Vancouver Seeks to Unleash Builders to Tame Runaway Home Prices
Vancouver’s candidates in Saturday’s election focus on building units, a harbinger for other cities
(Bloomberg) — Tucked between snow-capped mountains and the sparkling Pacific, with a mild climate and thriving cultural scene, Vancouver is a perennial contender for North America’s best place to live. It’s also the least affordable.
For 13 years straight, urban consultancy Demographia has named it the continent’s most expensive place for housing. The cost of owning a home in Vancouver, including interest payments on a mortgage, now sits at a staggering 90% of the city’s median income, according to the Royal Bank of Canada. Yet officials and experts couldn’t agree on the cause, let alone a solution.
Suddenly, out of a municipal election, a consensus is forming: housing isn’t expensive because of foreign money sloshing into the city. The problem is simply that there aren’t enough homes. The answer: rezone and build more.
That could make the Oct. 15 vote a turning point not only in Vancouver but in cities across Canada and the US where the cost of housing has suddenly become an acute and seemingly intractable issue. In both countries, the majority of people own their homes and protecting their value has historically taken precedence over any other concern at the ballot box.
Home ownership in Vancouver stands at more than 60% and the fact that so many appear willing to risk their biggest asset is a sign of how desperate things have gotten. With similar battles playing out in so many cities, Vancouver could become a bellwether and precedent for how, and whether, a city can fix itself.
“If they actually achieve this rezoning, it will be a change that’s heard all over the US,” said Sonja Trauss, founder of a San Francisco housing advocacy group.
Vancouver Mayor Kennedy Stewart is running for re-election on a promise to pursue zoning changes and build 220,000 homes over the next 10 years. “If my vision wins, then I think you’ll see this kind of change in other municipalities,” he said.
Like virtually every other city in North America, record low interest rates and demand for larger living spaces brought by Covid-19 sparked a home buying frenzy. Prices spiked, followed by rents as a new cohort of people gave up on buying.
Though prices are now cooling, that hasn’t brought relief because mortgage rates have risen even faster. Last month, Royal Bank of Canada declared that it’s never been harder to buy a home in Canada. And greater Vancouver has had less improvement than other places, with benchmark prices down only 3.4% since February, compared to almost 9% in Toronto.
Elected four years ago on the barest of margins, Stewart doubled the rate of construction approvals and convinced a fiercely divided council to endorse a city plan that would rezone virtually every neighborhood — many of them currently reserved for what are essentially single-family homes — to allow high rises near transit stations and small apartment buildings on residential streets.
But the city council needs future terms to implement these plans, and so Stewart is running with a slate of council candidates who support the measures.
A sign of the times is that even Stewart’s main opponent, local businessman Ken Sim, says he backs these steps, and the three sitting councilors running for re-election under his banner all voted for the plan.
In fact, there is only one major mayoral candidate running to repeal the new plan outright. The scion of a local political dynasty, Colleen Hardwick made her name as a city councilor by opposing or abstaining on most of the housing proposals that came to a vote in the last four years.
She says she’ll address the affordability crisis too, but rejects the whole notion of a supply shortage.
“They don’t know what they’re talking about,” she said of that theory’s proponents. “I’m giving you the analysis.”
In a 90-minute interview in her city hall office, Hardwick said that far from being the solution, rezoning to allow for more density is what’s raising land values and driving up home prices in the first place. She described a pyramid-scheme like situation that involves the city government coming to rely on windfalls from “upzoning” to fund its expanding budget.
Detractors of this argument say the high rents or prices those new units eventually command are a sign a lot of people want to live in them, justifying the land values. But Hardwick says prices and rents are so high because foreign investors are buying up units and leaving them empty.
This latter part of her argument dates back to an earlier era of Vancouver’s long housing debate. In the back half of the 2010s, amid a string of media reports about ghost mansions and multi-million dollar properties legally owned by income-less homemakers, the public came to lay blame for the housing crisis on foreign investors.
Politicians at both the municipal and provincial level created taxes targeting this kind of activity. But none of those policies helped lower rents or prices. Now most experts point to the relatively meager number of housing units they forced back on the market, or paltry revenues they generated, as evidence that foreign money was not a big part of the problem.
Hardwick disagrees and points to theorists like Andy Yan, the director of Simon Fraser University’s City Program. Yan doesn’t say foreign investors are causing the problem but argues Vancouver’s immigration and international connections provide ample avenues for real estate to be bought with money earned elsewhere.
Government data show a third of properties in the city are owned by investors, which he says is part of the reason home prices have detached from local incomes, and so much of what gets built is marketed to high earners.
“There is a supply issue in Vancouver, but it’s also shaped and influenced by demand,” he said, arguing policy makers should focus on raising local incomes and creating subsidized housing for the poor.
Hardwick, meanwhile, concedes the need for more density but not rezoning. She says adding duplexes that every residential lot is already zoned for will be enough and won’t require unsightly high-rise towers she believes would ruin the city’s famous charm.
But a September drive through the tony west Vancouver neighborhoods with the most to gain from Hardwick’s proposals showed few lawn signs supporting her. More numerous were those for Sim, who, in the latest survey, has overtaken her for the number two position behind Stewart.
In a conversation with one residents association opposed to the new city plan, the members didn’t bring up Hardwick much, even though her positions most closely resembled theirs. Instead they seemed to be holding out hope Sim would be more sympathetic than Stewart. That in itself may be a sign of change.
Hardwick’s outlook is derisively called NIMBY — Not In My Backyard — a description she rejects. Those on the other side have adopted the opposing name of YIMBY — Yes In My Backyard.
Beginning in San Francisco, the YIMBYs have gained momentum but mostly through shifting power from municipal to state governments to make the hard decisions. If Vancouver’s politics embrace this change, that could show cities how to do it all by themselves.
“That would be a very strong rebuke to the idea that talking about single family zoning is a third rail in politics,” said Stuart Smith, who’s been a YIMBY activist in Vancouver since 2016.
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