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Did the city’s report this week on empty homes bust a myth?

March 12th, 2016 · 27 Comments

So, as has become the tradition in Vancouver, whenever data (or even fragmentary information) on the very contentious issue of real estate and foreign investment is published, it sets off an energetic debate with people piling on to outright refute it or pick holes or challenge the interpretation.

This one is no exception and there was even more of this, in an atmosphere that has grown weirdly ever more polarized and vitriolic.

The critics this time jumped on “the media’s” use of the word “myth” in some stories and on various problems they believe they have spotted in the Ecotagious study that was done for Vancouver. That study, for the uninitiated, looked at 12 years worth of BC Hydro electricity-use data for 225,000 homes in the city, using various techniques to try to get around issues like automated light/heat switches, occasional visits by caretakers turning things off and on, and other factors that might give false positives to the question of whether the home was occupied.

It found that the overall city vacancy rate of about 4.8 per cent hasn’t changed from 2002 to 2014, that the rate within five large geographic sectors hasn’t changed, except that the downtown has dropped to about six per cent, and that the vast majority of the 10,300 units that are empty are condos (about 9,700).

I’ll take a look at the methodology questions in a bit, since all of us were still trying to understand them long after our publication deadlines had passed and new questions were being raised with every passing hour.

But first, I wanted to examine the issue of why almost every media outlet made a point of contrasting the study’s results with “public myths” or “prevailing public opinion” or “popular perceptions.” (I’ve attached at the bottom here a selection of the wordings used by various major outlets.)

As I said to my journalism classes, this study’s results didn’t make sense to readers unless they were put in context. And that context is the prevailing narrative in Vancouver that foreign investors are buying a significant portion of the city’s housing stock, that they’re leaving it empty, and that they’re contributing to the city’s unaffordability and/or unlivably low vacancy rate in some way as a result.

Those fears emerged publicly when Victor Li, then managing the family’s Expo 86 land holdings, marketed the first condominium built there exclusively in Hong Kong. Every since, the complaints about empty condos have ebbed and surged.

There was a big surge in the fall of 2008, enough of one that the newly arrived mayoral candidate for the fledgling Vision Vancouver party, Gregor Robertson, proposed a speculation tax. He quickly backed off when he got flagellated by columnists, talk-show hosts and others.

I recall around that time there was a persistent story told around Vancouver that there were 18,000 empty homes, according to a secret BC Hydro study that some claimed they had seen or knew of. Back in the day, activist Rand Chatterjee (where are you now, Rand?) wrote and talked a lot about this.

In 2009, planner/demographer/researcher Andy Yan did a study of 13 select buildings in the newer parts of Vancouver’s downtown, also using BC Hydro data. He found a relatively low vacancy rate – something that the critics of the day also didn’t appreciate. (Along with my reporting of it, as usual.) His main takeaway was that there were far too many studio and one-bedroom units, proportionally, among the downtown building stock and that that favoured purchases by investors, both local and not.

If you want to have a laugh, take a look at this old blog post of mine, where Andy got whipped by the critics for his bad methodology, small sample size, and pretty much everything else. (Needless to say, they all loved his methodology when, a few years later, he set off a bombshell by using NHS data to show that the vacancy rate – or “not occupied by usual residents” — was much higher and reached almost 25 per cent in select parts of Coal Harbour.” And that study, which I also reported on, earned me and Andy flak from a much smaller group of critics, notably the data-crunching firm Urban Futures, who questioned the methodology and stats.)

All of this to say – this issue has been going around for quite a while. It’s risen to a new fever pitch in the last couple of years, but it’s not new.

So pretty much all media outlets put the latest study in that context, because – whether the study has accurately captured the activity of the last couple of years, which is debatable – it does provide a picture from 2002 to 2014 that does not provide any evidence for the thesis that was percolating during those years that empty, investor-owned homes are driving up prices.

(And that, by the way, is the “myth” that some of us referred to. No one reporting on the issue suggested that it proved there was no foreign investment or no impact from foreign investment. Just not that impact.)

In fact, even though condos far and away account for the vast majority of the empty units, condo prices have been almost flat from 2008 until just recently, and still haven’t increased at anywhere near the rate of single-family homes.

Did reporters miss some of the anomalies and finer points in the city study, qualifications and limitations of the data that might affect some of information about vacancies?

You bet they did. So did the experts.

Both I and, it looks like, Matt Robinson at the Sun, scrambled to call people by deadline who would have the most solid expertise in finding holes. UBC’s Tom Davidoff was mostly concerned about the report’s strict definition of vacancy – more than 12 months – and wondered whether the real issue wasn’t “lightly occupied units” with owners using them only one or two months a year. Andy Yan focused on why the researchers used 25 days a month as their cut-off point for whether something was vacant.

As we all had a chance to process this complicated report, which had to use some fancy techniques to try to compensate for things like timers or occasional caretakers visits, we could see what some of the problems might be. And what they might not be.

Here are some of my takeaways, some of which I’ve been tweeting about at various points this week.

  • This report doesn’t seem to fully capture the situation from, not just 2015 but also 2014. The researchers didn’t categorize a unit as vacant until it had an electrical hook-up for 12 months, so as not to include places that were still under construction and therefore not habitable or in the process of being marketed. So that means anything newly built in 2014 that sat vacant for all of 2014 wouldn’t show up as vacant in the data for that year.
  • The large size of the geographic tracts in the study (Downtown, Northwest, Southwest, Northeast, and Southeast) means that hot spots that might have very high levels of vacancy are hidden underneath the general data. It’s very possible there’s a hot spot in Point Grey or Dunbar, but we can’t see it because they are lumped in with a huge area.) All we know is that, whatever is happening on the west side, it’s not happening in such large numbers (at least to the end of 2013) that it’s pushing up the average vacancy rate for the whole city among single-family houses. It doesn’t even change the overall vacancy rate for the Northwest sector, which was 7.5 per cent in 2002 and was measured at 7.4 per cent in 2014 – the highest rate of all five sectors. It is confusing understanding the west side and this report still doesn’t give us answers. I talk to some friends and acquaintances who are adamant their area is being hollowed out and they are surrounded by vacant houses. I talk to others who are equally adamant that that’s not true. Some report empty streets at Hallowe’en. The Sun’s trick-or-treat count shows some houses on the west side getting up to 300 visitors on Hallowe’en. And the number of people reporting their stats was much higher on the west side than any other part of the city, so someone there cares about Hallowe’en.

On the other hand:

  • A lot of people seemed to think the researcher was too stupid to know about timers. But, as far as I can tell, the team did a reasonable job of trying to account for them, by looking for volatility as a sign of prolonged occupancy rather than the amount of electricity used in a month.
  • It also seems like they tried to factor in the occasional presence of caretakers, since a unit was deemed as unoccupied if the electrical use was flat 25 days out of a given month. That would make sure that places only being visited by caretakers one day a month would still show up as non-occupied.
  • I was taken at first by Tom Davidoff’s point that maybe the real problem is units empty 10 or 11 months a year, not the full 12, as the city defined it. But the researchers did look at units that were empty four months of the year. The city rate is six per cent, only one per cent higher than the 12-month rate. Any place that’s vacant 10 or 11 months will be captured by that stat. So that means the rate of 10/11 months non-occupied isn’t any higher than six per cent. That pushes the number of “lightly occupied” units potentially up to 13,500 among the 225,000 homes tracked. Again, that’s not a huge extra number, unless those are concentrated in certain tight hot spots, which we don’t know about.
  • There seems to be some focus on the fact that houses awaiting renovations and without power weren’t counted. But I thought everyone’s concern was houses sitting vacant and uncared for, not those awaiting renos, so I don’t quite get this. We’re seeing a lot of teardowns and rebuilding in my hood the last couple of years – more than there’s ever been in our 15 years here – and definitely houses are sitting empty or lots are without power for a year or two while that’s going on. But then those houses get occupied, which is a good thing. As well, we have no idea what the number of those uncounted houses was and whether there were enough to significantly affect the non-occupied rate.

In all, as the report’s authors said, this should be taken as one more piece in the complex puzzle that is Vancouver’s housing market. They also recommended doing it again in two years, which would give everyone a better picture. And perhaps all the feedback will help them improve their methodology.

But I seriously doubt that will end the debates.

All the data in the world doesn’t seem to be capable of convincing anyone of anything they don’t want to believe. Not surprising – studies have shown that when people are presented with evidence that contradicts their previously held views, they rev up their cognitive processes even harder to disprove the new evidence. And the most educated a person is, the more energy gets put into countering the new arguments. It’s something I remind myself of all the time, as I feel my brain gearing up to defence mode.

 

SAMPLES OF THE REPORTING ON THE STUDY

CANADIAN PRESS

VANCOUVER – It’s a common complaint in Vancouver’s real estate market: investors are buying homes and letting them sit empty, driving up housing prices and leaving some neighbourhoods nearly abandoned.

Not true, says a new city-led study.

 

GEORGIA STRAIGHT

In January 2016, the benchmark price of a single-family detached home on Vancouver’s east side was $1.23 million, according to the Real Estate Board of Metro Vancouver. Homes on the city’s west side rose to a benchmark price of $2.93 million. A popular theory on why property values have increased so dramatically suggests foreign nationals are parking cash in Vancouver homes and then leaving them empty, thus distorting the real-estate market by separating it from local wealth and wages.

The study the city released today does not prove foreign money is having no effect on Vancouver property prices. However, by failing to find evidence of that where some assumed it would, the data does suggest the possible role of foreign money in Vancouver real-estate could likely be smaller than many have come to assume.

CBC

The percentage of vacant homes in Vancouver has remained flat over the last 14 years despite longstanding complaints that investors are buying homes and leaving them empty, according to a new report released this morning to city council.

VANCOUVER SUN

Vancouver’s soaring single-family home prices have been blamed in part on foreigners snapping up investment properties and leaving them empty.

That myth was dispelled by results of a study released by the city Tuesday that shows only one per cent of single-family homes are vacant.

Of more concern in a city strapped for affordable housing is the 12.5-per-cent non-occupancy rate for condominiums, which account for most of the city’s 10,800 empty homes.

 

 

 

Categories: Uncategorized

  • Salvaich

    There may be some statistical sleight of hand.
    Smart meters have only been around or 5 years or so, yet the report seems able to see beyond the previous collective power consumption records, even if they are zone by zone rather than dwelling by dwelling.
    Any explanation?
    -30-

  • maya

    I think the answer is yes it did. I have friends who live in Point Grey and Dunbar who say their neighbourhoods are hollowed out, no kids playing in yards, just empty houses. No one was saying this in 2002. I suspect PG, Dunbar, Arbutus, Shaunessy have been harder hit by foreign investors than other parts of the west side because of lot sizes. I live near Douglas park and just walking around the neighbourhood it obvious there are very few homes that could possibly be empty. Signs of life everywhere.

  • Lysenko’s Nemesis

    What did the study cost – us?

  • penguinstorm

    So you’re saying yes it did but no it didn’t?

  • maya

    Although the numbers haven’t changed, if empty houses are concentrated in a couple of areas, they are noticeable in those neighbourhoods.

  • Kirk

    A couple of weeks ago, Pete McMartin wrote an article, “Youth exodus is urban folklore”, based on statistics.

    Today, The Province ran an article, “Millennials fleeing Vancouver for cities with more affordable housing, threatening city’s tech economy”, based on statistics.

    Someone help me and point out which one is the incompetent reporter whom I should forever take with a grain of salt and a head shake.

    http://www.vancouversun.com/opinion/columnists/pete+mcmartin+youth+exodus+urban+folklore/11755633/story.html

    http://www.theprovince.com/millennials+fleeing+vancouver+cities+with+more+affordable+housing/11783875/story.html

  • McMartin’s column is about Metro Vancouver stats and I suspect the Province/Bloomberg article is just CoV stats. Both can be true.

  • Kirk

    Yet, both articles are attempting to sway readers. As a layperson, I just want to know, without spin and bias, is there a problem with young people leaving Metro Vancouver. Today’s Province article didn’t say, “Millennials fleeing Vancouver for Port Moody”. It’s obviously trying to say that young people are leaving Metro Vancouver for places like Victoria.

    Maybe I should ask, which reporter is trying to use stats to spin them to say something different? The articles are opposites. The stats may be both true, but both viewpoints cannot be. Which one is trying to deceive me?

  • According to BC Stats, there are approx. 232,000 people currently in the CoV aged 25 to 44. A decline of 1300 in that age groups cited by The Province/Bloomberg is 0.5%.

    Given that, I’m not sure using words like “fleeing” and “hemorrhaging” are warranted.

  • Kirk

    It has to be taken as a relative number to other age groups.

    If inflation is 3% and my boss gives me a 1% raise, I’d feel like I was falling behind. Similarly, if 1,000,000 people are moving here, and none of them are millennials, and if we even lost people in that age group, I’d be alarmed.

  • penguinstorm

    Do you think it’s possible that the kids who were playing in the yards in 2002 are now…oh, I don’t know…about 14 years older and possibly moved out of their parents homes? Or playing XBOX One games instead of outside?

  • francesbula

    I feel the same way, Kirk. And I haven’t found an answer yet. I talked to a person I rely on for stats and he doesn’t know where Bloomberg got the numbers from, since they aren’t from StatsCan (it doesn’t produce yearly stats like that) and seems to be from the labour force survey, except that the age categories don’t match. Maybe we’re all just going to have to wait for the 2016 census results and then all the fights can start again.

  • francesbula

    Yes, that is what I’m saying.

  • francesbula

    Good question. We were all so gobsmacked by the methodology and the numbers that we forgot to ask for once.

  • francesbula

    But there could also be other factors (NOT discounting your hypothesis but just adding in), i.e. the boomers who moved into the west side in a big wave in the 1990s all still sitting in their houses even though their kids are now grown and gone. This happens even in the suburbs — certain areas kind of hollow out as the kids from a generation of buyers leave home but those parents don’t leave for a couple more decades. As well, could be west side just got too expensive post ’90s for people with kids.

  • francesbula

    The researcher stated clearly during presentation that smart meters have only been in place for 2.5 years. So the data from those years were analyzed, patterns assessed and then that knowledge was used to “educate” the data from the previoius, non-smart meter years. That was his term.

  • Salvaich

    I might argue that this was a stretch to use a limited time sample then extrapolate backwards. It is the sort of thing that analysts do (“back casting”) but I think it makes for some pretty weak policy analysis on the part of the city.
    Thanks

  • maya

    Sure, but also fewer families can afford to live there. If you have young kids in this city, you most likely live further east where the prices are a bit cheaper.

  • Tiktaalik

    Do the stats break out both how many people are coming and how many people are leaving and not just the net population value? Knowing to what degree the population is churning would be informative. I’d expect to see that there are lots of people arriving, but also lots of people leaving.

    Anecdotally amongst my millennial friends, everyone with skills that are valuable elsewhere has an eye on the door (or has left already). I am interested to see the 2016 census.

  • Not at the CoV level at BC Stats, but there is a table for Greater Vancouver that shows net population gains from international and interprovincial migration and net population loss from intraprovincial migration. It’s not broken down by age groups, however.

    http://www.bcstats.gov.bc.ca/Files/1290e36e-dbb1-4ba8-911e-e6df69fb84fa/BCRegionalDistrictDevelopmentRegionMigrationComponents.pdf

    You can dial down to CoV level population estimates for gains/losses in 5-yr age groups, but it doesn’t explain what’s driving it. The gist is there have been net gains 2005-2015 for ages 25-34 and losses for 35-44.

    http://www.bcstats.gov.bc.ca/StatisticsBySubject/Demography/PopulationEstimates.aspx

  • Kirk

    Frances, I saw you ask for a graph of Vancouver prices vs CDN dollar.

    https://medium.com/@mr.allen/good-news-vancouver-real-estate-is-getting-more-affordable-bad-news-not-for-canadians-893a0d745133#.js3zud62s

    Looks to me like another sign of foreign investment. In the graph, historically, if the CDN$ went up (ie CDN economy doing well), then housing prices went up; if the CDN$ went down (ie CDN economy doing poorly), then housing prices went down. And, that makes sense.

    But, recently, the CDN$ is going down (ie CDN economy doing poorly), yet the prices of housing is going up. So, to me, that’s a sign foreign money is doing the buying. I wish the graph went back further.

  • Tiktaalik

    Regarding the Empty Homes on the WestSide myth I think with the results of this study we have to consider it busted.

    It seems like there are still people insisting there are almost no people living on their streets, and while I recognize there’s the possibility that there could be hyper localized empty neighbourhoods that are hidden by the broadness of the study categories, I’m now pretty skeptical.

    At this point I think the onus is on people who are certain they live on an empty street to get out there and figure it out for themselves.

    Here’s an idea: Organize a block party for your neighbourhood this spring. Go around your neighbourhood and knock on doors. That’s an easy way to find out how many people actually live in your neighbourhood…

  • francesbula

    Yes, it would seem like it’s more evidence for the presence of foreign buyers. As always, I feel like I need an economist to explain to me why I’m likely wrong about everything.

  • A Taxpayer

    From this week’s Economist:

    “In Shenzhen, a southern tech hub that is the frothiest market, with prices up by 53% in the past year alone, local officials have vowed to crack down on speculators and expand the supply of affordable housing.”

    So it seems that China is concerned about Chinese real estate speculators too.

  • jenables

    Food for thought:
    scmp.com/comment/blogs/article/1926280/vancouvers-vacancy-study-key-finding-it-didnt-find-and-vacant-homes-it

  • sthrendyle

    I have lived on two streets in North Vancouver for the past seven or eight years. You can walk by many houses at various times of the day and conclude that ‘no one is home.’ But then, one day, sure enough, you do see someone puttering about (and nod). Most of the time, there aren’t cars on the street (on the North Shore, lots are big enough to accommodate something called ‘garages’) and so you might think – ‘hey, the house is vacant.’ I will say, though, that there is one exception to this rule, and that is if you go canvassing for something like the Heart and Stroke Foundation. People seem to know you’re coming a mile away, and the place goes dark. As for condos, well, even when I lived in an apartment building that I knew was 100 percent occupied, the vast majority of the time I would not run into anyone else. In the meantime, I am happy to take the $500K that the Feds are offering to investigate this phenomenon to knock on a few doors. Maybe as a Liberal party campaign canvasser?

  • sthrendyle

    Coming late to the party, here, but I’m offering a simple solution (as a former employee). Ask the mailman.