The Decline of Vancouver
Vancouver, once a city with its own unique spin on Canadian ideals and culture, is well on its way to becoming a vacation city for the world’s rich, its economy transforming into one predicated almost entirely on catering to their luxurious proclivities, and its citizens transformed into modern serfs permitted to live in smaller dwellings on the city’s periphery, if you’ll allow me to exaggerate for effect.
Hyperbole aside, consider this: the nature of serfdom was one where serfs, unable to acquire their own plot of productive land, worked and lived on the land of wealthy nobles whom they served. In Vancouver the average person who owns a detached home made more money from capital gains on their property, roughly $100,000 per year in the last decade or so, than the average Vancouverite made in income, roughly $65,000. At those rates, it’s effectively impossible for average people without seed capital to join in on the boons of the Vancouver property boom, and so their role in the city’s largest source of wealth generation, property ownership, becomes catering to those who can take part, selling to them luxury booze, food, cars, clothes, and even their bodies. We have two classes of society forming along a divide that is growingly difficult to cross.
Real estate appreciation is not unique to Vancouver. Calgary and San Francisco, for instance, have seen gains in the real estate market near Vancouver rates, but those gains were a result of booming economies and income growth in those areas from oil and tech respectively. Vancouver has experienced no commensurate economic or income boom. According to Teranet’s housing price index, over the past 5 years Vancouver’s property prices have grown by about 23% compared to about 16% in Calgary – this despite Calgary’s economic growth running near double that of Vancouver’s over the same period. With the decline of oil prices, Calgary’s real estate market has tanked, as it would in a rational market. It’s safe to say economic prosperity has little to do with our real estate market. Anyone arguing that Vancouver growth outpaced Calgary’s because it’s a nicer place to live should note that Vancouver has been a nicer place to live than Calgary for a few decades now – suffice it to say any difference between the cities’ populations as a result of such known factors would already have been accounted for in the base population.
Foreign ownership is, of course, the culprit. Beneficiaries of the property boom, homeowners, developers, and the politicians whom they finance, often claim that foreign ownership isn’t actually as big of a problem as we make it out to be. This category of people cherry pick misleading statistics propped up by biased stakeholders and lobbyists like real estate agent associations, and almost always has something to gain.
For instance, the CHMC released a survey in 2014 indicating that only 3.4 percent of property in Vancouver was owned by foreign buyers. Within days, this statistic quickly disseminated to newspapers and other media outlets as gospel truth and a cut and dry case that foreign ownership wasn’t actually affecting property prices.
There were several problems with this survey that the media largely ignored. One problem was that its figures excluded the tens of thousands of Canadians (30-50% of whom estimated to buy property in Vancouver) who bought their residency through the recently defunct Immigrant Investor Program. According to our Immigration Minister “There is little evidence that immigrant investors as a class are maintaining ties to Canada or making a positive economic contribution to the country”. Indeed, there is an estimated 300,000 – 400,000 Canadians living in China, the majority of whom are ethnic Chinese.
It’s worth noting that a large minority of immigrant investors fraudulently claimed they would move to Quebec upon residency in order to eschew the longer waits of moving to British Columbia, and subsequently purchased property in Vancouver. The funds generated from this program thus accrue to the Quebec government and represent billions of dollars in loss for B.C. Not only is BC absorbing a disproportionate number of wealthy migrants but its also not receiving its commensurate share of the proceeds as a result of fraud. That’s a whole other can of beans, though.
The second flaw with the CMHC report is that the 3.4 percent rate of foreign ownership is grossly underestimated even if you ignore the “bought” citizenship problem of above. If you consider that foreigners disproportionately buy detached homes as opposed to condos, the problem is further magnified. For instance, A 2011 study by Landcor Data showed that 74 per cent of luxury purchases in Richmond and Vancouver’s west side were by buyers with mainland Chinese names with no western variant. Julia Lau, a real estate agent in Vancouver, told the International Business Times that the figure is closer to 80 percent from her experience.
And then you have real estate agents and lawyers with no understanding of economics claiming that the influx of foreigners and property price boom is good for an economy. Real estate, unlike other forms of capital investment, is not productive – in that other than actually building a structure, it does not produce ongoing economic good the way a factory does. And yet journalists continue to reference the uninformed opinions of these “experts” and contribute to a nice echo chamber of convenient but completely baseless conjecture.
This is not about race. China happens to be the biggest country in the world and a flight away from our city, and thus represents the greatest influx of foreign buyers in Vancouver, but it is not Chinese people that are the problem. It is about a stream of wealthy elite corroding the vibrancy of Vancouver. The New York Times recently wrote an investigative piece about the growing problem of shady wealthy foreigners scooping up luxury property. The leading paper had no qualms about directly questioning the value of foreign real estate buyers with quotes like “this flood of capital has created colonies of the foreign super-rich, with the attendant resentments and controversies about class inequality made tangible in the glass and steel towers reordering urban landscapes.” I have yet to see a single comparable piece in any Canadian publication. Whether it is because of corruption, political correctness, lack of funds, or simply bad journalism, I am not sure. Sadly readers have to typically scroll down to the comments section of online publications to get any meaningful commentary on the facts.
The problem is not just home ownership, but the erosion of communities and the long-term viability of Vancouver’s economy. I work at a successful startup in Vancouver with growing revenues, employees, and capital – by all means the kind of success story that cities like to flaunt as a case study in creating the environmental conditions to support innovation and small business. But for all of the city’s celebration of our tech industry, nothing meaningful has been done to buttress it. Our choice to headquarter in Vancouver was based mostly on the city’s livability and proximity to the tech hub of Seattle. While Vancouver has an initial charm and beauty that draws in talent, eventually as that talent ages and wants the kinds of things most people do like a house and a family, many can’t afford to stay, and leave for places like Seattle or the east coast where the cost of living is lower and salaries higher. I personally know several people that fall into this camp - I have tried to hire them.
Recruiting talent to this city is easy, but retaining it is not. The engine of startups and innovative businesses are its people, and when highly educated folks making six figures still can’t afford to live in your city (and it takes over an hour’s commute to get to downtown from slightly more affordable areas), you simply don’t have the conditions to grow a knowledge economy. Businesses like the one I work for typically move to more welcoming ecosystems, and so too with them will go the people that make up the vibrancy of the city. Indeed since 2012 British Columbia has experienced a net migration loss of young people, largely speculated to be directly a result of housing prices.
Entire downtown neighbourhoods and chunks of the west side are growingly becoming ghost towns as permanent residents are replaced with investors who don’t occupy their units. Local shops on the west side are going out of business because fewer and fewer people actually live there for most of the year, if at all. There is an eerie feeling you get walking in between the dozens of Coal Harbour’s high-rises at night. Despite the density of buildings, hardly anyone else roams the streets. By 2013 estimates, one quarter of condo units in that neighbourhood were unoccupied.
And yet we celebrate. Boomers who were lucky enough to buy in the 80s and 90s are millionaires several times over, and they and their children will largely live comfortably. A massive capital injection from abroad makes Vancouverites feel wealthy, while the city is in no real terms wealthier. Talented people continue to leave and with them the future of our city.
We’ve reached an almost criminal point of misinformation and political correctness. Picture an elephant in the room. This elephant has a large bed sheet poorly covering half its body. Most in the room say “hey look it’s an elephant.” Property owners say “no, we can’t be sure it’s an elephant, there’s a bed sheet covering part of it”. Politicians say “we can’t be sure it’s an elephant, we need to study it more”. And developers say “we did a survey and concluded it’s a hamster.”
It is hard reading the countless articles about the mass exodus from Vancouver and increasingly dire housing situation. Even living abroad I want to stay informed, but I can't help feeling pangs of worry thinking about returning to Vancouver given the current situation and projections.
I love you Vancouver, why do you make it so hard to love you.