Highest priced houses in Metro Vancouver belong to the lowest income earners, study finds
But take the analysis with a grain of salt, says housing expert
A new study says the highest priced houses in municipalities Metro Vancouver are owned by those with the lowest median household incomes.
The study — by the consultant group Site Economics Ltd. — took data from the Canada Revenue Agency and the Vancouver Real Estate Board.
It found annual taxable median household incomes are not associated with median home prices in different municipalities in Metro Vancouver.
"Port Moody now has the highest median taxable income in Metro Vancouver, yet only average house prices, and Richmond has the lowest median taxable income, yet some of the highest house prices," it stated.
Richard Wozny, a longtime real estate developer and the principal for Site Economics Ltd., believes this discrepancy between incomes and housing prices in Vancouver is the result of the owners of high-priced homes under reporting their actual income — though the claim is an extrapolation, as the report doesn't show any specific evidence of this.
Wozny says these owners — who are subject to property taxes — are not paying enough income tax needed to support the infrastructure and neighbourhood services that make the city so desirable, which in turn leads to higher house prices.
"Growth is not being required to pay for itself," he said. "It seems like politicians have been too timid to ask for something."
Wozny says if incomes are no longer a reliable source of taxes, there needs to be substantial tax reforms — property tax, for example — to better capture the wealth in the real estate market.
Take caution with data, expert says
Tsur Somerville, a professor at the University of British Columbia's Sauder School of Business, says while this particular discrepancy of low incomes, high house prices has been raised in the past, there's a problem with these studies.
"For instance, if we had one city that was full of people who bought these houses a long time ago and are now retired, they're going to have very low income and very high house prices because they bought houses a long time ago and they've increased in price," he said.
"If, in comparison, I have a city that's full of young people who are buying condos and paying one third of their income on their mortgage payments, then their ratio of house prices to income is going to be very, very different."
In this study, he says, older neighbourhoods like Vancouver, Richmond and Burnaby reflect this first kind of scenario while newer, suburban neighbourhoods like Port Moody reflect the latter.
The only way to get around this problem, he says, is to use more specific data to separate out these kinds of age and time effects.
But getting that data is difficult.
"Canadian data providers and government data providers have been cautious around privacy issues and worrying about people that identify individuals," Somerville said.
'Homes not taxed fully'
Professor J. Rhys Kesselman at Simon Fraser University's School of Public Policy says while there are methodological aspects of the study that are a "little weak," he agreed with the idea we do not tax the wealth in homes fully.
"If you had the same million or $2 million in the stock market and in bonds, you'd be paying on the interest, the dividends and the capital gains," he said.
"Put it in your home, and you don't pay it either as current income, and you don't pay it when you sell, if it's been your principal residence."
His solution is a progressive property tax — one that applies depending on the value of your home and regardless of whether or not you're a Canadian resident. In his proposal, anyone would be able to defer the extra taxes until the sale of the property (much like B.C.'s current senior property tax deferral program), so as to not burden older owners suddenly.
"It's a more balanced system ... and that additional revenue could be used for whatever you want," he said.
With files from CBC's The Early Edition