Despite the rise in job growth and record migration in British Columbia, Metro Vancouver’s housing affordability is still a concern for many. House prices are rising too fast in some neighbourhoods.
The housing crisis is growing every year. One of the most common solutions is allowing more diversity and density in housing. According to a recent survey of 600 residents, 71% of respondents support allowing duplexes, fourplexes, and 4 storey apartments in some neighbourhoods.
But while the debate goes on, the housing shortage continues in British Columbia.
We will look at the causes of this crisis as well as a summary of popular solutions offered by a few experts.
Supply shortages plague the housing market
Vancouver residents are now faced with an unprecedented affordability crisis. The crisis includes high rental housing prices and records low vacancy rates.
Also, there is a shortage of housing for sale. According to GVREB, the city had about 9,000 listings during Oct. 2020. That’s 30% less than the month that was the same in 2020, and 28% lower from the 10 years mean for listings.
But, despite having less active listings the transactions in Vancouver were up by 20% over the average of 10 months.
Canada isn’t building enough homes
According to strawhomes.com, one of the biggest issues for homes is the absence of new development. The growth rate of population in Canada due to immigrants has been far more than the capability of construction of new houses to be constructed.
There is also an issue of the sheer number of homes that are bought but left empty. This was a problem that was so alarming that Vancouver implemented the Vacant Home Tax.
Other major cities like Toronto have adopted the same policy. Some international cities like San Francisco and Hong Kong have also implemented such policies to curb housing demand only.
Prices continue rising
Canadian real housing prices have been on a rapidly rising trend over the past few years. Vancouver is no different with its heated real estate market. The most affected is the cost of detached houses, with the average price for detached homes in Vancouver increasing to $1,850,000 in the month of Oct. 2021.
Major parties during the latest Federal Election in Canada offered to tax foreign buyers and tax even more short-term rentals. But this has done little to solve the affordable housing crisis. This is because the tactic only lowered demand for housing and left little to no supply side policies.
Low mortgage rates
Another reason for the increase in average home price is the current low interest rates being offered in Canada. As interest rates are at record lows, homeowners are able to secure more mortgages than they ever have before however this is the main reason behind property values going up. Canadians collectively were owed $1.8 trillion worth of debt on mortgages in the month of Oct. 2021.
Three Serious Solutions to Vancouver’s Housing Crisis
Density & Red Tape:
Density by itself won’t do it. We must also reduce red tape in the city’s processes. The City of Vancouver adds 28% of the cost of a new home. By reducing red tape to city processes, it could alleviate housing costs and rents. It will also reduce the housing bubble as costs will be reduced for all the chains along with the real estate industry.
Use City Owned Property:
Vancouver could take the $21 billion of land owned by the city and use it to create affordable homes.
Change the Zoning of Single Detached Family to Six home dwellings
Vancouver houses 65,000 single-family detached homes. There is currently a max of three dwelling units for each parcel. But the city may permit all of these parcels to accommodate at least six units to create multi-family housing. This approach may have an impact on the city’s overall plan without altering the appearance and feel of neighbourhoods. This could help the housing situation.
Why did this happen?
Immigration
The situation could get worse. There is a growing population in Metro Vancouver which is now around 2.5 million. It is predicted to increase 50% over the coming 20 years. To work on demand is futile as many middle and working class families will need rental units, non-market housing, and other housing options. The city requires an aggressive and affordable housing plan to tackle the housing unaffordability.
Taxes that lined up government pockets but do little to create affordability
The Foreign Buyers Tax has not been proven effective in cooling the market. Also, the foreign buyer’s tax could be detrimental to Vancouver in the long term. A study by UBC suggests that it’s possible that the higher tax rates on single-family properties that are worth more than $2 million will raise the cost of townhomes and condominiums in the area. This is because they are now the most economical alternative.
Missing Supply Policy
What’s lacking is a more effective housing policy from the perspective of the supply side. Market forces will produce certain types of housing but this is only available to those who can afford it. By having more density it will allow for more supply in the city and ease rental prices and home prices.
Summary – A Need for rezoning
Many developer groups in Vancouver are calling for a mass rezoning of single-family neighbourhoods to increase housing density and diversity. The city of Vancouver mayor is pushing for an initiative to allow 6 units on any residential lot.
The restrictive zoning policies in single-family neighbourhoods are keeping middle-class renters, young families, and people on a low income out of the market.
One major solution is to allow greater density in housing in Vancouver.
by Richard Morrison
