Who is really to blame for the unaffordability of housing in Vancouver?

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The Vancouver real estate market is on fire! With no signs of slowing any time soon, the debate over which catalyst to point the finger at makes headlines day in and day out. The consensus? The inflow of Asian capital (predominantly Chinese) into the real estate market is driving up housing prices.

However, a closer at look at the framework of the market itself helps to identify the real challenges that are creating this heated market. Yes, there are structural issues such as constrained geography, scarcity of land, and strong net migration with a limited housing supply. But, what is causing this limited supply? Policy. High development fee charges, low density requirements, and blueberry farms in the heart of Richmond (Agricultural Land Reserves). Simply put, municipal bylaws and zoning regulations have devastated the affordability of housing for the average Vancouverite.

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Blueberry farm, Richmond, BC

 

A more pragmatic approach to real estate development policy could easily help cool the market and positively impact the lives of hundreds of thousands of people in Vancouver and the Lower Mainland. Instead of blaming foreign investment for driving housing prices and taking up the limited housing stock, policy makers could release restricted land for development, relax cycle times for permits, reduce development fees, and increase density (countering high land costs and allowing for an increased number of feasible projects). All of these factors are severely restricting developers and impeding on the free flow of capital.

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The Real Estate sector was the largest contributor to the Canadian GDP in 2015

To understand the potential long-term effects of thoughtless policy, look no further than our national GDP numbers. It is a misconception that commodities dominate our economy. The Real Estate sector was the largest contributor to the Canadian GDP in 2015 at 13% of total GDP. Include the Construction sector also, and combined they accounted for 20% of Canada’s GDP last year. With the latest economic cycle producing major downturns in manufacturing and commodities, let’s not kill the last industry that is still alive in Canada. Scaring off foreign direct investment as a result of restrictive policy and increased taxation will have a hugely negative impact on the Canadian economy. Not only will the impact be felt in the construction industry, where thousands of job will be lost, but it will indirectly affect a myriad of other professional services such as bankers, lawyers, brokers, and appraisers to name but a few. Please don`t kill the golden goose. If the inflow of capital was from Europe or the United States, would we being have the same controversy?

Affordability is in a political stranglehold. Restrictions on zoning, density, agricultural reserves, permitting, the list goes on. So, how did other major cities around the world such as Hong Kong, Manhattan, or Sydney create free market affordable housing? Through increased density, by attracting developers, and creating an environment for free enterprise that attracts foreign direct investment. The by-product of all of these factors is affordable free market housing.

Mainstreet Equity Corp. is a publicly traded (TSX: MEQ) residential real estate company in Canada. Mainstreet currently owns and operates properties in Surrey, BC; New Westminster, BC; Abbotsford, BC; Calgary, AB; Cochrane, AB; Lethbridge, AB; Edmonton, AB; Fort Saskatchewan, AB; and Saskatoon, SK.

Mainstreet provides affordable, renovated apartment suites to Canadians, and is committed to creating real value without diluting shareholder interests.

About the Author
Graham Coe

Graham is responsible for market research, identifying accretive buying opportunities, and facilitating the acquisition of new assets.

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