OP-ED: No Ceiling as Housing Prices Rise

By Ian McLeod

In recent years, housing costs have dominated the concerns of Vancouver residents. As housing prices bounce back after a brief dip in the market, anxiety over housing affordability will continue to be a top-of-mind issue.

When Think City surveyed and spoke with Vancouver residents during the 2008 Dream Vancouver process, many people expressed anxiety about the rising cost of housing and the lack of options. This past winter, with a world economic slump, it seemed home purchase prices in Vancouver might ease, but this prospect is evaporating. Instead, it appears prices are returning to peak levels.

The Greater Vancouver Real Estate Board reports that across the region, more existing homes changed hands in July 2009 than in any other July on record, and sales continued at a high volume through August. It says average home prices climbed 11.4 per cent from January to August, surpassing the all-time highs of summer 2008 in some areas, including the west side of Vancouver. The average detached home on the west side sold in July 2009 for $1.41 million, up 21 per cent in three years, while the average apartment in East Vancouver sold for $316,900, up 19 per cent over three years.

The basic outlook is confirmed from many sources: Vancouver home prices are still the highest in Canada, and they have stayed very high through a time when other assets have dropped sharply in value.

Lots of people will buy at these prices. Some people have equity from a previous property, and others have access to family capital. Another group of buyers are those who gamble on a future rise in income. And then, of course, there are all those who can't or won't take such a risk.

At the low end of the Vancouver market we have the one-bedroom East Vancouver apartment. With a starting mortgage of $285,000 at the current three-year rate of 3.6 per cent, the buyer will pay $1700 per month, with taxes and fees. If the mortage rate rises in three years to, say, 6.5 per cent, the monthly payment goes to $2200. This will be 78 per cent of the after-tax income of the median single parent in Vancouver, and not viable. It is 47 per cent of the after-tax income of the median married couple, and so a big stretch for those below the median. In fact, a large segment of the population is excluded from home buying market, and many others are stretching to buy a one-bedroom apartment.

For those of us interested in devising ideas to influence development and housing decisions, I can only suggest that we agree first on the fundamentals. Let's start with rental housing.

In the 1970s, Canadian governments at all levels were focused on encouraging rental development, but they have fled the field. A return of government participation could re-activate the development of social, co-op and private rental housing. This would take pressure off low-income people, provide renters with more choice, and possibly act as a brake on purchase prices. The non-profit corporation model is used routinely in the development of special housing for seniors, but it is rarely used to provide modest-priced mainstream housing in this region.

Even more broadly, we have to continue to make the case for densification – partly by learning more about how mixed-use, medium-density development can be made to benefit surrounding neighbourhoods. It should be obvious, in this market, that the single-family detached home is receding as an option for most home buyers who work in Vancouver, unless they are willing to move to distant suburbs and take on a lengthy daily commute. However, there is still fierce and effective resistance to medium-density development in many parts of the city. Among other effects, this unduly restricts the construction of housing for sale or rent. Densification has not stopped the rise in Vancouver home prices, but it has probably moderated their rise, despite the tendency of urban villages to go upscale.

One thing Vancouver can do is create a housing authority to bring together both market and non-market housing strategies under one roof. At present, responsibility for housing policies and programs is spread across several city departments. Land-use planning and housing development are natural partners and the city should employ a coordinated approach to ensure housing affordability is a key policy goal when planning and development decisions are made.

These are not issues we can resolve by beating up elected officials. City councils are beset by demands from the public that they should "do something" but also "leave us alone," and this understandably makes them cautious. It is the function of the citizen, and citizens' groups, to help develop credible proposals, identify common long-term interests across the community, and help create the social and political space for councils to do their jobs. None of this will guarantee a reduction in the price of housing, but it is the only effective option available to citizens.

Ian McLeod was a member of the organizing group for Think City's Dream Vancouver process. He is a public relations consultant at Karyo Edelman. He and his wife hope to sell a home in the deep suburbs this fall and purchase in Vancouver.