Strategy memo: the housing crisis and B.C.'s new government

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Photo: Four members of B.C.'s new government who could play key roles in easing the squeeze, from left to right: Selina Robinson, Minister of Municipal Affairs and Housing; Premier John Horgan; Carole James, Minister of Finance; Katrina Chen, Minister of State for Child Care

B.C.'s new NDP government - supported by the BC Greens – came to power partially on a wave of anger & dissatisfaction with how the previous BC Liberal government handled (and failed to handle) the affordability crisis. 

Indeed, the first commitment of the new government - listed in Ministers’ mandate letters - is to “make life more affordable.” 

So, what can we expect from Premier Horgan and B.C.’s new government? And where are we focussing our own efforts? This strategy memo lays things out. 


NDP Housing Promises

During the 2017 election campaign, the BC NDP promised twelve actions in three categories to tackle the housing crisis, which I’ve copied and pasted at the bottom of this memo.

Not all of the promises made their way into the official mandate letter for B.C.’s new Minister of Municipal Affairs and Housing, the Honourable Selina Robinson, at least with their original specificity.

Actual Housing Mandate

For example, the NDP's campaign promises to: 

  • “Charge an annual 2% absentee speculators’ tax,”

  • “Establish a multi-agency task force to fight tax fraud and money laundering in the BC real estate marketplace;” and

  • "Close the loopholes that let speculators dodge taxes and hide their identities.”

Have been combined into a more flexible form in Minister Robinson's mandate letter:

  • “Work with the Minister of Finance to address speculation, tax fraud and money laundering in the housing market.”

Some of this change in language may simply be for brevity’s sake, but some of it may also be due to decreased commitment to specific measures. At this point, it’s hard to say.

First moves will set the tone

One of the most important dynamics in the housing system is market psychology.

Do people believe it’s going to keep going up? Or do they think it’s going to flat-line or come down?

When the BC Liberals introduced the foreign buyers’ tax, it was a 180-degree reversal for them, and sent a strong signal to speculators and investors to beware. Correspondingly, the market cooled off for a bit. 

Then, the BC Liberals introduced a bunch of exemptions for the foreign buyers’ tax (including laudable ones), and also introduced a big loan program for first time homebuyers (a problematic idea), which sent the reverse signal: that they were willing to prop up the market.

Prices rebounded and have continued climbing ever since.

Thus, everyone’s waiting to see what the NDP government’s first moves on housing are, because these will set the tone and influence market psychology going forward.

We need the tone to be bold, swift and well-considered action to rein in costs.

We need the expectation to be that our housing market is going to be regulated for Homes First (investments second).

A Homes First Throne Speech

In a recent interview with the CBC’s Gregor Craigie, Minister of Municipal Affairs and Housing Selina Robinson reiterated the importance of a Homes First approach to housing.

We’ll be looking for the NDP to reiterate this basic, universal policy principle in their first throne speech.

Things to watch

First time homebuyer loan program & foreign buyers’ tax – at the end of July, Housing Minister Robinson announced that her and Finance Minister Carole James were reviewing these and other measures to determine whether they should be revised, kept or scrapped altogether.

Our own analysis is that the first time homebuyer loan program was the right intention, but the wrong execution. Many economists, including the UBC's Tom Davidoff and the head of the Canada Mortgage and Housing Corporation see it as bad policy. If we want to help first time homebuyers, we should focus on reining in costs, not using taxpayer money to help people get into sky-high markets. 

When it comes to the 15% foreign buyers’ tax, our analysis continues to be that it is both useful and insufficient. We need to shore it up by closing loopholes, expand it to places like Victoria, and pair it with additional measures that restrict harmful demand.

Next steps for our Code Red Campaign

  • Establishing the big picture - One of the challenges with housing is that it’s a classic “complex, adaptive system.” There’s no easy fix and many moving, unpredictable parts. It can be tricky to visualize an effective path forward.

    So, we’ve spent the last couple of weeks synthesizing and approximating all of those moving parts in an interactive diagram of the housing system. So that we can better contextualize our own work, identify opportunities to collaborate and refine policy, and keep our eyes on the big picture.

    We just need to polish it up a bit. Stay tuned.

  • Build necessary supply, restrict harmful demand, and tax housing wealth fairly – these are three basic categories of action that we’re focusing on, simultaneously. Why simultaneously? Because they work together.

  • Our Metro Vancouver organizing team is ramping up for the fall, working in individual municipalities and pushing for change. If you’d like to become a volunteer organizer email tesicca@gensqueeze.ca

  • In Victoria, we’ll be re-engaging on the topic of global capital, with a community meeting in October and related actions TBA.

  • Convening housing sector leaders - carrying on with our convening work that started with Building Housing Common Ground, we'll be looking for funding partners to help bring the band back together and dive deeper into policy details as B.C.'s new government settles in.  
  • Taxing housing wealth fairly – as we argued in a recent Vancouver Sun Op-Ed, if we’re to meaningfully rein in housing costs – and pay for ongoing programs like medical care and other social services in fair ways – we need to revise our tax system to address unearned windfalls in real estate profits.

    I.e. we need to go beyond a foreign buyers’ tax and a potential speculators’ tax and address things like upzoning windfalls and generational windfalls.

    This will be our research focus for the fall. 



One thing you can do right now

Write a quick email to the Minister of Municipal Affairs and Housing Selina Robinson, and ask her to set the right tone for all future housing actions by reiterating a commitment to the principle of Homes First (investments second) in her government's first throne speech.  



BC NDP Campaign Promises re: Housing

As indicated in their 2017 Election Platform

“Fixing the housing shortage”

  • Build 114,000 affordable rental, non profit, co-op and owner purchase housing units

  • Remove unnecessary rules that prevent universities and colleges from building affordable student housing

“Making renting better and more secure”

  • $400 annual refundable renters rebate (to match the homeowner grant)

  • Close the “fixed term lease” loophole and ensure controls on rent increases are enforced

  • Pass legislation requiring fair treatment during renovations and demolitions of rental properties.

  • Tighten the rules that protect good landlords and tenants

  • Provide the necessary resources for the Residential Tenancy Branch to do its job and resolve disputes fairly and in a timely way

  • Provide local governments the tools they are asking for to zone areas for rental housing

  • Provide local governments the tools they are asking for to tax short-stay home rentals

“Stopping the cheaters”

  • Close the loopholes that let speculators dodge taxes and hide their identities.

  • Annual two per cent absentee speculators’ tax

  • Establish a multi-agency task force to fight tax fraud and money laundering in the BC real estate marketplace

 


Showing 2 reactions

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  • commented 2017-08-28 14:39:16 -0700
    Hi Zoe, indeed we see taxation mechanisms as among the most powerful ways to actually cool the housing market.

    If we continue to provide favourable tax regimes for those who intend/expect to accrue long-term equity gains over and above their principle payments + inflation, or over and above what they might earn in the stock or bond markets, then we’re going to have a difficult time cooling the demand side of the housing market.

    So we see tax policy and cooling the markets as going in hand in hand.

    Totally agree with your thoughts re: cracking down on tax evasion and the purchase of residential units by holding companies.

    Best,

    Eric (Executive Director)

  • commented 2017-08-25 03:59:31 -0700
    “Taxing housing wealth fairly”

    Taxing gains made on real estate over the long term or taxing intergenerational real estate transfers is not taxing housing fairly. Instead of taxing these types of gains the NDP need to take measures that will cool the housing market so there are no more gains…

    If the NDP is planning on taxing gains they better be prepared to except that people will write off the losses…

    Instead, they need to stop companies from purchasing single-family residential units. New rules that limit corporations to the purchase of larger rental buildings only would help create more supply for the rental market.

    Not allowing corporations to purchase single-family residential units would also stop property transfer tax evasion (when corporate-owned properties are sold it is a sale of a company rather than a house. Therefore there are no property transfer taxes).

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Strategy memo: the housing crisis and B.C.'s new government
Strategy memo: the housing crisis and B.C.'s new government
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