Frances Bula header image 2

Two-thirds say our housing crisis the result of “basic flaws of capitalism,” others say cheaters; critics say false choice

June 13th, 2019 · No Comments

Okay, 361 people voted in my silly little poll asking if our housing crisis is the result of “basic flaws of capitalism” or cheaters taking advantages of a basically good system. And 64 per cent picked door number 1, although I have to note that a number of Twitter commenters said I was posing a false-choice question. I agree this may say more about my followers than about housing.

A sample:

One person had so much to say, it couldn’t fit into a tweet, so here are his thoughts in full. Please continue piling on.

Supply side:
    • Land use and zoning: 90+ years of highly restrictive zoning on a majority of our residential land. The city planners and leaders of the day were at least honest enough to clearly state that Single Family zoning was most definitely about preservation of property values, as well as segregation of classes/races. The City’s early money, having built their mansions in the West End, became upset when developers came along in the 1920s, bought up some of the earliest ones, and replaced them with economically more advantageous apartment buildings (right beside remaining mansions). Basically, natural urban economics at work. The result of their displeasure at this natural phenomenon, especially the resulting mixing of classes and races, became First Shaughnessy and the City’s first zoning plan in the late 1920s/early 1930s. There’s a rich irony that those who likely earned their wealth from unbridled colonial capitalism then turned around and used government power to both heavily restrict it and skew it mightily in their favour when it came to their own homes.
    • Of course, it must be mentioned that all this took place in a city wiped clean of its original First Nations inhabitants, and that many of Vancouver’s first 1%ers earned their wealth thanks to Lt. Gov. Trutch’s earlier actions, who believed “that British Columbia’s future lay in taking land from native people and making it available to developers such as railway companies.” BC, from its earliest days of violently erasing First Nations from their lands, has always been about development and speculation.
    • Since the first city plan established the dominance of single family zones, we’ve seen a few formerly SFH areas upzoned to multi-family, mostly in the 1960s (a small portion of Kerrisdale, along with portions of Kistilano and Marpole), and less so in the 1970s (Fairview). Other than that, and the already mixed zoned West End of the 1960s, most of our density has gone into formerly industrial areas (thanks largely to the anti-development changes brought in by Art Phillips and TEAM): False Creek south in the 1970s on old industrial wasteland, Champlain Heights in the 1970s on the old city landfill, Yaletown/downtown/False Creek North on post-Expo industrial/warehouse land from the 1980s-2000s, Arbutus Walk on old brewery lands, and finally River District on old industrial land. I don’t know the history of Joyce/Collingwood, but I’m guessing it was similar to Fairview in the 1970s: one of the poorest areas of Vancouver (after the DTES) and not wealthy/organized enough to argue against upzoning.
  • Any other density has gone in on a few select arterial roads (Cambie/Oak), where the 90 year old policy/philosophy of placing multi-family housing closer to pollution (noise and air) continues.
  • ALR: we can argue about the merits of the Agricultural Land Reserve, but it has clearly restricted the supply of land for development, whether residential or commercial/industrial, in Metro Vancouver.
  • Transportation: roughly 30% of our land is given over to roads and on-street parking. That seems…sub-optimal, in terms of land-use economics. That figure hasn’t changed since the first City Plan of 1927/28.
Demand side:
  • 1940s/50s: creation of CMHC to support housing construction via subsidized government-backed loans. By the mid 1950s CMHC provided mortgage loan insurance for all mortgages with a 25% downpayment, a substantial form of subsidy backed by all taxpayers.
  • 1970s: capital gains tax exemption is allowed for the primary residence (after capital gains taxes are brought in by Trudeau Sr. on other investments). This is now a subsidy worth $7-8 billion per year.
  • Accommodative central bank policy, especially over the past decade: the Bank of Canada tracks the housing market closely, and adjusts interest rate policy accordingly. Similar to with the ALR, one can argue the pro/cons of the past decade of record low interest rates, but access to capital in Canada has been very easy for most of the past decade. Canada has happily claimed its place near the top of the global debt to income charts over the past decade. That has changed to an extent over the past 12 months (B20 rules and a slight increase in interest rates), but these kinds of moves take time to have an impact on house prices.
  • On a smaller scale, there are other direct and indirect subsidies below the federal level: provincial home owner grants that reduce an already low property tax rate, along with some of the lowest municipal property taxes in North America (thanks to an outdated Vancouver Charter restriction).
  • Finally: zoning is also a large subsidy for property owners, especially single family homeowners:
Foreign capital:
  • with the above structures in place, in some cases for decades, I’d argue that the influx of foreign capital (both legal and illicit) simply added fuel to a fire that had long been burning. Vancouver has had a housing crisis for decades, if you were low to middle income. It just so happened that certain upper middle income and upper income classes (engineers, lawyers, doctors, and other professionals) got burned by that fire in the past 5-6 years, and were far more effective in complaining loudly about it.
  • we’ve been looking for an easy bogeyman to blame for our crisis, and most of us are looking everywhere else but in the mirror. So, foreign capital it is, and let’s conflate legal and illegal sources to boot.
I’m certainly happy to see the provincial government put demand taxes in place (FBT, School Tax, Speculation Tax), and launch inquiries into money laundering (long past due). But if we think focusing only on demand measures and illegal capital will solve our crisis, I think we are sorely mistaken. When our provincial housing minister argues that townhouses and duplexes are legal in BC…
…without acknowledging that municipal zoning restrictions make both illegal on most residential land, then I’m not confident that we will sort this out.
We’ve placed significant restrictions on supply for most of a century, at the same time as we’ve subsidized demand at all levels of government for 70 years or so. No wonder we have a crisis.
To answer your question: the system is not OK, we should definitely curb cheaters, and what we’re dealing with is typically what happens when government policies mix with subsidized capitalism: a bastard hybrid that benefits a chosen subset of the population. It just so happens that that subset forgot about its children…and they’re pissed, along with some of the upper classes who were hoping/expecting to join them in single family house land. Will the rest of the city’s residents be happy with any proposed solutions? Will we be honest enough with ourselves to properly diagnose the various, complicated reasons behind how we got into this mess? Based on discussions with friends and acquaintances, and reading media and Twitter threads, I have my doubts…


Categories: Uncategorized