The B.C. government's affordable housing conundrum
Unwilling to deflate the market, the government can only tinker with the status quo
It is one of Finance Minister Mike de Jong's favourite stories.
De Jong was taking a cab from the Vancouver International Airport when he struck up a conversation with the driver. After they exchange pleasantries the driver says: "You've got to do something about housing prices."
The driver says his kids want to live in South Vancouver, but they can't afford it. To which De Jong responds: "Well, where do you live?"
"Vancouver," the driver answers.
"So basically," De Jong says. "You'd like the government to do something to reduce the value of your home?"
It's the paradox facing any empathetic home owner in Metro Vancouver. No one wants their kids — or anyone else for that matter — kept out of the housing market. But at the same time, it sure is nice to see all those zeroes in your property assessment.
This is what de Jong is thinking about when he sits down to determine what the provincial government will do in an attempt to make purchasing a house on the Lower Mainland more affordable.
Help for first-time buyers
There is an expectation a number of these changes will be put forward in February's provincial budget.
The first change will likely be changing the threshold for first time home buyers' credit. When speaking to reporters in September, de Jong explained his government's likely next steps.
"We are not interested in taking steps that will see a diminishment in people's equity, the value of their homes, but we are interested in facilitating entry into the housing market by young families, young British Columbians," he said.
"That threshold now for exemption is at, I think, $475,000. How many first-time buyers are purchasing homes in excess of that is a question that deserves to be asked before we tout a further adjustment to that threshold."
A change of that nature would allow for first-time home buyers in the Metro Vancouver market to receive the same tax break on a $600,000 Yaletown condo as someone purchasing a $250,000 house in Prince George.
That may level the playing field in a province where Metro Vancouver prices are so far out of whack with the rest of the province. But it's still a pretty special first-time buyer who can afford $600,000 for a condo — to say nothing of the minimum $1 million it takes to buy a single family home in Vancouver.
Transfer tax changes
The government is also considering changes to the Property Transfer Tax. But don't expect the province to scrap the cash cow. The last projections estimate the tax will bring in $1.3 billion this year, $350 million more than budgeted.
The tax has remained the same since the 1980s. So the government is likely going to change the tiers of the transfer tax.
"I've always thought of the tax as something of a revenue neutral process for government," said de Jong. "That's why much of the attention has been paid to analyzing the thresholds and the possibility of creating a third threshold at the higher property values."
A change to this degree would mean more expensive homes would still be on the hook for the entire property transfer tax, but there could be higher exemption levels that will be set in the budget.
Incentives to build
The final move is increasing the stock of property available. De Jong has hinted the government may tie the property transfer tax incentives to new housing. The province may also give breaks to buildings with increased density. But a lot of that challenge falls in the hands of municipal and federal governments.
And making small changes that don't actually reduce price opens the government up for sharp criticism. Housing critic David Eby calls these suggestions short term solutions to a systemic long term issue. Instead, Eby has suggested the government should focus on connecting homelessness, and rental housing prices and purchase housing prices.
"If I was going to make a recommendation to the provincial government, it would be to take a step back and look at the housing issue as a whole," he said. "Look at the best policies from other jurisdictions that have faced these issues. And stop with the short terms fixes. They are not getting us ahead, and in some cases they are compounding the issue."
On top of that Eby relates it to his own experience. The MLA lives in a condo on Vancouver's West Side, one of the country's costliest neighbourhoods.
"I do know a lot of people who can't afford a two-bedroom condo that want to have kids and want to live in the city they went to school in, that they work in," he added. "I don't understand this government's priorities in terms of how they are addressing the housing market issue."
That's an argument De Jong fully understands — though he's likely more receptive to it coming from a cab driver than a member of the political opposition.
It's especially challenging tinkering with a market that has made instant millionaires on paper of many people/voters. And it likely makes the government terrified of the economic ramifications of doing anything to drop value.
So, they're left to experiment with small threshold changes and tax rebates to deal with one of the most massive challenges in Metro Vancouver of this generation.