Affordability, or lack of it, continues to be a hotly debated issue in the Lower Mainland and now Vancouver Mayor Gregor Robertson and B.C. Premier Christy Clark are in a written sparring match over what's the best solution.

Robertson wrote a letter to Clark stating that taxpayers' money should play a bigger role in addressing the lack of affordable housing in Vancouver and he called on the provincial government to do more.

"The single biggest step the province could do to address the soaring housing costs in Metro Vancouver is to generate thousands of new housing units that are affordable for lower and middle income taxpayers."

That includes more investment in co-operative, social and rental housing, he wrote.

Robertson added that another big step the province could take is to address what he calls "unwarranted speculation" by implementing "an increased property transfer tax on the most expensive properties, with the proceeds invested into affordable housing" and "taxation measures [that] discourage quick resale or 'flipping' of new housing."

Premier says taxes not solution

It didn't take long for Premier Christy Clark to respond, saying taxes won't solve the issue. 

In her own letter, the premier writes that introducing new taxes to drive housing prices down could actually hurt existing homeowners.

"Driving down the cost of housing by just 10 per cent would mean a family with a home currently worth $800,000, could lose $80,000 in equity in their home," Clark writes. "That could put some homeowners with large mortgages into negative equity."

She also wrote that foreign speculation is not a source of the problem as most real estate speculation taking place in the region is being done by local investors.

"Local investors are three to four times more active in the region's housing market than foreign investors," wrote Clark.

The premier then turned the tables on Robertson, saying there's a lot the city could be doing right now to address sky-high housing costs.

She suggested the city take a look at civic fees and levies that add more than $76,000 to the price of a 800-sq.foot condo, according to a study done by the Urban Development Institute.

Costs of condo construction

The Urban Development Institute, the voice of the B.C. real estate development industry, says there are embedded costs of more than $500,000 even before a condo is finished in Vancouver, because of land values, construction costs and municipal fees and levies.

The half-a-million dollar price tag comes from a list of various fees, says UDI president and CEO Anne McMullin. 

Those could include land and construction costs and a number of other extraordinary municipal costs, such as sustainability requirements, parking standards, electric vehicle charging stations, public art contributions. 

"And then you've got other things like rezoning fees, development fees, building permit fees, demolition fees, engineering fees, and the catch all miscellaneous fees."

"That's even before there's any profit," she says.

She adds, however, that only about 10 per cent of the half-a-million dollars it takes to build a condo are due to levies the city imposes.

The discussion follows a recent report by Vancity that outlines the average cost of a single family home in Vancouver hit $1.72 million last year, and warns people could leave the city in large numbers because of it, creating a labour shortage.

To hear the full interview with UDI President and CEO Anne McMullin listen to the audio labelled Urban Development Institute.

Read Vancouver Mayor Gregor Robertson's letter to B.C. Premier Christy Clark

Read B.C. Premier Christy Clark`s letter responding to Vancouver Mayor Gregor Robertson