Housing affordability: If it’s bad for buyers, it’s worse for renters.
Early last week I attended the SFU Community Summit’s Housing in the City: Beyond the Headlines panel discussion on issues relating to housing in B.C. and efforts to move us closer to the goal of affordable, suitable, and secure housing for all.
Each offering a different expertise, the speakers’ presentations ranged from First Nations housing; to community groups leveraging land assets to build affordable housing; to the economics of building more rentals. Christine McLaren from Happy City described urban design and social geometry for happier harmonious living (who knew—the ideal front yard for genial neighbourliness is exactly 10.6 feet deep). Marla Zucht from the Whistler Housing Authority explained how that resort municipality extracts housing from new developments to provide affordable rental and home-ownership for the people who work there.
There was a lot of anticipation as UBC geography professor David Ley rose to speak about foreign investment (or more specifically, as he distinguishes it: non-local capital).
Earlier that day, urban planner and researcher Andy Yan had released a new report suggesting that almost three-quarters of detached home sales on the west side were to Mainland Chinese buyers. Yan was in the audience, and told me he was taking a lot of heat for his research, including accusations of racism from real-estate industry types and even the mayor.
In Yan’s defense, it is precisely the lack of data that he feels has the potential to incite racism, because in the absence of facts rumours and half-truths can flourish. I’m inclined to agree, and as I’ve previously proposed: we should better track and analyze the effects of non-local capital on our unaffordable housing, and adjust our available taxation tools to protect local residents by investing that revenue in affordable housing and work to prevent reported tax fraud. It’s important to note the majority of our regional real estate market is driven by and for locals (speculators or otherwise), but we still need to analyze the role of non-local capital, while repudiating xenophobia and racism.
Even the B.C. New Democrats have done a full reversal on the issue of foreign capital. It was the NDP government who originally stopped collecting data on foreign and corporate real estate purchases, ironically out of a fear that foreign money might leave the region. Last month, speaking to her record as Vancouver-Mount Pleasant MLA, now-MP Jenny Kwan clarified her previous position protecting the privacy of investors hiding foreign assets with the goal of better collecting data about foreign ownership of local housing.
There doesn’t look to be any forthcoming meaningful action from the B.C. Liberals though. In case you missed the news release during the federal election, the governmenthas no intention of targeting non-local investors or house-flippers, although they are considering measures to further protect first-time buyers.
Even if we did have decisive leadership and direction to mitigate and extract value from speculators, luxury properties and foreign and corporate investors—it’s a bit like closing the barn doors after the horses have gone. The Vancouver housing bubble is quite unlikely to contract in the near term, and those high prices that shut so many out of the market are here to stay for the foreseeable future.
But if it’s bad for buyers, it’s worse for renters.
Those ever-inflating house prices aren’t just thwarting first-time-buyers, they are putting pressure on rentals. The latest CMHC data puts vacancy rates in Vancouver at below one percent. If you have multiple bedroom needs or pets, it’s even worse and it certainly isn’t affordable. The average rent in Vancouver rose 4.6 percent in 2015, twice the national average, making it the most expensive of any major metropolitan area in the country. Meanwhile our median income is among the lowest.
The lack of affordable rental is a growing crisis which most analysts are predicting will get even worse as buyer potential is diminished. Savvy investors have anticipated this—between high demand and local governments’ willingness to bonus rental developments—they see real opportunity to make profit in the rental market.
Arguably, increasing supply might temper our low vacancy rate, but there has very little market or government initiative to ensure those rentals are actually affordable. We can only hope that our new federal government’s promise of funding and incentives for new affordable housing will help to create more supply, which otherwise cannot be left to the market alone.
Rent control is another obvious solution, but in a free enterprise housing market—where renovictions are a thing, and the provincial Residential Tenancy Act is in desperate need of overhaul—there is potential for pushback from industry. Arguably rent control could be seen as a disincentive for new rental builds, although cities like New York have managed to make renter protection a condition of rezonings.
But there is a tool that hasn’t been subject to much discussion in our province, one that might bring some relief to beleaguered British Columbians: a renter’s tax credit.
The idea is simple enough: a provincial tax credit, means-tested and income adjusted, that could offset the burden of renting in unaffordable markets.
Renter tax credits are not a new idea—for millions of Canadians, renter tax credits are already available and working to alleviate their rent burden: in Quebec as the Solidarity Tax Credit, and in Ontario as part of the Ontario Trillium Benefit, where it is also tied to relieving the cost of energy use in remote communities. In the United States, after years of tax and lending policies directed to encourage homeownership, renter tax credits are being considered as a tool to promote equity and alleviate household poverty.
Why not here in B.C? B.C. Housing does collect data on housing costs relative to income: the Housing Income Limits, published annually, track the income required to pay the average market rents in planning areas throughout the province. Here in Vancouver-Mount Pleasant, almost three-quarters of the population rent, half of those renters pay more than 30 percent of their income on rent, and a growing number of that cohort spend more than 50 percent.
There are many practical justifications for a tax credit, starting with housing equity and poverty relief. Our province consistently ranks above the national average for rates of child poverty. Food must often take a second place to rent and utilities: hunger and food insecurity in turn diminish productivity and health, ultimately costing our system in other ways. Those credits in turn are likely to return to our local economy either directly or indirectly. The indirect economic impact is most notably the ability for business to attract and retain employees. Experts predict that without meaningful intervention, housing unaffordability could trigger a labour crisis in parts of our province.
There is need for further study. One unintended consequence of a renter tax credit might be to put pressure on landlords to declare their rental income and comply with local construction and residential by-laws. While at first glance this might seem like a fair and equitable consideration—in our city, with its sky-high property prices—mortgage helpers often take the form of undeclared suites and rentals; they make up an important part of the rental continuum, and we can’t afford to jeopardize them.
Do the benefits of a renters tax credit outweigh the risks? Let’s urge some immediate provincial action to study the idea.
One thing is for sure, inaction is no longer an option and we need relief for renters, now.
Special thanks to Grant Diamond at UBC School of Community and Regional Planning for his research help on this.
Originally published in the Georgia Straight, Photo Ann Hung
