Higher taxes no solution to Vancouver's real estate crunch, says study
'Onus is on the province to take a leadership role in guiding and directing a regional housing strategy'
Cutting through red tape and allowing greater density will do more to create affordable housing in Metro Vancouver than taxing speculators and foreigners, according to a new study.
"I'm not suggesting that the tax has no part to play, but that approach is unbalanced and one-sided," says James Tansey, an associate professor at UBC's Centre for Social Innovation & Impact Investing.
Supply side ignored
By focusing on reducing demand with taxes rather than increasing supply, the province's goal of fostering more affordable housing might be unachievable, he argues.
"It is possible that higher marginal taxes on single family homes above $3 million will actually increase the price of condominiums and townhomes in the region as they become the affordable option," he notes.
He also notes as more tax revenue is committed to social and affordable housing construction, that will put more pressure on construction costs, potentially raising the cost of all housing in the region.
Vancouver's not alone
The study, entitled Growing Pains: Density, economic growth, sustainability and well-being in Metro Vancouver, compares the region with similar cities around the world and finds similar challenges.
"If you look at Stockholm, Melbourne, Sydney ... they all have the same pressure because it's a highly desirable place to live," says Tansey.
"People move here because of the vibrancy of the city, because of the quality of life, because of the economy."
And since that's unlikely to change, he argues the province should play a larger role in opening up the region to faster development and greater density to meet the demand.
Time to step in
As a first step, the province needs to step in and reduce the barriers for developers at city halls to get projects approved faster, he says.
"All of the studies have shown that regulation is a significant barrier. It's more significant than foreign buyers and speculation by orders of magnitude and it is the one thing we can control.
"That might be imposing things like performance standards for permitting. If it is not permitted within six months it's approved automatically. It's encouraging density," he suggests.
And, he says, there needs to be a region-wide strategy that will address the imbalances in density across all the cities in the region.
"The challenge is we are managing housing and density on a city-by-city basis. The onus is on the province to take a leadership role in guiding and directing a regional housing strategy."
"There are huge areas on the West Side of Vancouver that are very low density. Surrey is a quarter of the density of Vancouver. Burnaby is about is about half," he notes.
Keeping the character of neighbourhoods
And for those concerned about a wave of highrises wiping out single-family neighbourhoods, Tansey says there are many ways to increase density and keep the character.
"You can house six families on a single-family lot if it is done well and not impact the character — and bring more social life to those communities," he says.
"Given that provincial and municipal governments have limited ability to affect interest rates and population growth and have no incentive to reduce economic growth, taking control of their destiny by increasing the supply of homes and reducing the costs of regulation seems to have very little downside," the study concludes.
The study was funded entirely by UBC without any external funding from commercial industry, notes Tansey.