, COPE can then run a Mayoral candidate and a slate.

Gregor Robertson’s favourability ratings have continued to decline since his election. The main reason his approval rating are not even lower is precisely that COPE has not criticized Vision strongly enough (if at all) from a progressive perspective. Vancouver is a progressive city, so without criticism from the left, Robertson’s approval ratings are artificially buoyed. People fear criticizing Robertson on account of his popularity, when in reality his popularity derives from a lack of progressive opposition from the people most familiar with the policies of Vision: COPE.

Suzanne Anton of the NPA has been a consistent critic of Robertson, creating the false impression that Vision is not a pro-developer, pro-corporate party (when in fact it is). The effect of this is that right-wing and centre-right voters will line up behind the horrible NPA this fall, giving hope to the NPA’s Rob Ford-ist dreams.

4. COPE will get wiped out if they run a slate and a Mayoral candidate.

It is important to understand that there are very few coalition scenarios whereby COPE might wield any power on Council. Vision has shown that it will not willingly work with other parties, so COPE would have influence only if Vision won a minority of seats and COPE held a balance of power. But it should be noted that if COPE holds the balance (for example, if COPE has two seats and Vision has four), the likely outcome will not be greater power for COPE so much as a new alliance between NPA and Vision, who already vote together on all major decisions. NPA and Vision are natural allies on all major issues.

In this ‘tight race’ scenario, COPE is in fact more likely to be wiped-out than to win the balance of power. On the other hand, with a full slate of strong candidates, there is no telling how many seats they might win (it all depends on the strength of the candidates). This election season, Vision has recognized the power of Vancouver’s only progressive party (COPE) by pre-empting their possible surge and giving them three candidates for Council. It is up to COPE’s membership to now agree with Vision’s analysis (but not their offer) and take the point all the way to its logical end: COPE can run independently and join the momentum of a progressive Vancouver.

Assessing the China Factor

It is two months since The Mainlander hosted a story on new Chinese housing policy that is exporting real estate investment pressures — especially to favored locations like Vancouver.
Vancouver Real Estate Frenzy

Aspects of the situation have taken interesting turns, beginning with a big story on Chinese surge that appeared the very next day in the Vancouver Sun. That article found irony in the fuel that Chinese “crackdown” on real estate speculation is pouring on Vancouver’s price fire. According to entrepreneur Cam Good, “There are literally planeloads of Chinese coming here to buy real estate.”

Over a month later, Vancouver business publisher and former municipal politician Peter Ladner called for action “to discourage overseas property speculators” — and mentioned “spreading high single-family lot land costs over two or three homes on the same property [to] drive down the unit price of the new (smaller) homes and discourage the trophy homes on large lots beloved by so many overseas investors.”

The April 5 Ladner article sparked an immediate response from Vancouver City Councillor Geoff Meggs: a tout of Vision Vancouver’s controversial STIR giveaways to incentivize developers.

A week later Ethan Baron reacted with a weird equation: that Canadian purchase of Chinese goods (cheap here because of offshored worker exploitation) somehow means that Vancouver then owes a wide-open real estate market to the fortunes made by the overlords of those workers!

A few days after that, developer mouthpiece Bob Ransford pushed back at Ladner with what amounted to a call to develop as much as possible as fast as possible: “We need to focus on removing all the barriers that stand in the way of supplying the housing stock that is required to meet the demand.” In other words, whatever the degree of speculation, it must be sated, and attendant profits realized, regardless of any consequence to anything else. (Ransford also digressed to claim that the 1988 giveaway of the huge Expo 86 site to Li Ka-shing has been so good for Vancouver.)

Within a week, Cam Good — protagonist marketer in the February Vancouver Sun story — weighed in with a head-on assault against the Ladner protectionism that might impair the profits he is realizing from his Beijing office and his planeloads of buyers. After all, “in meccas like Richmond, 98 per cent of the hundreds of homes we’ve sold are to buyers who are Chinese.” Toward the end of his piece, this promoter went on to promise, “real estate is the best investment you’ll ever make.”

That promoter also cited a March 29 Wall Street Journal article, digging through cautionary freight to latch onto this sentence: “Chinese buyers have stampeded in to Vancouver and to Toronto, two of Canada’s hottest markets.” The unmentioned sobering part of that same article tots up these three factors: “the now-inflated ratio of house prices to income [which means] Canadian housing prices could be in for a 25% drop in the next three years,” a “debt-to-disposable-income ratio for Canadian households [that] rose to 148.9% last fall … surpassing U.S. borrowing for the first time since 1998,” and “Canadian recourse law [that] makes it harder for buyers to walk away from bad debt.”

Following in the footsteps of the Wall Street Journal, Gord Goble responded to Cam Good by highlighting a Vancouver unaffordability ratio of ten times income, a figure that points to the mania that precedes a broken bubble.

Near the end of April, David Ebner quantified the situation in broad and simple terms:

There are nearly 600,000 high-net people worth at least $1.5-million in China this year, according to the consultancy Bain & Co. About 10 per cent of them have already left, another 10 per cent are planning to apply for immigration, and about 30 per cent are considering it.

It remains to be seen whether China will continue to permit this flight of entrepreneurs and capital.

On May 2 Jay Bryan waved red flags about general real estate overvaluation in Canada and attributed the exceptionalism of “the rocket-propelled Vancouver market” — current annual increase of 13.4% — to “a flood of wealthy Asian buyers [that] continues to support sky-high prices.” He concludes with the obvious: “Few seem confident that the Vancouver market is stable.”

Three Telling Sidelights

One. Weeks after hitting the panic button on January 20 to abort the agenda set for city council, Vision Vancouver eventually handed Chinatown over to developer interests after five nights of hearing from the public why they should not. Who can resist the offshore money that stands poised to dehistoricize the core of Vancouver through “revitalization” with condos — especially after massive parking structures failed to do the job? (See Vancouver approves Chinatown condo for an overview.)

Two. In an April 19th marathon, all morning and all evening at Council, Vision Vancouver cobbled together some trailblazing last-minute repression into a bylaw that requires permits for protest structures and threatens to levy thousands of dollars in fines for infraction. In the lead-up to this decision — a decision deplored by the BC Civil Liberties Association — city officials admitted to direct involvement with the Chinese consulate.