
New Taxes and Higher Density Aren't Fixing Vancouver's Housing Problem - pseudolus
https://www.citylab.com/design/2019/05/vancouver-affordable-rent-housing-home-prices-zoning-density/588916/
======
refurb
Considering single family home prices in Vancouver are down ~20% since last
summer, I’d say the new taxes and new buildings are working!

~~~
megy
Are apartments also down? You can easily get the situation were expensive
homes are down, but cheap apartments are up.

~~~
echlebek
Yes, apartments are now selling under asking price.

~~~
NotSammyHagar
In Canada is an apartment what the us would call a condo or something similar?

~~~
yazaddaruvala
Canadians don’t differentiate between apartment and condo.

It was really weird moving to the states and have people care which word I
used.

(Extra) Fun Fact: Canadians do differentiate (a lot) between University and
College. Something Americans do not do.

~~~
nullterminator
Now I'm curious, what do they mean in America? As a Canadian I think both
words describe a single unit in a multi-story building, but say "apartment" if
the entire building is owned by one company and all units are rented, and
"condo" if each unit is sold to an individual owner (who may still rent it out
privately if they want). I rent an apartment, I'd buy a condo. They're
physically the same thing, just different ownership models. Most Canadians I
know (Vancouver/Calgary) do the same.

~~~
voisin
This is an accurate description of the difference.

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Tiktaalik
Depends on what one's opinion of 'the housing problem' is.

The new taxes (coupled with stricter lending rules) have had a remarkable
effect on land values. Detached home sales are at 20 year lows and we're
seeing 25-30% declines in prices.

[https://twitter.com/SteveSaretsky/status/1126176658816290816](https://twitter.com/SteveSaretsky/status/1126176658816290816)

Rents haven't plunged, but there's evidence that the rises in rent have
stalled out. The amount of multi-unit developments under construction is
unprecedented[1], with tons in the pipeline, so I'd expect the sub 1% vacancy
rate to rise and rents to moderate.

[1]
[https://twitter.com/YVRHousing/status/1126269398606438400](https://twitter.com/YVRHousing/status/1126269398606438400)

~~~
NotSammyHagar
Thanks for those two interesting sources. It'd say prices are going down,
sales are slowing because people are shying away from buying rapidly
depreciating assets, but those homes are still way over what they should cost
in general. When prices come down to match reasonable value from other similar
areas (with perhaps some extra value for being in Vancouver) then sales will
come back.

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BurningFrog
This article rests on much of the common ignorance around these
counterintuitive issues. I'll try to address the biggest ones:

\- New supply in a desperate shortage situation will always be expensive.
Interpreting that as new supply being bad is the _dumbest thing you can do!!_
Yet it's extremely common in the housing debate.

No! The new supply is expensive _because_ of the desperate shortage! There is
no magical way to build cheap housing in a shortage, liked no one would notice
it somehow... The old housing is just as expensive! Keep the supply up, and
prices _will_ come down!

\- "This is all the fault of foreigners and speculators".

No! We all have the impulse to blame our problems on evil outsiders who are
different from us and don't care about human values like _we_ do. That's
xenophobic bullshit 9 times out of10. Vancouver just has too few homes for too
many people. There is no foreigner conspiracy. Just build and and it will be
alright, alright?

Probably didn't change anyone's mind, but I honestly think those are the two
biggest points.

~~~
Dylan16807
It's not xenophobic to say that money is flowing in to building ownership, and
that this inflates prices. You might be able to find _someone_ calling them
evil but that's 9/10ths strawman. And it wouldn't be a conspiracy in the first
place.

~~~
BurningFrog
If that's an accurate description of what's actually happening, sure.

But I really doubt that's the case. Normally prices rise because supply is
strangled by legal restrictions, controlled by the local property owning
elites looking out for their property values. That's _definitely_ the case
here in California. I don't know Vancouver enough to say.

 _When that happens_ the secondary effect is that housing in that area becomes
a great investment. This attracts investment capital from all over the world,
much of it foreign, since it's a big world. This in turn probably drives up
prices even faster.

And... I guess it's not even exactly _wrong_ to say that the foreign money
_is_ driving up prices in that scenario. But it's also not at all a root
cause!! Trying to regulate it is attacking a symptom, not the real problem,
and will solve nothing.

The _real_ solution is to "legalize housing", as the slogan goes. Make it
legal to massively build the housing that is demanded, and there _will_ be
housing for everyone.

And as always in these situations, getting to the _real_ solution is much
harder, because there is real _power_ in the way who benefits from the status
quo.

~~~
Dylan16807
If the root cause drives half the price increase, and the speculation drives
the other half, regulation to fight speculation can do a lot! You certainly do
want to fight both. And if it's harder to speculate, that might also reduce
the pushback toward increasing supply.

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sandworm101
>> “In Metrotown here in Burnaby, and in parts of Vancouver, at nighttime
you’ll walk around and you’ll see the big apartment buildings, and there’s no
lights on—because nobody’s there.”

I've been saying this for years. It is scary. I used to live on the north
shore. In my old neighborhood perhaps 70% of houses are dark, either empty or
under some stage of reconstruction. My generation has moved away, leaving an
aging population of parents. Most of those are moving away once they sell
their family homes. My old neighbors who have stayed might all be living in
1/2/3 million-dollar houses, but they feel very alone at night.

~~~
trophycase
Maybe they should just lower prices? I don't understand how it is more
profitable to leave 60% of your rooms unrented or whatever it may be.

~~~
povertyworld
Maybe there is a tax incentive to leave it empty? For a while people in
Manhattan were puzzled by empty store fronts in popular neighborhoods. Then it
hit the news that if you crank the rent up sky high on retail space so that no
one can afford it because there can only be so many Gucci stores in Manhattan,
the lost rent (that no one could have actually afforded) can be used as a tax
deduction.

~~~
p1necone
Is that really how tax law works in Manhattan? How far does that extend? If I
own a 2 bedroom house, and the second bedroom is empty can I claim a tax
deduction on hypothetical unpaid rent from a roommate?

~~~
povertyworld
It's only for retail space. Actually, I just went looking for a source
explaining exactly how this works, and it seems to have been a little
overblown. I think it might have been stories like this that are bit light on
details that got this idea started:

[https://www.amny.com/opinion/the-sad-story-behind-nyc-
vacant...](https://www.amny.com/opinion/the-sad-story-behind-nyc-vacant-
storefronts-1.26023055)

But the only specifics I could find is that there is a tax on commercial
retail rent in NYC on $250,000 a year or more rent, and now the rent has been
pushed up so high that everyone is paying it, but ultimately landlords are
just holding out for long term leases with big national brands, and many of
them already have all the Manhattan locations they need. Apparently, there is
a push to raise it to $500,000, or even put in a tax on empty retail to give
landlords an incentive to take a chance renting on boutique or so-called
"popup" stores.

[https://cityandstateny.com/articles/opinion/commentary/reduc...](https://cityandstateny.com/articles/opinion/commentary/reduce-
manhattan-storefront-vacancies-fix-commercial-rent-tax.html)

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rb808
I think the end of the Chinese speculative bubble is having huge effect in
previously crazy hot markets. Vancouver, California, Australia/NZ, HK have all
finally come down in price in the last year. Is going to be a hell of a
hangover.

~~~
Bombthecat
They are moving to Europe / Germany, prices are sky rocketing here.

Right now, the discussion we have is : socialize private buildings and make
them state owned ( I kid you not!) No talk about new buildings, or law changes
etc..

~~~
thrower123
Build more Mietskaserne!

[https://www.smartcitiesdive.com/ex/sustainablecitiescollecti...](https://www.smartcitiesdive.com/ex/sustainablecitiescollective/mietskaserne-
should-be-berlins-next-export-world/330131/)

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ovis
The common refrain that Vancouver is experiencing an exodus due to housing
costs is a bit contentious: [https://biv.com/article/2019/02/housing-related-
brain-drain-...](https://biv.com/article/2019/02/housing-related-brain-drain-
metro-vancouver-myth-says-analyst)

I'd be interested to learn about other objective studies on this.

~~~
kareemm
Anecdotal, but I've had 20 (!) friends leave Vancouver over the past 5 years.
18 of them had young families and sought situations where they weren't
grinding themselves into dust to make it work in a city/province that didn't
appear to want them. 2 sought better professional opportunities in Toronto.

------
Tiktaalik
It's remarkable to me that major foreign media outlets such as the WSJ,
Atlantic, NYT, Financial Times and Bloomberg have no issues calling a spade a
spade, noting the obvious distortive impacts of foreign capital on Vancouver's
real estate market, meanwhile if local media notes this same fact it invites
an avalanche of pearl clutching comments about potential 'racism.'

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vadym909
An average Canadian or American cannot compete with the ill-gotten wealth of
corrupt individuals in China, Africa or anywhere else. Those corrupt
individuals are investing in these properties taking advantage of the stable
and lawful markets enabled by the common man- but they are also harming them.
Ironic.

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matchbok
> “Who are we building for? What income brackets can afford these units being
> put up in Vancouver?” asks Andy Yan, director of The City Program at Simon
> Fraser University in Vancouver.

That is such the wrong question to ask. We live in a market economy, no single
person decides what sort of thing gets built - the market does.

Today's luxury apartment is tomorrow's affordable one. It is unfair and
unrealistic to expect the market to build brand new and cheap apartments.
Those words to not go together.

We can't just build more houses in the same size of city - it needs to expand
outward. Stuffing more apartments in the same square mile won't do much.

~~~
Guest42
The goal is to build housing that is actually used as housing as opposed to a
vehicle for speculation.

Legislative policies determine the type and terms of the "market economy" that
is lived in.

If today's luxury apartment had a decent probability of being tomorrow's
affordable one it would not have demand. Unless of course one assumes that
luxury buyers are seeking to lose money.

~~~
ultrarunner
Brand new luxury housing stays brand new forever?

~~~
bobthepanda
Well, how long is tomorrow?

Housing that becomes affordable by the time I am dead is not really
"affordable" housing for me.

~~~
Consultant32452
It becomes approximately fifo. Oldest or otherwise least desirable housing
becomes affordable housing as demand is met with newer more desirable housing
being built. But if you're never building new housing, nothing gets pushed out
the bottom to become affordable.

~~~
eastWestMath
That would make sense if location didn’t matter and people couldn’t renovate
buildings.

~~~
Consultant32452
That's just noise as long as construction keeps up with or outpaces demand.
The problem is some cities have held back construction for decades, so it will
take significant construction to get to the other side of the supply curve.

As a thought experiment, what if you doubled the supply of housing units in
Manhattan? Or 10x? 20x? I have a hard time believing housing prices would
remain high.

------
cletus
I see a bunch of comments here saying basically that "today's luxury
properties are tomorrow's affordable properties". I don't know where this myth
originated but it's exactly that, a myth.

Look at Manhattan's most expensive buildings in terms of price per square foot
(which can be north of $5000!). Some, like 15 Central Park West and One57 and
some others on 57th Street, are new but many are not. Famously there's the San
Remo building (which is ~100 years old), Walker Tower in Chelsea and a number
of other buildings on Park Avenue and Fifth Avenue that are a century old,
give or take, and not remotely affordable.

There are factors why these buildings will basically never be "affordable",
namely:

\- They may have ceilings in the order of 14-18'

\- They may have floors and ceilings that are 1' thick or more;

\- Land prices are extremely high.

So even though some of these apartments might be "only" 2000 square feet, they
occupy the space of an apartment that might be as much as 2-4x as large due to
the way the building is built. A stone's throw from Walker Tower you'll find
postwars that sell for under $1500/sq ft, for example.

I'm actually a big fan of cities not becoming ghost towns of empty condos and
houses that are nothing more than a place to park capital for the ultra-
wealthy. Australia, for example, forbids foreign purchases of anything other
than new builds.

Developers build ultra-luxury condos because it's way more profitable. Part of
the reason is the demand but another part is the cost structure is wrong and
New York City and state bear some of the blame for this eg [1]. That's just
insurance. Construction itself has become unaffordable. Many capital projects
exist in the US today that would simply be cost-prohibitive to build or
replace now.

I'm all for an extreme measure here: the world's large urban centers should
start taxing homeowners on worldwide income. No double taxation. There are
already mechanisms for this. You want to own property in NYC or Vancouver or
San Francisco? Great. You're now a resident taxpayer. You can always seize the
property if they won't pay.

One thing about Vancouver in particular, and this probably applies to Canada
in general: WTF is up with a median wage of C$50k? How is it the US can afford
to pay US$350k+ for a SWE in NYC or SF that might earn less than C$100k in
Vancouver? How did that happen?

In the developed world there basically hasn't been an increase in real wages
since 1980 while the ultra-wealthy get richer and richer. With no wars or
revolutions in sight to redistribute that wealth (which, historically, has
been what's happened when wealth inequality gets too out of whack), something
needs to be done to address that.

[1] [https://www.constructiondive.com/news/critics-blame-nycs-
sca...](https://www.constructiondive.com/news/critics-blame-nycs-scaffold-law-
for-rocketing-insurance-fees/529039/)

~~~
hn_throwaway_99
The reason these older apartments (known in NYC anyway as "pre-war") are in
demand, though, is they were built with much higher quality - as you point
out, high ceilings, thick walls, etc. All of those places have been renovated
(many times in fact), but the value lies in the higher quality older
construction, and importantly, that fact that that construction does not exist
going forward is a big reason for the value in those apartments.

I personally have seen new "luxury" condos in a major American city built in
2000 being devalued because since that time there have been many more "more
luxury" condos built, to the point where the older condos lack features that
make it difficult to compete with the newer buildings.

