Monday, August 20, 2018

The upside and downside of B.C. NDP government housing policies

During the 2017 provincial election campaign, the B.C. NDP never explicitly stated that it wanted to drive down housing prices.

But it included a headline in its platform indicating that it would make homes more affordable if it formed the government.
It's true that prices have fallen for the most expensive homes in the Lower Mainland. They're more affordable.
But the NDP's tax policies have shifted demand to lower-priced properties.
In the Champlain Heights area of East Vancouver, that contributed to a 16.1 percent increase in the price of condos in July over the same month in 2017.
Collingwood condo prices are up 14.1 percent whereas Fraserview condos rose 19.5 percent on a year-over-year basis.
These are in more affordable areas of Vancouver.
The NDP pledged in 2017 that young families would "have real prospects of affording their first home". 
But for buyers on the East Side, home ownership has definitely not become more affordable. This is especially true after factoring in effects of tighter federal mortgage eligibility.

Different story unfolds on West Side

Single-family home prices are crashing in posh West Side neighbourhoods like Dunbar and Point Grey.
They're each seeing double-digit decreases over the past year, due in part to a range of new NDP taxes.
They include a five percent hike in the foreign-buyers tax, a new property surtax on homes valued at more than $3 million, and an increase in property-transfer taxes for more expensive homes.
But condo prices have risen on a year-over-year basis in every West Side neighbourhood. Again, it's a sign of shifting demand patterns.
The "benchmark" annual increase of a West Side condo was 6.6 percent by the end of July over the same month of 2017, according to the Real Estate Board of Greater Vancouver.
In the most affordable West Side neighbourhood—Marpole—benchmark condo prices were up 10.6 percent,
The NDP promised more affordable housing. But one year into the Horgan government, it appears to have delivered more affordable home ownership only for those in the market for mansions on the West Side of Vancouver and in West Vancouver.
Those are not traditional NDP voters.
The NDP base, on the other hand, is facing stiffer condo prices on the East Side of the city.

Tenants have received a better deal from Horgan

The NDP record has been better with renters.
Tenants were promised security "where they live". Plus, the party promised to "crack down on the cheaters who are distorting BC's housing market".
The NDP hasn't kept all of its promises. To date, it hasn't followed through with an annual $400 renters' refund.
But it has toughened rules around renovictions.
The NDP has also eliminated a B.C. Liberal government rule allowing landlords to jack up rents beyond what's ordinarily permissible to match rents in the surrounding neighbourhood.
And through B.C. Housing, the NDP is delivering 600 units of modular housing for the homeless.
That's a spectacular improvement over the previous B.C. Liberal government, though it falls short of housing the 2,200 homeless in the city, as COPE council candidate Jean Swanson has repeatedly pointed out.

Holes being blown in B.C. budget

During the campaign, the NDP also promised to "close the loopholes that led speculators dodge taxes and hide their identities".
Legislation has been promised to achieve that objective in the fall, though this will only apply to future transactions.
Finance Minister Carole James has given no indication that she'll amend section 49 of the Business Corporations Act. Doing that would provide transparency over who owns numbered companies that bought properties in the past.
Until that happens, voters should consider this pledge to "close the loopholes" to be only partially fulfilled.
The NDP also promised a "speculators' tax", but in reality, it's a vacancy tax.
Out-of-province property owners who leave homes unoccupied in certain parts of B.C. have to pay a fee.
But it's not a tax on flipping properties, which is what most people would define as a speculation tax.
In the meantime, the housing market has seen a dramatic slowdown.
As the Straight has previously reported, that's likely to create a half-billion-dollar hole in the provincial budget due to lower-than-expected property-transfer taxes.
A slower market could also reduce the take from vacancy taxes, property surtaxes on expensive homes, and the foreign-buyers tax.
Lower assessed values on the West Side will also affect the City of Vancouver's tax collection. East Side property owners in NDP constituencies will carry a higher proportion of the municipal-tax burden.
This can't be laid entirely at the feet of the finance minister because tighter federal mortgage rules and gradually rising interest rates are having an effect. These factors are out of her control.
But James appears to have grossly overestimated what was achievable through the new NDP housing taxes.
And she failed to anticipate the likelihood of fewer housing transactions as a result of so much demand being absorbed in recent years.

Cornerstone of NDP platform in jeopardy

The reduced real-estate revenues are undoubtedly going to have an impact on one of the NDP's grandest promises during the 2017 election campaign.
Over 10 years, Premier John Horgan pledged to build 114,000 affordable rental, nonprofit, co-op, and owner-purchase housing units through partnerships.
Revenue though housing taxes was going to help finance $6.6 billion of "affordability measures", according to the government.
This warmed the hearts of affordable-housing advocates across the province.
But as of today, the numbers don't add up.
And the math will get worse for the finance minister if prices of condos ever start falling at the same pace as those of single-family dwellings in posh areas.
In its last budget, the NDP government forecast an additional $1.3 billion in revenue over three years from four new housing taxes.
It's starting to look like something's got to give.
Either the government backs off its pledge to spend $6.6 billion over the next decade on affordability measures or it starts running large deficits.
Of course, there are third and fourth options: finding new areas to tax or selling off government assets.
Neither of these will reinforce perceptions that the NDP has a solid handle over government finances.

Is it time to consider a cabinet shuffle?

Of course, if things really go awry, Horgan could always find himself a new finance minister to set things right.
Jobs, Trade and Technology Minister Bruce Ralston was the NDP finance critic for many years when the party was in opposition.
Ralston is a former chair of the Vancity board of directors. He's also very good at math.
In the past, the NDP has demonstrated a tendency to play politics with its budgets.
That will become increasingly clear if its new housing taxes generate less money than what was being raised by the previous government's housing taxes.
Horgan would then have to do something dramatic to send a message that he understands the scope of the problem.
The reality, however, is that the premier's office has likely played a major role in the development of these new taxes.
People in the premier's office knew it was good politics to blame speculators and the wealthy for high housing prices. That's far sexier for the media than focusing on mundane topics such as the effects of sustained low interest rates, the rate of millennial household formation, quantitative easing, immigration, interprovincial migration, and baby boomers' equity being transferred to subsequent generations.
So firing the finance minister wouldn't get to the root of the problem.
But if a new finance minister were to have a longer leash to re-examine housing through the prism of economics, rather than politics, perhaps some real progress could be made in achieving genuine affordability for young families.
Right now, it's clear that the status quo isn't going to cut it. Not politically and not economically.
Surely, Horgan's intelligent enough to realize that by now.
Anyone who seriously believes that money launderers in casinos are causing the housing-affordability crisis is delusional. And anyone who promotes this idea at the expense of other factors is exploiting the gullibility of the public.
This type of nonsense could ultimately cost Horgan his premiership.
It's time for a fresh start.

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