Articles
24th April 2009
BC Pol's Silence on Housing Slaps Problems onto Young
By Howard Rotberg
By the time the provincial election in B.C. is held in May, British Columbians will have, in the course of seven months, participated in federal, municipal and provincial elections. Notwithstanding recent reductions in housing prices in Greater Vancouver, there still remains a crisis in affordability for both owned and rental housing. Current price declines and fewer condo project starts may mean that this is the ideal time to investigate the development of affordable rental housing.
One would therefore assume that housing policy and housing affordability would have been major themes in all three elections. Although there has been the usual promises of money for social housing, that is, housing for the most poverty stricken residents, to address a growing and scandalous problem of homelessness, there has been a surprising lack of discussion of housing policy in general, and programs to assist in affordability specifically.
It is our young people, those aged 35 and under, who have found themselves to be most disadvantaged in our present housing system, yet few have the analytic tools to understand how the system is stacked against them, and why politicians from all levels of government are mostly silent about an issue that is so important for their quality of life. The purpose of this article is to explain to our young people the perverted priorities of our housing system as implemented by politicians at every level.
Housing policy in Canada is a confused mix of jurisdictions with programs at times coming from every level of government. At other times, each level of government excuses its inaction by suggesting that the real jurisdiction lies with another level of government. In fact, both the federal and provincial governments have been exercising jurisdiction in various facets of housing policy, and the municipalities have the limitation that they can only do what the province allows them to do.
However, in the event of strong municipal will, the province will be unlikely to erect roadblocks to municipal programs.
The primary aspect of policy that is so misunderstood in the present environment is the extent to which various levels of government give financial benefits to higher income owners of housing, rather than to lower income renters.
There is no good reason for this and such housing analysts as Professor David Halchinski (formerly of UBC and now of University of Toronto) have argued the case for tenure neutrality in government benefits – between owners and renters.
Accordingly, to the extent that young people are over-represented in the rental market, and middle aged and older people are over-represented in the owned housing sector, then our young people are losing out, and, in a democracy, should at least be made aware of precisely how such programs operate to their detriment and to the benefit of older, wealthier landowners.
In my recent book, Exploring Vancouverism: The Political Culture of Canada’s Lotus Land (CanadianValuesPress), I outlined a number of the ways that our municipality acts to keep up property values for the benefit of the baby boomers owning houses and keep low the taxes on those houses. For the little known fact is that for a million dollar house in Vancouver the property taxes are 40% less than the same value house in Toronto.
Local politicians have dutifully served their masters in Kitsilano, Dunbar, and Shaughnessy by obligating new developments downtown and elsewhere to assume a whole array of costs – for planning studies, infrastructure, amenities such as libraries, parks, and day care centres, and now “green” features – where the costs of these are added to the purchase price.
The existing residents are happy that this imposition of costs on the buyers of one bedroom condos not only helps keep their property taxes low, but increases the value of their homes to keep pace with the elevated price per square foot of the new condo units.
Provincial politicians, now asking for the votes of young people, should be asked why they give financial benefits to wealthy older people without a means test, rather than help younger people.
I refer, firstly, to the provincial Seniors’ Property Tax Deferral Program, where anyone over 55, with no income limitation, can defer their property taxes until death or sale of the house, with a nominal interest charge, and the province compensates the municipality in the interim.
Surely, we can see the advisability of not forcing indigent seniors out of their homes, but, without a means test, we have benefits flowing to seniors with million dollar incomes and five million dollar oceanfront homes.
In addition, the province has a Homeowners’ Tax Assistance Program, where homeowners, of any income level, who have homes worth up to $1,050,000, are getting provincial benefits to offset cost of property taxes. Why aren’t these programs being discussed?
The Provincial government collects a lot of money from property transfer taxes each time a home is purchased; but there is a provincial First Time Home Buyers’ Program that exempts the tax from homes costing under $425,000.
Query whether this done to benefit young people getting into an inflated market, or rather to benefit large developers to assist them in their sales. In Vancouver, the only homes under $425,000 are the one-bedroom condos that the developers have been flogging.
Given the overall neglect of first time buyers, and given the size of the property transfer tax that kicks in above $425,000 (1% on the first $200,000 and 2% on the balance), I think that the benefit was intended more to give developers a sales support, rather than help young people, since the whole amount of the tax kicks in, as soon as the price goes over the $425,000 threshhold.
And what about the Federal Government?
Again, there is a history of benefiting homeowners more than renters. Firstly, there is the whole CMHC mortgage insurance program, which makes it possible for home buyers to get a bank mortgage with less than 25% down.
Until recently, the government was so keen to induce young people into an inflated housing market, that CMHC was giving 40 year amortizations to people putting as little as 5% down on their properties. It was not only in the United States where people who should have been renting were induced into buying at the top of the real estate bubble, but here in Canada as well.
A lesson we should be learning from the American sub-prime fiasco is that there are some people who should be renting and should not be induced to get in over their heads in pricey owned housing, where interest rate increases combined with volatility in prices can result in financial tragedy.
Then there are a variety of federal programs, some lapsed, such as the Assisted Homeownership Program or the Home Ownership Stimulation Plan, and some current such as the Home Buyers’ Plan, administered by the Canada Revenue Agency.
This allows each spouse to withdraw, tax free, up to $20,000 out of their Registered Retirement Savings Plans, to be used towards the purchase of a home and repaid to the RRSP within 15 years. Of course, the last mentioned amounts to a tax subsidy to home buyers by the general tax base, which of course includes renters.
In addition, the last federal budget gave homeowners a tax credit up to $1350 towards their cost of home renovations.
Moreover, the largest single federal government benefit bestowed on home owners as opposed to renters is the exemption from income tax of the billions of dollars of capital gains tax that would be collected had not the government made the decision to exempt principal residences from capital gains tax.
In the United States the tax system helps out with affordable housing – there is a system of affordable housing tax credits issues to developers of affordable housing, which can be sold to high income individuals and thus generate funds to the developers for early stage soft costs and construction costs.
So what does this all have to do with affordability? The answer is that government funds are not unlimited, and benefits given to home owners mean there is insufficient money to subsidize the rental market.
In B.C., there is a Rental Assistance Program providing assistance up to $9200 a year for families making less than $35,000 per year, and a program called SAFER – Shelter Aid For Elderly Renters. But these programs help towards the cost of rent, but do nothing for the acknowledged major problem in the rental market – the lack of construction of new purpose-built rental units since the income tax changes in the early ‘70s. With the benefit of inducements on the cost side, developers can be induced to build what young people including young families need – decent yet inexpensive rental housing.
To have affordable rental units, we need to have a healthy balance between supply and demand. The cost of owned housing is prohibitive - recent studies peg the family income needed for an average house in Vancouver at $120,000 while the average mean income is only $60,000. So, there is a problem for Vancouverites with an income under $100,000, and not just a problem building social housing for the disabled and the homeless.
Politicians have for too long deferred taking any action on creating inducements for private sector and non-profit construction of rental units by opting to create more “studies."
Vancouver witnessed a study costing $300,000 by consummate political insider Ken Dobell, which led to nothing. And last week, Metro Vancouver paid for a report by McClanaghan and Associates called “Measures to Stimulate Private Rental Investment.”
One really has to wonder about all the studies, when a 30 minute Google search of “Affordable Housing” can yield information on the dozens of affordable housing inducement programs operating in the United States and in several other provinces in Canada.
The United States has so many programs and private sector affordable housing developers that there is a magazine called Affordable Housing Finance, updating its readers on the latest American programs.
I live in Vancouver but spend 7 to 10 days in Ontario each month where my private sector company has developed six affordable rental properties in the last six years, utilizing a variety of Ontario programs.
Generally, we obtain a forgivable loan per unit constructed, forgivable over 15 years, provided we adhere to the terms of an operating agreement, specifying the maximum rents per unit, and the maximum income of the tenants.
In my book, I canvas the variety of policies that can be implemented to create both affordable rental housing and affordable owned workforce housing (with resale price restrictions).
There are numerous ways for a municipality to set up and finance Affordable Housing Funds. There should be a demolition tax of $20,000 per unit demolished which can go into the Fund.
Like Victoria, the city should pay all of its GST refund into the Fund. The Province can rebate back part of the nearly $1 billion per year it gets from the Property Purchase Tax.
The City can institute preferential development charges and property tax rates on rental properties. There are numerous models for programs called Brownfield Remediation Tax Assistance Programs, wherein the costs of environmental remediation of a contaminated lot can be offset against the future property taxes.
I have written extensively about the Community Housing Trust model, where buyers buy town homes that have been subsidized by government at a lower than market price with a resale price restriction registered on the deed that they have to sell at the same percentage reduction from market value as they did when they purchased.
There are no shortage of model programs working well elsewhere. But there is a shortage of political will to help young people with their real housing needs, which may for the short term, or even the long term, include renting, or buying in a Community Housing Trust.
The fact that in our three recent election campaigns there has been very little talk about the issues raised here is a slap in the face to younger voters. Perhaps, once they understand how the system has been operating to their detriment, our younger voters will stand up and make their voices heard, and demand that politicians address these issues.
Howard Rotberg is a former development lawyer, who combines his writing with developing affordable rental housing for low income working people across Southern Ontario, mainly in converted heritage buildings. His new book on Vancouver looks at some of the cultural values and ideologies in Vancouver that have promoted greed over social justice.
By the time the provincial election in B.C. is held in May, British Columbians will have, in the course of seven months, participated in federal, municipal and provincial elections. Notwithstanding recent reductions in housing prices in Greater Vancouver, there still remains a crisis in affordability for both owned and rental housing. Current price declines and fewer condo project starts may mean that this is the ideal time to investigate the development of affordable rental housing.
One would therefore assume that housing policy and housing affordability would have been major themes in all three elections. Although there has been the usual promises of money for social housing, that is, housing for the most poverty stricken residents, to address a growing and scandalous problem of homelessness, there has been a surprising lack of discussion of housing policy in general, and programs to assist in affordability specifically.
It is our young people, those aged 35 and under, who have found themselves to be most disadvantaged in our present housing system, yet few have the analytic tools to understand how the system is stacked against them, and why politicians from all levels of government are mostly silent about an issue that is so important for their quality of life. The purpose of this article is to explain to our young people the perverted priorities of our housing system as implemented by politicians at every level.
Housing policy in Canada is a confused mix of jurisdictions with programs at times coming from every level of government. At other times, each level of government excuses its inaction by suggesting that the real jurisdiction lies with another level of government. In fact, both the federal and provincial governments have been exercising jurisdiction in various facets of housing policy, and the municipalities have the limitation that they can only do what the province allows them to do.
However, in the event of strong municipal will, the province will be unlikely to erect roadblocks to municipal programs.
The primary aspect of policy that is so misunderstood in the present environment is the extent to which various levels of government give financial benefits to higher income owners of housing, rather than to lower income renters.
There is no good reason for this and such housing analysts as Professor David Halchinski (formerly of UBC and now of University of Toronto) have argued the case for tenure neutrality in government benefits – between owners and renters.
Accordingly, to the extent that young people are over-represented in the rental market, and middle aged and older people are over-represented in the owned housing sector, then our young people are losing out, and, in a democracy, should at least be made aware of precisely how such programs operate to their detriment and to the benefit of older, wealthier landowners.
In my recent book, Exploring Vancouverism: The Political Culture of Canada’s Lotus Land (CanadianValuesPress), I outlined a number of the ways that our municipality acts to keep up property values for the benefit of the baby boomers owning houses and keep low the taxes on those houses. For the little known fact is that for a million dollar house in Vancouver the property taxes are 40% less than the same value house in Toronto.
Local politicians have dutifully served their masters in Kitsilano, Dunbar, and Shaughnessy by obligating new developments downtown and elsewhere to assume a whole array of costs – for planning studies, infrastructure, amenities such as libraries, parks, and day care centres, and now “green” features – where the costs of these are added to the purchase price.
The existing residents are happy that this imposition of costs on the buyers of one bedroom condos not only helps keep their property taxes low, but increases the value of their homes to keep pace with the elevated price per square foot of the new condo units.
Provincial politicians, now asking for the votes of young people, should be asked why they give financial benefits to wealthy older people without a means test, rather than help younger people.
I refer, firstly, to the provincial Seniors’ Property Tax Deferral Program, where anyone over 55, with no income limitation, can defer their property taxes until death or sale of the house, with a nominal interest charge, and the province compensates the municipality in the interim.
Surely, we can see the advisability of not forcing indigent seniors out of their homes, but, without a means test, we have benefits flowing to seniors with million dollar incomes and five million dollar oceanfront homes.
In addition, the province has a Homeowners’ Tax Assistance Program, where homeowners, of any income level, who have homes worth up to $1,050,000, are getting provincial benefits to offset cost of property taxes. Why aren’t these programs being discussed?
The Provincial government collects a lot of money from property transfer taxes each time a home is purchased; but there is a provincial First Time Home Buyers’ Program that exempts the tax from homes costing under $425,000.
Query whether this done to benefit young people getting into an inflated market, or rather to benefit large developers to assist them in their sales. In Vancouver, the only homes under $425,000 are the one-bedroom condos that the developers have been flogging.
Given the overall neglect of first time buyers, and given the size of the property transfer tax that kicks in above $425,000 (1% on the first $200,000 and 2% on the balance), I think that the benefit was intended more to give developers a sales support, rather than help young people, since the whole amount of the tax kicks in, as soon as the price goes over the $425,000 threshhold.
And what about the Federal Government?
Again, there is a history of benefiting homeowners more than renters. Firstly, there is the whole CMHC mortgage insurance program, which makes it possible for home buyers to get a bank mortgage with less than 25% down.
Until recently, the government was so keen to induce young people into an inflated housing market, that CMHC was giving 40 year amortizations to people putting as little as 5% down on their properties. It was not only in the United States where people who should have been renting were induced into buying at the top of the real estate bubble, but here in Canada as well.
A lesson we should be learning from the American sub-prime fiasco is that there are some people who should be renting and should not be induced to get in over their heads in pricey owned housing, where interest rate increases combined with volatility in prices can result in financial tragedy.
Then there are a variety of federal programs, some lapsed, such as the Assisted Homeownership Program or the Home Ownership Stimulation Plan, and some current such as the Home Buyers’ Plan, administered by the Canada Revenue Agency.
This allows each spouse to withdraw, tax free, up to $20,000 out of their Registered Retirement Savings Plans, to be used towards the purchase of a home and repaid to the RRSP within 15 years. Of course, the last mentioned amounts to a tax subsidy to home buyers by the general tax base, which of course includes renters.
In addition, the last federal budget gave homeowners a tax credit up to $1350 towards their cost of home renovations.
Moreover, the largest single federal government benefit bestowed on home owners as opposed to renters is the exemption from income tax of the billions of dollars of capital gains tax that would be collected had not the government made the decision to exempt principal residences from capital gains tax.
In the United States the tax system helps out with affordable housing – there is a system of affordable housing tax credits issues to developers of affordable housing, which can be sold to high income individuals and thus generate funds to the developers for early stage soft costs and construction costs.
So what does this all have to do with affordability? The answer is that government funds are not unlimited, and benefits given to home owners mean there is insufficient money to subsidize the rental market.
In B.C., there is a Rental Assistance Program providing assistance up to $9200 a year for families making less than $35,000 per year, and a program called SAFER – Shelter Aid For Elderly Renters. But these programs help towards the cost of rent, but do nothing for the acknowledged major problem in the rental market – the lack of construction of new purpose-built rental units since the income tax changes in the early ‘70s. With the benefit of inducements on the cost side, developers can be induced to build what young people including young families need – decent yet inexpensive rental housing.
To have affordable rental units, we need to have a healthy balance between supply and demand. The cost of owned housing is prohibitive - recent studies peg the family income needed for an average house in Vancouver at $120,000 while the average mean income is only $60,000. So, there is a problem for Vancouverites with an income under $100,000, and not just a problem building social housing for the disabled and the homeless.
Politicians have for too long deferred taking any action on creating inducements for private sector and non-profit construction of rental units by opting to create more “studies."
Vancouver witnessed a study costing $300,000 by consummate political insider Ken Dobell, which led to nothing. And last week, Metro Vancouver paid for a report by McClanaghan and Associates called “Measures to Stimulate Private Rental Investment.”
One really has to wonder about all the studies, when a 30 minute Google search of “Affordable Housing” can yield information on the dozens of affordable housing inducement programs operating in the United States and in several other provinces in Canada.
The United States has so many programs and private sector affordable housing developers that there is a magazine called Affordable Housing Finance, updating its readers on the latest American programs.
I live in Vancouver but spend 7 to 10 days in Ontario each month where my private sector company has developed six affordable rental properties in the last six years, utilizing a variety of Ontario programs.
Generally, we obtain a forgivable loan per unit constructed, forgivable over 15 years, provided we adhere to the terms of an operating agreement, specifying the maximum rents per unit, and the maximum income of the tenants.
In my book, I canvas the variety of policies that can be implemented to create both affordable rental housing and affordable owned workforce housing (with resale price restrictions).
There are numerous ways for a municipality to set up and finance Affordable Housing Funds. There should be a demolition tax of $20,000 per unit demolished which can go into the Fund.
Like Victoria, the city should pay all of its GST refund into the Fund. The Province can rebate back part of the nearly $1 billion per year it gets from the Property Purchase Tax.
The City can institute preferential development charges and property tax rates on rental properties. There are numerous models for programs called Brownfield Remediation Tax Assistance Programs, wherein the costs of environmental remediation of a contaminated lot can be offset against the future property taxes.
I have written extensively about the Community Housing Trust model, where buyers buy town homes that have been subsidized by government at a lower than market price with a resale price restriction registered on the deed that they have to sell at the same percentage reduction from market value as they did when they purchased.
There are no shortage of model programs working well elsewhere. But there is a shortage of political will to help young people with their real housing needs, which may for the short term, or even the long term, include renting, or buying in a Community Housing Trust.
The fact that in our three recent election campaigns there has been very little talk about the issues raised here is a slap in the face to younger voters. Perhaps, once they understand how the system has been operating to their detriment, our younger voters will stand up and make their voices heard, and demand that politicians address these issues.
Howard Rotberg is a former development lawyer, who combines his writing with developing affordable rental housing for low income working people across Southern Ontario, mainly in converted heritage buildings. His new book on Vancouver looks at some of the cultural values and ideologies in Vancouver that have promoted greed over social justice.