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Vancouver the most unaffordable? No, says provocative talk

May 25th, 2011 · 50 Comments

Trying to get people to take a closer look at conventional wisdom is one of the hardest jobs around. One of the unshakeable beliefs Vancouverites have these days is that housing prices here are more disconnected from local incomes than almost any other city. I have to say, I’m prone to that thinking myself.

That’s why my ears went up when marketer Bob Rennie made it a central theme in his talk to the Urban Development Institute last week that the city is not as unaffordable as it’s often made to appear in headlines. He had his research consultants break out the numbers to look at the average price of housing when the top 20 per cent of sales — the outliers who are paying millions for houses on the west side of Vancouver or expensive condos in Coal Harbour — are excluded.

His numbers are in my story here. I’m still inclined to think that Vancouver housing prices are skewed high, for very particular reasons, but I’m putting this out here as a thinking point. I’m sure many of you will disagree for various reasons. (I see Judy Rudin is already packing counter-arguments into 140 characters on Twitter.) Perhaps some of you may find some merit in Rennie’s analysis.

I’d like to hear what you have to say, because this is an issue that I keep circling around with no satisfying answer. There are days when I think there’s something seriously wrong with the city and its housing prices. And other days where I think that we’re a city of people who want to have a big city but pay Saskatoon housing prices.

The reality is that, as cities grow, housing prices close to the centre or close to the most attractive areas get bid up. There’s a larger pool of people with money who will do what it takes to get those prime spots. And the rest of us have to go to other parts of the city. Those of us with okay but not spectacular incomes have to live in smaller places or put in a basement suite or otherwise compromise if we want to be close to the central city. If we insist on having the full house and yard, we have to move further out. (And, ironically, people who campaign to keep new housing out of their neighbourhoods in an effort to keep them as they are ultimately end up spurring their transformation — because those neighbourhoods then get bought up by the small pool of wealthy people able to afford them.)

But is there a large, economically prosperous city that doesn’t work this way? I’m actually working on a bigger journalism piece on this, so pile on.

Categories: Uncategorized

  • matt

    What cities are you comparing Vancouver to in terms of population and economic growth? Calgary’s population is growing faster with a much more vibrant economy yet real estate costs much less.

  • Tiktaalik

    So we’re stripping off the top 1/5th from the dataset and then trying to say the rest is “cheap.”

    It feels like this is just an exercising in fudging the numbers to get the result you want.

    Here’s a question. In the last five years how many houses are now moving into this special “top 1/5” area that we’re now excluding since it “operates in its own world.” Is it increasing? Will the special fenced off, “own world” segment of the Vancouver market soon be larger than 1/5? 1/4? 1/3?

  • Morley

    Don’t most cities have a luxury market that skews the numbers?

  • Dan Cooper

    As others and myself commented over on the G&M thread:

    a) Sure, if you exclude the most expensive housing in Vancouver, then the average of the rest will be less. This is news? Of course, the same would be true of any city. Cut off the bottom 20% (e.g. the leaky condos on main thoroughfares above bars and next to drug houses…) and maybe you’ll have something meaningful to say.

    b) Even “lying with statistics,” what is left is too dang expensive. Maybe that is just the way it is going to be, but to pretend it isn’t so and/or is not a problem that needs to be considered and addressed as best possible is very odd. The cheapest condo in Vancouver per the MLS is $122,000 – actually a few tens of thousands less than the next lowest I see, which suggests to me that any buyer would be strongly urged to pay for a very detailed inspection of the building. The cheapest freestanding house is $409,000, for a “value mainly in land” 25×99′ lot out on deepest darkest Triumph St. Forget people working in service jobs, even a single professional can barely if at all afford anything habitable in this city unless – like me – they first owned elsewhere and built equity before moving.

  • The latest RBC Housing Trends and Affordability report: http://www.rbc.com/economics/market/pdf/house.pdf
    “Vancouver – Testing the boundaries of rationality”

    My partner and I make double the median family income, have no dependents, and still can’t afford to buy (or at least believe renting is more financially prudent). I think Vancouver has an affordability problem. It might not be felt by anyone who bought more then 5 years ago, but anyone trying to enter the market today is screwed.

  • IanS

    I agree with the posters above regarding the obvious effect of removing the most expensive housing to create a lower overall average. That does seem to be fudging for effect.

    However, I found the discrepancy arising from prices in different areas to be more persuasive. As long as the result is qualified along the lines of “housing prices in Vancouver have only gone up ___%, excluding ______________”, I think the point can be made the prices are not going up generally as much or as fast as perceived. I think that kind of analysis has some merit in providing a more realistic assessment.

  • david hadaway

    No need to fix hen house door, says fox.

  • Jonathan Reimer

    Wait, what is Bob Rennie’s interests here? It may be helpful to remember what ol’ Bob does for a living.

  • Gassy Jack’s Ghost

    Kind of like the distinction between “homelessness” and “street homelessness”, the difference between Metro Vancouver prices and Vancouver prices makes all the difference here. Sure, there are relatively affordable properties in Abbotsford, Pitt Meadows or Langley, but you won’t ever see Rennie marketing them, now, will you? Even your post’s title, Frances, reinforces this little game of hide-and-go-seek that Rennie is playing with the numbers.

    Right now, smart offshore buyers probably aren’t looking to invest in a market that keeps bubbling up, and bucking the trends, as they may have been doing before the Olympics. Perhaps this accounts for the 1% offshore statistic. If this is a snapshot assessment focused just on the past year, rather than an average over many years, it could easily just be a blip.

    But these stats do bear out conventional wisdom, namely, that Bob Rennie is the Condo King, and he will do anything to convince people to buy real estate.

  • Recognizing the difficulty in stating figures clearly and concisely in order to survive the editorial guillotine, I point no fingers. However, figures stated without sufficient detail only raise the question of selectivity. That it is in every one of Bob Rennie’s best interests to improve the appeal of, and shine a spotlight on, the Vancouver real-estate market should be glaringly obvious.

    “Rennie Marketing Systems commissions research.” are the results available to the public? Are these findings subject to independent review? Who has been commissioned?

    “1% of the high end buyers are non-resident investors” does not mean 1% of purchases are from non-resident buyers.

    -is this 1% expressing proportion of individual buyers, or proportion of purchases? What proportion of total sales (in number of units as well as dollars) does this represent? I.e. are there a few very large investment groups (which count as individuals) buying large numbers of units? Also, does this exclude purchases by local investors with funds derived elsewhere? Is this even possible to know?

    “after the most expensive condos in the top fifth were taken out”
    -one out of every five properties is an enormous proportion of the total housing market. How many property seekers fit into the top 20% as opposed to the remainder? This ‘top fifth’ needs to be stated more bluntly. Examples help.

    Admittedly, I don’t know Bob Rennie, but he is in the business of marketing real-estate. If he is doing his job, he is taking meticulous care in presenting his information to run a profitable business — selling condos. He is free to say whatever he wishes, but only a fool would neglect to question it.

  • Tristan

    The Demographia affordability studies, in which Vancouver was ranked the most unaffordable out of 272 cities in 2010 and 3rd most unaffordable out of 325 in 2011, are based on the ratio of median house price to median income. Again, that is MEDIAN house price, not mean (or average), so Rennie’s analysis is irrelevant. He is pretending that the affordability studies are based on averages, but they are not.

  • Gavin

    Yes, Vancouver’s housing is very high but I wonder if just focusing on average prices by region hides some of the truths and distracts from a factual discussion about how to solve the problem.

    Personally I’d like to see a comparison of house prices by distance/commute time from the central core. I suspect if you look at the core of Toronto where the 600,000 people closest to downtown live you will see more comparable housing prices to Vancouver proper. The GTA is much larger and has more suburban housing stock (and highways) than Greater Van so when you average prices across the full area prices look lower. But is Langley really much different than Markham and Richmond Hill? If so is it because of more highways and thus greater mobility?

    If Vancouver had more highways wouldn’t housing be cheaper because it would allow more options for families to live in the Valley? Do we really want that? Would an expansion of rapid transit be a better solution? These are the sorts of things we need to discuss.

    It would definitely be better than vilifying Bob Rennie or discussing protectionist measures like the one Peter Ladner proposed.

  • Jason

    “Wait, what is Bob Rennie’s interests here? It may be helpful to remember what ol’ Bob does for a living.”

    EXACTLY. Every market fundamental you look at is way off for Vancouver….rent to price ratio, price to income, etc. etc. And the numbers are only getting worse. Every day there is another report out by a bank or economic analyst about the fear of a sizable market correction in Vancouver. If you look at any of the charts you can see why, and if you put our chart up against any other major market that has crashed in the last couple of years, you’ll see that we’re right in line with them…we just haven’t fallen off the cliff yet.

    Renie is out there promoting Real Estate…and the Real Estate agencies are continuing to push the “dream” that this will go on forever. It won’t.

  • JK

    This is clearly the debate that is coming to dominate the agenda, and for good reason.

    Some background on the statistic would be useful. The recent trend of tours from China to help investors find a home over the weekend likely involve a company here that completes the actual transaction, making it look “domestic” (i.e. part of the 99%). On the affordability question, if you take medians, our square footage costs significantly more, and our workers make less. If Rennie’s presentation and sources could be posted, it would be helpful to determine the validity/real meaning of the stats.

    Housing prices are skyrocketing, but incomes aren’t. We’re not developing good jobs, and the workforce housing stock is stagnant. This is driving out the ambitious and engaged people who want to make a mark on the world through their careers, not just their real-estate holdings.

    A few transcendent global cities are enclaves for the rich in their downtowns. Most also have swaths of neighborhoods with workforce housing for professional families or more amenity-oriented zones for younger professionals, then suburbs in various states of rise or fall. Vancouver is deficient in that middle category. Go to Seattle, Portland, Toronto, Boston, Chicago and other mid-sized cities and you’ll find a much bigger (though not always fast-growing) zone that works for the middle classes. We’re going straight for the high-end payoff without ever having gotten the middle right, and the result is more polarization.

    Reporting Rennie’s figures at face value puts an argument on the table without analyzing how the data have been manipulated. When there’s such a clear agenda, I would hope for more checks on the sources.

  • MB

    I am not going to argue that there is a wide gap between average incomes and housing prices in Vancouver city. There is, but as the article says in so many words, the gap, as currently configured, changes with location.

    But many tend to see Vancouver housing prices as a bubble that will burst sometime. I don’t believe it is. Prices dipped recently during the deepest recession in a half century, but bounced back 18 months later. That was a very strong test of price resiliency, so my conclusion is that housing prices here are pretty solidly grounded.

    Richard Heinberg’s latest post addresses economic bubbles, and while he addresses China and Japan, I think some of his comments could help us understand what exactly constitutes a bubble.

    “During the 1980s, real estate prices in Tokyo were jaw-dropping. In the Ginza district in 1989, choice properties fetched over 100 million yen (approximately $1 million U.S. dollars) per square meter, or $93,000 per square foot. Prices were only slightly lower in other major business districts in the city. By 2004, values of top properties in Tokyo’s financial districts had plummeted by 99 percent, and residential homes were selling for less than a tenth their peak prices. Tens of trillions of dollars in value were wiped out with the combined collapse of the Tokyo stock and real estate markets during the intervening years.

    […] “Building is being driven by artificially inflated demand—the very definition of a bubble. And this is resulting in oversupply.”

    Here’s the link to a great analysis:

    http://richardheinberg.com/museletter-228

    We do not have artificial demand. It is mostly real demand. And we do not have a debt-ridden housing and development oversupply in Vancouver. Quite the opposite. Our land base is finite compared to Calgary (as matt #1 attempts), which has an ocean of flat, undervalued farmland from which to make cheap, sprawling suburbs … which, incidently are subsidized and overly reliant on private transport fueled by cheap gasoline, which isn’t cheap any more and which indicates a major vulnerability.

    Vancouver is the antithesis of Calgary in many ways. They are not comparable in land use issues.

    Many, many people make the mistake of not including the cost of more time spent commuting and maintaining, insuring and fueling several vehicles per family in their calculations of living farther out where housing is “cheaper”. There are significant indirect costs to living further out.

    So, in minding the gap, how do we make it smaller when real estate prices are permanently high?

    First, we need to put the large single-family home on a large lot to bed. They are unaffordable to middle incomes in urban Vancouver, and usustainable in the long run anyway, considering the challenges we face this century. They are so last century. Get over it. Release that gorrilla, and let other ideas flow.

    Try looking at earning more money through renting a portion of your freshly-purchased abode, be it detached or attached. Michael Geller helped develop rentable suites within suites at UniverCity; perhaps he has more commentary on this.

    “Mortgage helper” is a truly accurate term. Renting out our basement suite helped my wife and I immensely for years. It’s usually worth it even if you need to give up a car in order to meet the the mortgage payment.

    Another way to address the gap is to introduce other tried and true forms of housing that consume less land (which is where a major chunk of the price resides) like fee simple row houses, subdividing standard lots into smaller chunks (I live on a half lot which is $350,000 cheaper than my full lot neighbour’s), and having an annual competition with awards for the best three and four-storey walk ups on or within one block of arterials.

    With higher density you can have “mingle” mortgages where two singles can own strata condos designed with larger common spaces and ensuits in separate bedrooms, and easily recognizable dividing lines.

    Building with wood instead of concrete may help to lower the per unit cost, but I’d prefer post and beam over stick frame with very good sound attenuation between units and significant energy conservation measures. Eliminating underground parking from condo developments on major transit corridors is also a tried and true way to save over $30,000 on the purchase price.

    These examples do not necessarily pertain to building more towers, but they are still an important part of the mix.

    Providing much more public transit is one of the most valuable tools to reconfiguring a city to be more efficient and to fully address affordability by providing a much cheaper alternative to owning and operating a car, and in ultimately decreasing the staggering taxes put into roads and patching up broken bodies resulting from car accidents and particulate pollution.

    Then there is the issue of building resiliency. Leaky condos are the most infamous example of lack of resiliency here on the Wet Coast. Cheap housing is cheaply built housing, and that includes design detailing for a temperate rainforest. If I had my way I’d ban OSB and force generous soffits onto builders.

    Moreover, energy consumption is becoming a larger issue with every fresh report on climate change and price increases in fossil-based heating fuels. The purchase price of a house is often the primary consideration, but how many give a thought to long-term operating costs? Perhaps that $30,000 geothermal heating system and solar h/w are worth it when you work out the cost of living in a house for a couple of decades.

    There are many things that can be done at a community scale. For example, encourage planners and councilors to consider incrementally converting a small portion of the underutilized backwaters of our vast road network for new housing. Who in leafy West Point Grey or sunny South Vancouver needs 66-foot road allowances AND 20-foor alleys anyway? Neighbourhood-scale heating plants have a lot lower per unit energy costs and are drawing more attention, and it is reasonable to assume that cheaper energy costs will become a very marketable attribute.

    Why not have a city or Metro-inspired task force on affordable housing to foster more ideas and flesh them out?

  • Hazuchan

    One of the real concerns for someone in the business of Bob Rennie is that there is real discussion happening about limiting foreign ownership of real estate. Australia’s new legislation in 2010 that limits foreign speculation in real estate has had the effect of bringing prices down. I think this is clearly a viable policy option if enough people want it. Make this an election issue!

  • Hazuchan

    By the way, we would like to see the data set and report used by Rennie’s researchers. By his own admissions, he is just a real estate saleman, not an expert in statistics.

  • Jason
  • MB

    @ Jason 10:

    “Every day there is another report out by a bank or economic analyst about the fear of a sizable market correction in Vancouver. If you look at any of the charts you can see why, and if you put our chart up against any other major market that has crashed in the last couple of years, you’ll see that we’re right in line with them…we just haven’t fallen off the cliff yet.”
    ———-

    Perhaps you’re wrong. I don’t know what jurisdictions you are referring to (no references were provided), but it isn’t the US housing market that is in widespread default.

    It’s quite different up here, especially concerning the financial aspects (read: Debt), and one should define “market correction and “falling off a cliff”, which to me are substutute words for “bubble” when they use such words so cavalierly.

    Read #11 for comments on how inappropriate comparisons between Vancouver and cities like Calgary are. The physical and economic differences are too great.

    Read the link in #11 for an insightful view of the world economy and bubbles. Vancouver is not isolated.

  • “Downtown is second time buyers, rich guys, and foreign money. We’re a resort city, but as I get into the suburbs, I start to look at local incomes,”

    said Condo King Bob Rennie in the middle of the 2008 economic meltdown:

    http://www.youtube.co/watch?v=Bc7GFRn3ggk

    They must have all sold to the locals since then. Joy!

  • Ternes

    I’m a little dismayed at some of the knee-jerk anti-statistics responses above and in the comments on the Globe article: “he’s doing something other than a straight average, he must be evil!!!”

    Not even commenting on his conclusions here, but checking for outliers that might be skewing the data (which is what he claims to be doing) is a standard statistical tool used all the time to help analyze messy and complicated real-world data.

    If you think you’re doing an average over one homogonous statistical population but are in fact covering more than one distinctintly different populations, you average value becomes misleading. It’s like if you recorded the travel time for a group of people, some of whom drove cars and some of whom went by foot: the average value would tell you essentially nothing, or at least considerably less than looking at the average of the two distinct groups. What Renney is doing is a way of determining if there are in fact two distinctly different groups at work in the Vancouver real-estate market.

    Whether he’s right or not is an entirely different matter. For me, the real problem is that he hides all his data and calculations, so no one can call him out if he really IS fudging the data.

  • Kirk

    What dumb logic. What’s the average price across the country when you exclude the top 20% in their cities?

    It’s like saying Vancouver doesn’t have a drug addiction problem is you exclude that 20% of the population.

  • Ternes

    The question is, what is the average value telling you?

    Go back to the my drivers vs walkers example. An average of travel time for both drivers and walkers doesn’t tell you anything about the behaviour of the entire group. I’m not saying that housing prices are governed by forces *that* distinctly different, but I am saying that it’s worthwhile considering the forces covering Vancouver real estate as not being completely monolithic and uniform across all participants in the market.

  • @Ternes Are you suggesting housing prices in Vancouver are bi-modal? I don’t think so. If you’re concerned about outliers skewing the mean, use a median. That’s what this 2006 study did – http://www.canada.com/vancouversun/news/westcoastnews/story.html?id=ff7fd1e0-f52e-4de7-af5b-6117dc6cded5, and found Vancouver was the least affordable city in Canada, and 15th world-wide.

    Anyway you slice the data, Vancouver’s housing prices are out of whack.

  • Jason

    MB, sorry I thought the 5 articles I posted in #12 might be considered “Reference”.

    Which market fundamental would you like me to point to that shows Vancouver is anywhere near any historic “norm”?

    As for additional reference, this is from 5 days ago from RBC:

    “We fear that the Vancouver market is becoming increasingly disconnected from local demand conditions and vulnerable to a painful correction, especially once interest rates resume their ascent,” said Robert Hogue, senior economist with RBC and author of the report.

    http://www.cbc.ca/fp/story/2011/05/20/4816251.html

  • mike

    The biggest issue I have with Rennie’s numbers is that he excluded the top 20% of sales. Removing that many sales is hardly removing outliers, rather it is simply removing the top 1/5th of the market. Of course the overall average will fall significantly!

    And to say that top end real estate is a market unto itself is patently ridiculous. Based on the laws of supply and demand if one house goes for $2 million , the person with 1.7 million buys the next best house they can find, and the person with $1.3 million does the same and so on… now we have houses east of Fraser going for $1 million.

  • Agustin

    Why limit ourselves to a single metric? (Be it the mean price, the median price, or the mean price excluding the top 20%.)

    Why not look at a graph of the distribution of prices? This will be much more informative than any single metric.

  • Evil Eye

    I think Mr. Rennie just wants to build and sell more shoe-box size condos in the city.

  • Sandy Garossino

    The issue is not so much where we are, as where we are going.

    Unfortunately, we are not even close to the endgame on the anomalous real estate market here, which has its roots in the surge in global liquidity and monetary tightening in China.

    Singapore, Hong Kong, Vancouver and Sydney are among a handful of cities where real property has become an international investment instrument that moves the dial on affordability for local residents. Even very minor adjustments of fiscal policy in China now have global implications.

    Vancouver is potentially more vulnerable than other markets due to the frailty of our underlying economy and our regional dependence on commodity prices. Increases in US interest rates, contraction and corrections in Asia could hit us quite hard.

    It’s vital that we start looking at this issue within the context of a larger strategic Asia plan–one that offers not only challenges but also extraordinary opportunities.

    If we plan for it.

  • I smell a bigger story than some speech by a condo marketer. The content of the speech is bizarre in its arrogance but does ignore the elephant in the room that prices are out of whack with incomes.

    I don’t think Vancouver’s high prices, including the 20% that’s stratospheric, is going unnoticed in Ottawa or Victoria. The City is the proverbial Nortel on the TSE in 2000.

  • “Singapore, Hong Kong, Vancouver and Sydney”

    Pop quiz: pick the city in that list that has not imposed significant foreign ownership restrictions on residential property. I’ll give you a hint: it starts with a V.

  • Everyman

    Frances, really, Bob Rennie as an impartial source to start a discussion? The man exists to peddle real estate!

    Of far greater interest (and an article I doubt we’ll see anywhere) is the effect these new buyers will have on civic life in Vancouver. If you’re coming from (and likely still making your living in) a society with no democracy, how likely are you to get involved ? No coincidence Richmond had the lowest voter turnout % in BC in the last federal election.

  • Steven Threndyle

    I’ve met Bob Rennie and like him, but seriously, quoting his ‘research’ is really like quoting the tobacco industries in the 60s who said that ‘smoking wasn’t harmful to your health.’ Condo marketers in the suburbs are currently advertising condos for ‘less than comparable re-sales’ – so, what does that mean for your resident living in a wood frame walk up for the past 20 years – that you’re living in the equivalent of a 486 computer? How are you building equity in that? In Vancouver’s defence, though, it does have one thing that many other communities in BC don’t and that is well-paying jobs (we’ll exclude, uh, BC’s largest agricultural crop – one you can even grow in your home! from this discussion…). Look at the Case-Shiller index in the USA that shows houses now off 33 percent from their 2006 peaks in 20 key markets. Do we really think that people in, say, Santa Monica or Mercer Island didn’t think “real estate is a safe investment… it will never go down… people will always want to live here…” And I’m sorry, but “Abbotsford” and “Maple Ridge” are no more Vancouver than Squamish is…

  • Judy Rudin

    Hi Frances,

    Thanks for the mention. Actually, it was probably more like several hundred characters over several tweets. I must be slipping; sent out at least 2 before problem solved. 😉

    Great thread. Lots of interesting opinions, discussion and arguments. I would expect nothing less of your readerhip.

    I think of the housing affordability question as less a stand- alone issue, and more as a crucial component of city building, as a whole.

    We are, in my opinion, lacking some key drivers that must be present in order to create a city that is sustainable (in all interpretations of the term). One that is geared towards creating a well-rounded, diverse “working” city, where young people, their families and the middle class are able to help support the infratructure and operational side of the place in which they live.

    This, as opposed to a resort or retirement city, where you probably will take in less (or no) income tax (less for the feds and province to give back to us, in order to build more infrastructure e.g. transit, a an example). Where lower paying service jobs are the only ones that can be found, and whose job-holders must be transported in from a great distance– at great expense to the system and to to the exclusion of other important infratructure needs.

    My appetite is for a healthy, working city with a diverity of jobs, affordable and different types housing that is kind to families, where the main objective is to have a place to live versus a high risk investment vehicle (co-op, row housing, –hello Michael Geller!), where many people can afford to live where they work, creating a sustainable, and growing robust tax base that contributes to the building and maintenance of infrastructure—beyond the funding provided merely by property taxes from the few. I think, however, that we may be heading for the latter scenario.

    So, what concerns me most is that nexus where:

    *housing (type, size, location)
    *affordability of same
    *very low combined household incomes
    throughout Metro Van
    *an anemic job base/market in Vancouver
    * a lack of people paying income tax in CoV (man cannot live by propoerty tax, property tranfer tax and HST alone!)
    *lost community connections

    cause a divergence in the fabric of our city, rather than a convergence.

    All I seem to hear when bringing up the possibilities, the cause and effect or side-effects of unaffordable housing , are the usual claims that “this is just the way things are” and “well, look at (fill in the blank) city; we can’t dothings differently?!” and “what, don’t you believe in free enterprise?!” All of which, of course, aume that we will drive away economic opportunity.

    It seems to me that our town is tilted and defined almost exclusively to the importance of real estate transactions, to the exclusion of all other considerations, in defining what and who we are.

    This fetishization of real estate is not healthy for our city or most of its inhabitants–and is definitely not providing good public policy. This willful ability to ignore the potential “what ifs” does not move or provide us with the kind of “out-of-the-box” or leading edge thinking that benefits the many, never mind most, in our population.

    I would give my vote to any politician who at least had a the nerve to have this converation with the public. Are we so married to the old paradigms–and so shruggingly accepting of the inherent risk in betting it all on real estate (Hello? USA?!) that we have become inerred to the dangers of this group think? Are we sleepwalking into a future that is unsupportable, because we want to avoid this conversation?

    What, exactly, are we afraid of?

    There may be real opportunities in asking ourselves some hard questions about our unwavering assumptions about what “must be”. In those converations, we may even find ome opportunities that benefit all of us.

    A not unrelated anecdote. I listened to respected federal Auditor General Shiela Fraser issue some warnings today, as she exits her job as Canada’s public expenditures watchdog: politicians, she said, must be honest with voters as the time is fast approaching when people must be boldly told that they will have to face either rising taxes or broad cuts in those programmes they say they want. The days of smiling and saying that “there’s nothing to worry about here” are over.

    I feel that that that type of refreshing honesty could be applied to the housing affordabilty issue we are facing here in Vancouver. There will be ramifications to the whole of our city in the future if we do not discuss this, and if we act now, we may even save ourelves a world of hurt, down the road.

  • Tessa

    I don’t think Mr. Rennie is really being accurate there. If you want to understand just how unaffordable Vancouver is, look at the lowest prices you’re going to pay for a house in Vancouver. The Vancouver Sun recently ran a list of run down stinkers over $500,000 each, all located in the city’s poorest neighbourhoods. When you compare house prices to what people are making, it’s shown to be even more unaffordable.

    But of course the fabulously wealthy and well-connected condo marketing guru with the phrase “everything is going to be alright” plastered in big neon letters in his swank Chinatown office/art gallery/trojan horse of gentrification would say affordability isn’t really that big a deal. Why would he want prices to drop? As long as he can sell, sell, sell.

  • Housing affordability in Vancouver BC
    Standard Two-Storey: $716,000 qualifying family income $141,600.
    Detached Bungalow: $635,800 qualifying family income $126,000.

    Townhouse: $476,300 qualifying family income $94,500.

    Condo: $362,700 qualifying family income $72,400.
    Based on a 25% down payment and a 25-year mortgage loan at a five-year fixed rate -excluding maintenance fees.
Source: RBC. March 2010.
    Family Type:
    Non-immigrant: Median Family Income $80,127

    Immigrant: Median Family Income $60,316

    Source: Statistics Canada, 2008.

  • tf

    Tessa – your comment reminded me of the fabulous 1973 British film “O Lucky Man” – have you seen it? An allegory on capitalism.

    “Sell, sell, sell, sell everything you stand for
    Tell, tell, tell, tell all the people that you care for
    Running here, running there
    Keep it moving, sonny, don’t despair
    Because the next one will be, the next one will be, the next one will be, the best one of the year”

    The lyrics are from the song “Sell Sell” by Alan Price – quite appropriate if we’re going to develop policy based on a speech given by condo king Bob Rennie to the UDI…:)

  • Bob Rennie sez homes are affordable. News at 11.

  • Rennie’s arguments are obviously self-serving, but his playing with the numbers is not completely wrong. Distributions are as important as averages.

    After all, it’s well known that median incomes have been pretty stagnant in most of the developed world, but at the same time we also know that the richest have been getting richer – i.e income inequality is increasing and the distribution of income has changed. In that case the median number does not contain all of the information – you have to look at the other percentiles (median being the 50th.)

    I believe what Rennie is suggesting is that the same now applies in Vancouver real estate prices.

    Personally, I’ve long had a suspicion that changing income distribution and housing affordability are connected.

    The expectation (that many now have) that someone on a median income should be able to afford a median home is a recent phenomenon – up until about 50 years ago home ownership was the preserve of the well-off. What changed this? Poor people got better off post-WW2 and interest rates have trended downwards over the long term – giving someone on a median income a shot.

    I believe we’re now going backwards on income distribution and this is one of the factors affecting affordability.

    The rich having a lot more money to spend may be fueling prices at the top end, while reduced investment in social housing and lack of rental housing development (see other recent discussions here) are squeezing the bottom end (i.e there is some portion of the market that might have rented, but choose to pay the premium to buy because they cannot get what they want in a rental.)

    So perhaps current prices are justified by market conditions – but those market conditions are a warning sign of a change in society we should not ignore.

  • MB

    @ Jason 25: “MB, sorry I thought the 5 articles I posted in #12 might be considered “Reference”.
    ———-

    It’s actually #18. No matter. It did not appear before I made my comments in #19, but it held it’s place in the queue. When you post more than one Web link your comment is automatically withheld until the moderatror can check it’s legitimacy. Happens to me here occasionally and on other blogs all the time.

    Nonetheless, having skimmed the articles you linked to, I still think Vancouver’s housing prices will remain higher than other cities, though there may well be a correction. How severe is like polishing a crytal ball.

    One thing we may experience is worldwide deflation that will impact everything. Another recession like the last which immediately followed stratospheric energy prices (the world economy is fueled by petroleum) may well result in fewer bailouts as governments discover the things they propped up last time with trillions of borrowed public dollars / yuans / yen / pounds were a little thin on the ground to begin with, and government debt remains so high that the decision-makers may have no choice but to let it collapse.

    Then, Vancouver’s housing prices will fall radically (i.e. a lot more than a “severe correction”) not because geography, population pressures and desireability constrained the land into permanently higher prices, but because there was a huge international economic collapse.

    I am concerned about the reports of average household debt. Don’t people learn? We learned from our own experience with debt and hammered down the mortgage with everyting we had for 11 years and are now debt free. My coworker, though, is suffering from Manopause and the tally for his new cars is up to three in six months for a single guy. My point is, weed out the foolishness and the national, regional and local personal debt levels will decrease remarkably.

    Moreover, personal and household debt does not translate into institutional debt with the banking sector in Canada.

    I’ll say again that I believe Vancouver housing prices will remain relatively high and the gap between that and income will remain wide. This has to be accepted as a fact of life here. But there are ways to make the gap just a little smaller. Read #15 again for about a dozen ways this can be done.

    Just watch out for signs of worldwide deflation.

  • RS

    So, even accepting Rennie’s methodology for the sake or argument, in what universe is $632,000 an affordable price for an average family home?

  • Great comments by MB. If you haven’t read them carefully, take some time to do so.

    Bob Rennie is a very charming guy and a wonderful salesman, and he seems to have sold some people on the notion that Vancouver is really not that unaffordable after all.

    While rents are not that far out of line with rents for comparable cities around North America and elsewhere in the world, our sale prices are very high and yes…unaffordable.

    Sure there are other places that are more expensive, but the fact is, our housing is not affordable by a very large segment of the market. So we make it affordable by offering smaller and smaller units.

    There are some better solutions, of course. One would be to significantly increase the amount of land zoned for multi-family housing…not just high rises, but three and four storey high density wood frame townhouses and stacked townhouses…you should see some of the ‘back to back’ stacked townhouse projects being built in Toronto. There is a definite market for them here.

    Also, municipalities need to stop using new development as a cash cow to fund operations…whether it be through fixed CAC’s and DCC’s or trying to share in the ‘land lift’ upon rezoning. Some people say this does not increase the cost of housing, it just reduces the value of land. Nonesense. It increases the cost of housing.

    Finally, we need to reconsider the standard of finishes. Do we all really need granite countertops? Does a starter home have to be 1500 sq.ft. with two and a half baths? Why can’t we build on smaller lots? Why can’t we further reduce parking standards?

    There are many things we can do to help bring down the cost of housing. But first we need to accept that there is a problem, and not be sold otherwise.

  • Keith

    A measure of housing affordability would be the percentage of the population that rents. In Vancouver, I’ve never seen that number below 60%. On that basis, Vancouver real estate cannot be considered affordable.

    At a recent lecture, noted architect Bing Thom was offering his take on Vancouver today; he pointed out that a great city needs to be based on more than real estate, immigration and the drug trade. A vibrant and dynamic city needs to offer a home to a large variety of incomes, occupations and family types. The market is failing to provide the solution, realistic non market solutions must be found.

  • Westender1

    Michael Geller, having just paid the remarkably low property taxes on my condo, I think you’re on to something with the statement that: “…municipalities need to stop using new development as a cash cow to fund operations…whether it be through fixed CAC’s and DCC’s or trying to share in the ‘land lift’ upon rezoning.” Vancouver needs to be collecting enough in taxes to fund appropriate municipal infrastructure. Relying on development and density increases to pay for library renovations is folly.

  • Glissando Remmy

    The Thought of The Evening

    ‘Welcome to Vankong, where you can live like in Hong Kong and pay for it like in Vancouver!’

    Michael Geller # 42 said:

    ‘Sure there are other places that are more expensive, but the fact is, our housing is not affordable by a very large segment of the market. So we make it affordable by offering smaller and smaller units.’

    Yeah, that’s the trick. We live in an experimental city, starting with Solomon’s 500 years dream & Vision who want to change the way we think, to accepting that living in a 325 sqft condo-crypt is the way to go.

    http://www.youtube.com/watch?v=Lg9qnWg9kak

    I could only imagine Bob Rennie salivating at the idea of marketing something like this in Vancouver. Can you picture it?

    ‘Large 325 sqft, posh, multi-use condo, all inclusive, one and a half bedrooms + den, enclosed balcony, solarium, and 20 Flex.’ – Low 1 Mill.

    Affordable, he says.

    Then Roger Kemble #36 brings us back to BC the Best place on Earth.
    Not affordable.

    We live in Vancouver and this keeps us busy.

  • MB

    Judy Rudin (34):

    “I think of the housing affordability question as less a stand- alone issue, and more as a crucial component of city building, as a whole.”
    ———-

    Excellent lead in for your futher insightful commentary on housing from a social perspective.

    I appreciate the reference to cohousing, which is a way for like-minded people with limited economic resources to take control of their housing destiny. Cohousing does teach homeowners much about the the value and often frustrating and complex process of designing, financing, building and operating their own multi-family housing. It’s not for everyone, especially the part about getting along with others, but it is certainly a valid component of an affordable housing mix.

    This is a fine discussion, but it’s often necessary to get people to stop bitching and start thinking. We have an affordable housing challenge to address, and we need significant constructive thought to come to resolutions.

    I agree with Judy that it has as much to do with existing city building paradigms as anything else, and this dovetails with land management.

    Michael Geller said “…we make it affordable by offering smaller and smaller units.” While I largely agree, especially when starting with 4,000 sf monsters on 50 foot lots on the west side, there must be floor under that expensive ceiling that is somewhat larger than a shoebox.

    This tells me that housing and land should be seen as inseparable. For example, Michael’s reference to the back-to-back Toronto townhouses is a good one, and it may afford a small yard for each unit which are ground-accessed.

    But 70% of Vancouver is zoned single family on predominantly 33′ x 122′ (4,026 sf) lots which allow a titch more than 3,000 sf finished floor space at the standard FAR.

    The single family lot is where we should begin to address affordable housing, which is directly related to affordable land, especially if the land price is the component most subject to market increases. Housing construction costs are quite stable and predictable most of the time, location, heritage and materials notwithstanding.

    The urban efficacy is quite low in our single-family zones. Mark Allerton (39) made the astute observation that single family detached houses on standard lots became affordable to average families only 50 years ago, but we have now popped out the other side of that window. Many older houses saw generations of large families packed inside prior to the expansion of “cheap” housing in the suburbs during the Fifties.

    There isn’t any more new land in Vancouver city. Now, consider that each lot in the majority of the city has a largely underutilized 24 foot setback, effectively locking out about 20% of the available space on the lot that could be devoted to much better uses, like housing.

    This adds up to more than 18 acres for 1,000 standard 33 foot lots. Take out half the setback area for housing and you’re into thousands of acres of “freed up” and largely wasted land throughout the city. Add sideyard setbacks and subdivide the backyards and you’re well on the way to lowering the per square foot cost of housing by reducing the area of land it sits on.

    This may well lead to a much expanded range of choices to fill the huge vacuum between detached houses on large lots and shoebox studio condos.

    Attached row housing will have an even more dramatic effect on increasing the efficient use of land. Row housing is centuries old in Europe and is a varied as unadorned two-up-two-down through four-storey homes.

    I actually think that sky high housing prices result significantly from poor land use choices as much as from specultation and limited supply.

    It’s an opportunity to re-examine our land use standards, which are based on shaky premises of the 50s on 7/10ths of our urban land.

  • So speaking of creating more affordable housing choices in Metro, in an effort to put my money where my mouth is, I have purchased 3 lots in West Vancouver next to the Seniors Centre, one block off Marine Drive on which I am proposing 9 smaller homes. The proposed density ;for Hollyburn Mews, which combines a duplex and coach house on each lot is 0.61, yest 0.61 which as many of you know is less than single family density in Vancouver.

    In addition to the rezoning, the District is wisely proposing an OCP amendment for the entire block, which is bounded by non-residential uses on three sides, to avoid criticism that this is a ‘spot rezoning’.

    The project is, to my mind, a wonderful demonstration of how we can sensitively infill smaller, more affordable housing choices into a well located, mature neighbourhood without significantly altering its character.

    However, while there is significant support for the proposal, there is also very significant opposition. As this North Shore News story points out, the Public Hearing has been adjourned until June 6th. If you agree that this sort of alternative housing is needed in West Vancouver and other Metro municipalities, do let the mayorandcouncil@westvancouver.ca know, or come to the Public Hearing. http://www.nsnews.com/business/West+Vancouver+coach+house+hearing+draws+crowd/4849276/story.html

  • rf

    A new low for, Frances….

    “Let’s just remove all of the evidence that does not serve our purpose, then we can make our case!”

    How would “Rennie logic” hold up:

    1. In court
    2. In medicine
    3. In accounting
    4. In psychology

    Wait a second…. Bob Rennie should be in politics!

  • “sky high housing prices result significantly from poor land use choices as much as from specultation and limited supply”

    Well we can add up the rents on a detached dwelling with 2 basement suites and a coach house and figure out what an investor would pay for it, if interest rates were at non-emergency levels. That would give us a baseline utility on the land, never mind that an owner-occupier now has to be part-time amateur multi-unit landlord. I don’t see how taking on that burden is helping citizens positively contribute to the community if their time is spent property managing; seems like they should be out enjoying what the City has to offer, no? In my mind it’s better to produce true “single family” living spaces; not everyone has the desire to manage tenants, especially those with kids.

  • MB

    Jesse, I wasn’t thinking about just owner / landlords (was one myself once, and admittedly it left a bitter taste …).

    With 70% of our residential land zoned single family detached, and with over 1/3 of our entire land base under asphalt, and with no more available raw land unless one fills in the ocean and levels the mountains, one can conclude that we manage our urban land base inefficiently.

    We need to densify hopefully in human-scaled ways in order to utilize what we’ve got more efficiently.