Only policies that directly tackle the severe housing supply shortage will effectively address Metro Vancouver’s housing affordability crisis, says one prominent local economist.
“I see the supply issue as being the most fundamental one that needs addressing in this region,” Ryan Berlin, Senior Economist at Rennie, told Daily Hive.
Sales volumes have dropped by half over the past year, and the number of unsold new multi-family units across the region fell by 408% over the last four years.
The average rental vacancy region-wide is less than 1%, with the city of Vancouver leading the pack with an exceeding low vacancy rate of just 0.45%.
“The data is unequivocal and unambiguous when we’re looking at the volume of new supply in relation to demand,” he said. “When we look at the projects we’re selling, the number of units in a building or in a project versus the number of registrations or suite requests to those buildings, it is clear that demand is far outpacing supply on the new side.”
He says foreign buyers do not represent a significant share of purchasers or market participants in Vancouver, and this is reflected by the provincial government’s data.
For the period between August 2016 and September 2017, after the province’s 15% property transfer tax for foreign buyers came into effect, foreign buyers accounted for just 3.3% of home purchases in Metro Vancouver – down from 12.4% between June and July 2016 before the tax was suddenly introduced.
Even the City of Vancouver’s approved policy of providing municipal residents first preference for pre-sales during the first 30 days and regional residents for the following 60-day period does not address the overarching supply issue.
“It doesn’t mean foreign buyers are not having an impact, because they typically do buy more expensive products and they might be eating supply that would have gone to someone with fewer means to purchase,” he said. “But these are effects that are occurring at the margin.”
According to Berlin, the foreign buyer avenue that was approached to moderate the market is now “tapped out”.
Upzonings next to transit hubs to create transit-oriented developments, the development of brownfield sites, and increased density in single-family neighbourhoods, with infill policies such as laneway housing, are the path to “expand supply and reduce the upward pressure on prices,” Berlin said.
“What I like about those policies is just on the principle that they address the supply side of the market. Over the past two years, we’ve seen very few policies from the local, provincial and federal levels that effectively address demand,” he said.
“The vast majority of these policies have targeted the demands of the market in a way that restricts demand, with the one exception being the BC Home Partnership Plan which encourages first time home buyers to get into the market.”
When it comes to existing properties through the re-sale market, he says such properties are being lifted at rates that are rivalling historic lows.
He also believes the City of Vancouver’s 1% empty homes tax will have a minimal effect.
“This empty homes tax will not entice all those units into rental, so I think that no matter what you’re going to not have a good impact directly on the housing stock,” he said, adding that it could raise some revenue towards affordable housing projects.
Macro-scale policies are another dimension to consider. Prospective buyers need to be on the lookout for other interventionist policies by various levels of government, and that consists of new mortgage rules, higher interest rates, and other hurdles or stress tests for uninsured borrowers that could provide further obstacles for first-time buyers.