What is Canada Doing About the Current Housing Crisis?
Is the Canadian government serious about affordability or is this just talk?
When Pierre Polievre, leader of the Canadian opposition party, promises to cut development charges, streamline permitting processes, and incentivize municipalities to build the homes faster, adding that “government-imposed costs and bureaucratic delays account for 60% of housing prices in cities like Vancouver,” I cringe because I don’t think it’s possible to deliver on his dream of home ownership for Canadian families. In fact, Jordan Peterson challenged Poilievre in his interview, “If you just reduce these regulatory burdens, are you really going to create homes at a price people can afford, or does that money just get pocketed elsewhere?”
I live on the west coast of Canada so I am interested in housing costs in Vancouver and the Lower Mainland. We have seen a slight dip in prices in the past months but nothing like what needs to happen for the average family in Canada to afford a home. I would say we need a minimum drop of 25% in housing prices. That might not even do it.
I think about someone who purchased a condo in 2011 for $179,000 and sold it for $458,000 in 2022. This one bedroom condo was in a less desirable area of Greater Vancouver. Their income did not go up, by comparison, and they could never have afforded to purchase at the selling price, maybe not even at half the selling price.
A new development that is going up in my neighbourhood has a 566 sq. ft. one bedroom condo listed at $524,900. A 25% drop would put this home just under $400,000 and out of reach for the average wage earner.
What can be done to lower housing costs?
REDUCE GOVERNMENT FEES AND CITY DEVELOPMENT COSTS
Reducing government fees is a place to start, Poilievre is right about that. Apparently he arrived at his speculative “statistic” by simply deducting the cost of materials and labor from the selling price of a home. We all know there are additional non-negotiable costs besides labor and materials.
This article shows that government fees do significantly drive up housing prices to the tune of 20%:
According to the 2022 CMHC report Housing Market Insight – Government Charges on Residential Development in Canada’s Largest Metropolitan Areas, government charges on new development may be defined under the following categories: taxes…warranty fees…municipal fees…development charges…density payments…and permit fees.
The list of categories is not exhaustive.
When developers need to get financing for these fees during the duration of the build, which can take years from start to finish, you are adding additional interest costs.
Currently developers are asking for relief and extended payment periods for Community Amenity Contributions (CACs) and Development Cost Charges (DCCs). A June 15 article, 'At a reckoning point': City of Vancouver to defer fees paid by developers to prevent new housing slowdown, states that the City staff recognizes the temporary impact on cash flow by offering relief such as extended payment terms, but of greater concern is the potential loss of future Development Cost Levies (DCL) if housing projects are cancelled altogether due to poor financial viability. We are not hearing a lot about these cancelled projects but it is happening.
INCLUDE SOCIAL HOUSING REQUIREMENTS IN NEW BUILDS
Requiring developers include lower cost homes would be a good idea, if developers agreed to this. Unfortunately, and understandably, they are trying to find a way out.
Last month a headline read: $55-million payment approved to remove social housing in future Vancouver tower. I quote from the article,
To better ensure the financial and economic feasibility of the Curv tower project, Vancouver City Council has approved the developer’s request to alter the public benefits strategy associated with the project, specifically the affordable housing component.
The city took a $55 million payment from the developer in exchange for permission to scrap the plan to designate 20% of the build as social housing units below market value. Apparently the Rezoning Policy for the West End of Vancouver was already revised on a temporary basis in September 2024 to reduce a social housing requirement from 25% to 20%. Now the policy was disregarded altogether.
The city may have a “requirement” for affordable housing, but it can be amended or disposed of it altogether in exchange for millions.
The rationale for this new flexibility is, “the sustained weaker condominium market demand, high borrowing costs for construction financing, and steep market inflation of construction costs, along with other economic headwinds.”
If a developer says, I can’t finish this project unless…., the city is motivated to yield in order to prevent developers from abandoning projects.
Note the reference to “the sustained weaker condominium market.” It makes me wonder if we have finally reached a place where condominiums are no longer selling because people can’t afford them? Another possibility is that speculators do not see the market going up in the near future and are reluctant to invest.
HIGHER DENSITY HOUSING
Patrick Condon, author of, Broken City: Land Speculation, Inequality and Urban Crisis, published in 2024 by UBC Press, says that over the course of three decades adding well-planned new density to the city has failed to make housing affordable as hoped. In the interview, Patrick Condon Says This Is Why Housing Costs Are So High, he states, “unfettered speculation, fuelled by global wealth looking for asset investments, drives Vancouver land costs up so high they erase savings that can be delivered by building many units on a parcel instead of a few.” In other words, new towers keep rising but we don’t see these homes selling for less.
According to the article/interview, land prices “have increased fivefold in Vancouver over the past 15 years, while income levels have stayed fairly flat.” Building 25 storeys of units one top of another, instead of a single-family home on the plot of land, should yield more affordable homes, however, Condon says, “if you just rezone for more density, you find that the main beneficiary of the upzoning is not the renter or owner, but the land speculator.” This is what Peterson alluded to.
Condon largely blames a global economy based on “your assets making money, not your wages….wealth is increasingly concentrated among a global elite, land has become the place to stash their wealth.” In other words, instead of buying a home, people buy real estate as an investment. This shift, he claims has “pushed the values of urban land up and out of sync with regional wages. Housing prices end up escaping their traditionally assumed “real estate fundamental” ratio of four to one, home price to annual wages. That ratio in Vancouver is now 12 to one.”
According to this recent article it appears the problem for developers is that “investor pools have evaporated.” Meanwhile as developers work at “improving their economic and financial viability” through “additional density through greater verticality” they are also sacrificing “community amenity and public benefit,” an example being smaller and fewer affordable units.
In the interview, Patrick Condon points out that, “throwing proper planning away, with all its associated social benefits, the benefits that made Vancouverism famous, is not a path to affordability.”
Condon adds that “Since the 1970s, Vancouver has tripled its total number of housing units. If adding housing supply and new density to a city leads to affordable housing as many now contend, Vancouver should have the lowest housing prices in North America.”
Unfortunately it appears that instead of delivering greater affordability, higher density housing merely squeezes more people into a smaller space.
The article makes a very significant point. If density “can’t deliver affordability, then we must ask whether this particular proposed building is a good precedent to approve.”
EMPTY HOME TAX AND SPECULATION AND VACANCY TAX
The June 2022 article, The Data Shows Taxing Empty Homes Works - BC’s speculation and vacancy tax returned 20,000 empty units to the rental market, states that the cost of homes rose as much as 40 per cent in some markets between 2015 and 2016.
Presumably unavailability is the core reason for the housing crisis and the BC government has attempted to get more houses on the market to address a “housing shortage.” One strategy has been to implement an “empty housing tax”—an additional tax of 3% on homes that are unoccupied for more than 180 days a year, with some exceptions.
The following is from the City of Vancouver Empty Homes Tax Annual Report for 2022:
There is strong evidence that the Empty Homes Tax is reducing the number of vacant residential properties in Vancouver. From the 2017 to 2022 reference years, the number of vacant properties decreased by 54% based on data collected by the City under the EHT program.
External data has also highlighted the positive impact of the EHT on Vancouver’s rental housing supply. The Canada Mortgage Housing Corporation (CMHC)2 observed a significant shift toward long-term rental in Vancouver from 2018 to 2019 following the introduction of EHT and the Speculation and Vacancy Tax, with an increase of 5,920 condominium units in the long-term rental stock. This increase exceeded the number of new condominiums added to the stock during that period….
Although there is an apparent increase in availability, strangely housing prices continue to resist dropping.
As a side note, or maybe it isn’t a side note? Sam Cooper, in his book, Willful Blindness (p. 193, 2021 edition) sees a surge in empty condo towers as evidence of “narco-economies,” something DEA (Drug Enforcement Administration) agents are taught to recognize. In his book Cooper explores a link between drug money laundering and foreign investment in Vancouver real estate.
With the sudden glut of condos for sale on the market, owners are trying to rent them out but this is not fixing the problem of affordability of home ownership because prices are still not dropping.
Meanwhile, a Vancouver Sun article by Douglas Todd states, “some analysts point out the emphasis on rental units may be leading to fewer affordable homes being built for would-be owners.”
If people can’t afford to buy a home then they are forced to rent. Sadly, rents have increased astronomically, along with housing increases. Fifteen years ago a basement suite in our area rented for $500. I checked craigslist today and the lowest available one bedroom suite is currently $1300. Think of the impact on seniors or a one income family. This is driving people to homelessness in our wealthy country.
FEDERAL FOREIGN BUYERS BAN
For years people in the Lower Mainland have been concerned that foreign investors are contributing to unaffordability.
I quoted investigative journalist, Sam Cooper earlier. He states in Willful Blindness, that in 1988 real estate started to curve up above trends and developers privately told him that about 30 cents of every real estate dollar in B.C. was coming from Mainland China. Following Expo 86, Expo lands were sold to investors from Hong Kong, amounting to about one-sixth of downtown Vancouver. Mass land acquisitions by numbered companies have been happening for years.
I just spotted a 2016 CBC article entitled, Vancouver home sells for more than $1M over asking price. At the bottom of the article was this note: A previous version of this story included inappropriate references to the ethnicity of potential buyers.
A great article written in MoneySense in 2016 clearly points to foreign buyers driving up prices in Vancouver. But the article adds that those who draw attention to the negative impact of foreign investment have been labeled as “racist” and “xenophobic.”
Very recently the Federal government of Canada responded to this crisis by introducing the Federal Foreign Buyers Ban, with exceptions for “international students, temporary residents, specifically exempted foreign nationals and refugee claimants,” as per this BC Real Estate article:
Starting January 1, 2023, non-Canadians are banned from purchasing homes in Canada under the definition of 'residential property' indicated in the legislation, regulations, and regulatory amendments. This ban was initially implemented for a period of two years. However, on February 4, 2024, the Government of Canada announced its intention to extend the existing ban on foreign ownership of Canadian housing for an additional two years, to January 1, 2027.
Meanwhile Redit claims, Flawed foreign ownership narratives drove ‘housing nationalism’ in Canada. In the comments someone references a 2016 CBC article that highlights how BC Premier Christy Clarke took representatives from over 60 companies on a trade mission to Southeast Asia “as part of the province's strategy to create more international trading partners.” This was also printed in the article:
Information about B.C. properties for sale — translated into Chinese from the Multiple Listing Service used by agents —was published through a Shanghai-based company to give clients a jump on bidding, according to the Victoria Times Colonist report on April 13.
Real estate developers don’t like the foreign buyers’ ban and are pushing back against it. In the CBC article, Metro Vancouver's condo market is slumping. Here are 4 key factors behind the slowdown we read, "While the intention is understandable, the current broad-brush form of the ban also limits access to foreign capital that could help builders meet presale thresholds and finance new construction," the Homebuilders Association Vancouver said in a statement.
This June 2022 article, states that Tsur Somerville, professor in Real Estate and Finance at UBC,
…had warned that a wave of money from offshore buyers had likely contributed to the massive spike in home prices. After the first-ever data collection of foreign buyers showed that five per cent of Metro Vancouver real estate was sold to buyers who don’t live in Canada during a 20-day period, the Liberals did introduce a foreign buyer tax.
LANDOWNER TRANSPARENCY REGISTRY
It may come as a surprise to learn that BC has historically allowed buyers to be anonymous and hide their identities behind numbered company names.
This has changed. According to the Canadian Government’s Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) website, verifying the identity of persons and entities as required by the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and associated Regulations, came into effect on June 1, 2021.
A February 2018 article, British Columbia to require anonymous land owners to reveal their true identities reads, “In its Tuesday budget, B.C. announced it will become the first province to require those behind landowning numbered company to reveal their names.”
Real estate agents are now required to determine the purchaser’s valid and current identification (such as a passport) to determine the purchaser’s citizenship, residency or exempt status. There is some concern, however that the deterrent of a $10,000 fine for not complying is not enough. In other provinces the fine is as high as $25,000.
Incidentally, I recently visited Vietnam and every place I stayed required that I show my passport. That was only for a temporary stay.
A 2019 article on the BC government website states:
World-leading legislation introduced by the provincial government will help bring an end to the days when B.C. could be used by shell companies and other legal entities to anonymously hide wealth, evade taxes and launder money.
In 2016, Transparency International Canada released a report indicating that nearly one-third of the 100 most valuable residential properties in Greater Vancouver were owned by shell companies. Data leaks, such as the Panama Papers and the Paradise Papers, have provided further examples of how loopholes have left Canada exposed.
British Columbia’s new beneficial ownership registry is Canada’s first publicly searchable registry of its kind. Information, including names of all corporate interest holders, beneficial owners or partners, will be publicly searchable through the registry. Tax authorities, law enforcement agencies and relevant regulators will have access to more detailed information and may use it to crack down on tax evasion, fraud and money laundering.
It is a disturbing to imagine how this may have contributed to escalating housing costs.
REDUCE SPECULATIVE BUYING - BC HOME FLIPPING TAX
A 2021 headline claims, Investors account for a fifth of home purchases in Canada. Are they driving up housing prices in a booming market? Without a doubt. According to one article, a new condo can be sold two or three times before it is sold to the occupant.
The BC Government recently implemented a home flipping tax, as stated on its website:
Starting January 1, 2025, the BC home flipping tax will apply to income earned from the sale of a beneficial interest in residential property located in B.C. if the beneficial interest was held for less than 730 days.
This is meant to address the issue of speculative investors driving up the price of family homes.
MATCH MIGRATION TO DEVELOPMENT
Canada has let in an unprecedented number of newcomers in the past few years. In Vancouver Sun article, Douglas Todd writes,
"Rapid population growth has exacerbated (Canada’s) housing affordability challenges,” says the OECD, noting Canada’s population grew six times faster in 2024 than the average among member nations, with almost one million newcomers.
According to this article,
Canada has announced a plan to decrease the number of temporary residents to 5% of the total population over the next three years, including temporary foreign workers and international students.
Will 5% of the population be enough? That still seems like an incredibly high number.
According to Canada’s Housing Minister the remedy seems to be to increase federal spending on immigration:
In a May 14 letter to Robertson made public via social media channels, B.C. Housing Minister Ravi Kahlon called on Robertson and the new Liberal government to tie federal funding and housing plans to annual immigration rates.
Kahlon also called on Ottawa to provide more funding via new housing and infrastructure agreements beyond April 2028.
WHY NOT REMOVE THE TRANSFER TAX?
This is a personal gripe of mine. I see the B.C. Transfer Tax as a simple money grab. The government website states:
The general property transfer tax applies for all taxable transactions. The general property transfer tax rate is:
1% of the fair market value up to and including $200,000
2% of the fair market value greater than $200,000 and up to and including $2,000,000
3% of the fair market value greater than $2,000,000
Think of the senior who will be disincentivized to sell their home and downsize. I was recently told of a couple who decided to renovate their home, instead, for what it would cost them to move. Personally, we have been trapped into staying in our home rather than moving to a two bedroom home because of this extra cost.
Yes we are beginning to see a slowdown in development and a slight dip in prices. But this might only be part of a vicious cycle where a decrease in available housing in turn causes prices to go up once again.
Not everyone agrees with the need for housing prices to drop; in particular I am speaking of Canada’s new federal Minister of Housing and Infrastructure, Gregor Robertson. Robertson, was Vancouver’s mayor between fall 2008 and fall 2018, when home prices roughly tripled, according to the Canadian Mortgage Housing Corporation. This article states:
B.C. Premier David Eby says his housing policies are intended to result in a decline in home prices — an outcome new federal Housing Minister Gregor Robertson said he does not wish to see, sparking reaction and debate nationwide.
On Wednesday, Roberston told media in Ottawa he did not wish to see home prices decline but rather build affordable housing, meaning non-market options such as co-ops, social housing and rental units pegged to local incomes.
I hate to be pessimistic, but I really don’t see a 25% drop happening in housing prices. That would be a real shake-up. But at the same time, it’s the minimum of what we need to see. A government subsidized income alternative that has been talked about will never enable families to get into the housing market. It will not top up the income of those who almost “qualify.” AI tells me that “you generally need a gross annual income of around $100,000 or more, with a minimum 5% down payment of $20,000, and good credit.”
Very well rounded article highlighting many of the factors influencing housing market prices.