Congratulations To A Few Politicians Who Saw That High Immigration Caused High House Prices—-Shame on Those Like Trudeau Who Refuse to See

Douglas Todd: Vancouver’s housing crisis four decades in the makingVancouver Sun 02.16.2017

Metro Vancouver residents have struggled with housing crises since the 1970s.

Four decades ago, even when the gap between local wages and housing prices was not nearly as severe as it is today, economist Gordon Soules published an eye-opening book titled The Housing Crisis: Causes, Effects, Solutions.

In it, Art Phillips, Bill Vander Zalm and Mike Harcourt detail a fist-full of reasons that house prices were so high in Metro Vancouver, including lack of zoning density and inadequate social housing.

The politicians did not shy away from how high immigration rates and foreign capital were among the biggest contributors to the city’s rising prices — phenomenons re-confirmed this year by UBC geographers David Ley, Dan Hiebert and other scholars.

What follows is an historical perspective on how Metro Vancouver came to 2016, which has been arguably the most dramatic year in the city’s escalating housing crunch. It also offers a look at the future.

In the mid-1970s, then-Vancouver mayor Phillips, one of the city’s most progressive leaders, wrote in The Housing Crisis:

“I maintain that the primary approach to solving the housing problem in the Greater Vancouver area lies in the immediate reduction and future control of immigration.”

A decade before Expo ’86, when Canadian politicians began concerted wooing of East Asian investment and migrants, Phillips said, “We can and should control that proportion of our population pressure that is represented by the influx of foreigners.”

Then-alderman Mike Harcourt, who would go on to become Vancouver mayor and NDP premier, listed several causes of high prices, but also focused on rapid in-migration.

“First, it is essential that we relate both the local and the national housing problems to our immigration laws. Are we in fact merely trying to create new housing, as well as new employment opportunities, just to keep pace with the yearly average of 200,000 immigrants that Canada is admitting every year?” Harcourt said.

“Perhaps we should seriously consider whether we can continue to admit so many immigrants. Further, maybe we should make it less desirable for people to migrate to Vancouver from other areas of Canada by making it more attractive for them to remain where they are.”

Phillips and Harcourt were offering policy recommendations in an era when Canadian governments of the left, right and centre routinely adjusted immigration rates in response to changing conditions in the economy and labour market.

Athough Vander Zalm didn’t directly emphasize immigration, he complained about speculators who “compound profit without doing a thing for it.”

Despite declaring he was “not a socialist,” Vander Zalm said the “ideal” response to the housing crisis would be one in which “most land would be owned by the government and leased to the people.”

Known for his frankness, Vander Zalm later, as premier in the late-1980s, zeroed in on immigration, taxes and rising prices by instituting the property-transfer tax.

“Foreign investors, many speculatively, are driving up home prices beyond the reach of British Columbians. These people paid no tax and most have never paid a B.C. tax of any kind,” Vander Zalm said.

“These welcome newcomers should also contribute to the needs of the province, and this should be done through some sort of ‘property transfer tax’.”

Early housing worries snowballed in 2016

Vander Zalm’s property transfer tax has been expanded. Premier Christy Clark raised the rate again this year, to ostensibly gain more revenue from rich immigrants, foreign buyers and local proxies.

Indeed, three levels of government brought in policies in the last half of 2016 in response to anger over the way Metro Vancouver has transformed, according to Demographia, into the third-most-unaffordable city in the English-speaking world.

In the 1970s, when The Housing Crisis was published, “unaffordability” — which can be measured by the ratio of real-estate prices to local earnings — was about 3 to 1.

By 2016, it had expanded to 13 to one.

What have governments done in the face of foreign capital and an estimated 400,000 millionaire immigrants and their family members moving to Metro Vancouver?

The B.C. government’s 15-per-cent tax on foreign buyers was the first big surprise of 2016, proving popular.

But the province’s interest-free loans for first-time homebuyers, introduced in December, have been denounced by many as inflationary and a pay-off to political donors in the real-estate industry.

The City of Vancouver, meanwhile, began imposing a tax in 2016 on empty houses, and most suburbs increased zoning density.

And the federal government made moves to close the loophole that allows Canadian lawyers to launder illicit cash. Ottawa is also instituting a “stress test” to make it harder to obtain mortgages.

Trudeau and Harcourt on the future

Back in 1976, Harcourt predicted that Metro’s housing crisis would be largely solved by the federal government reducing immigration levels “by the early ’80s.”

But the opposite happened. The last prime minister to lower immigration rates was Pierre Trudeau.

After Brian Mulroney was elected in 1984 — expanding free trade and creating more open borders — politicians began suggesting anyone who wanted to lower immigration levels was xenophobic.

Justin Trudeau says he has no intention of following his father’s lead. This year, he bumped up the country’s immigration rate to the highest it’s ever been, more than 300,000.

“Far be it for me to question a decision my father might have made in the late-1970s,” Trudeau told the Vancouver Sun and Province editorial board on Dec 20, “but we’re on a track to welcome more immigrants over time as our population ages.”

The prime minister recognized 45 per cent of the population of Metro Vancouver, and almost 50 per cent of Toronto, is foreign-born, adding that B.C.’s major urban centre is facing a more “extreme” housing crisis than the Ontario hub.

“We are going to continue to monitor and make sure that as a fundamental core principle people can afford places to live, whether it be in great cities like Vancouver or in smaller communities across the country,” Trudeau said.

“We are working very, very hard on a housing strategy that we hope to announce in the coming months that is going to directly address … places like Vancouver, where housing is out of reach for middle-class Canadians.”

As for the views today of B.C.’s former politicians, Phillips died in 2013 and Vander Zalm could not be reached for comment.

But Harcourt has many ideas about how Metro Vancouver could move ahead.

The former premier said governments need to respond to how “international capital, a lot of it Chinese,” is flooding into Metro Vancouver, Toronto and other gateway immigration cities.

“Foreign capital regards housing like bricks of gold. It’s considered a safe investment. But it’s massively inflating the markets at the higher end. It’s also impacting other parts of the market, because local people who are professionals and reasonably higher income can’t afford single-family ownership.”

Harcourt believes the B.C. government’s 15-per-cent tax on foreign buyers, and the City of Vancouver’s one-per-cent tax on empty homes, “are bringing down the overheated market in terms of international demand.”

But Harcourt cautioned that Metro’s housing supply, as well as health and educational services, are being over-stretched because 90 per cent of immigrants to the province move to Metro municipalities, which have limited abilities to levy taxes.

“We’ve got to say that we’ve benefited tremendously from our immigration policies. They’re quite pragmatic and shrewd,” Harcourt said, adding the topic often strikes a “raw nerve”.

However, the former premier said governments need to respond to accelerating urban immigration.

“Are we going to reduce the numbers of immigrants until we can kind of catch our breath in terms of housing and everything else? And/or are we going to increase the affordable housing, and other services for immigrant reception?”

Harcourt maintained these are valid questions that people shouldn’t “run around saying are racist.”

He added that the federal government has a major role to play in getting back into funding social housing.

A November speech in Vancouver by the head of the Canada Mortgage and Housing Corp. showed how the once-beneficial Crown corporation has become “bankrupt,” Harcourt said.

CMHC CEO Evan Siddall lectured Vancouverites about “creating an us-against-them” attitude toward foreign buyers, making the dubious claim that less than 2.3 per cent of condos in Toronto and Vancouver are owned offshore.

Harcourt, however, lamented how the CMHC “has gone from being really aggressive at creating livable and affordable cities to being basically a mortgage insurer. It’s lost its soul.

“I remember CMHC when it really had some vision and leadership and some courage to take on these tough issues. And now, it’s just turned into a shadow of itself.”

In the ’80s and ’90s, the federal government, through the CMHC, was building 25,000 subsidized housing units a year across Canada, Harcourt said. The City of Vancouver alone built roughly 20,000 social-housing units during that period.

But federal efforts to support non-profit housing crashed in the early 1990s.

“(Former Liberal finance minister) Paul Martin got rid of social housing to reduce the deficit. Paul is a friend, but in my opinion, it was one of the dumbest public policy decisions in the last 50 years,” Harcourt said.

“Social housing just got lost in the shuffle. And now we’re suffering the consequences of 25,000 non-profit units a year over 22 years not being built. And that’s 550,000 units of housing across Canada. You wonder why we’ve got a housing crisis? That’s a huge part of it.”