Is Real Estate a Commodity or a Human Right?

On May 9^th, 2018 CBC Vancouver Radio and Fairchild TV hosted a forum on housing in Metro Vancouver. A panel of real estate experts, including Mark Ting, answered the question:  “Is real estate a commodity or a human right?”   Below are the highlights of Mark Ting’s interview with CBC’s “On the Coast” host Gloria Macarenko, where he discusses what he learned from the forum.

Was there any particular topic that stood out to you?

As you know, I’m not a fan of all the government policies that were introduced to cool down our real estate market. These measures were supposed to curb demand and help out with affordability so that first time homebuyers and millennials could to enter the market.  That hasn’t happened—things have only become worse for the first time buyers.

I believe these policies are flawed because they are tackling “demand” and “demand” doesn’t really go away, it just shifts to other areas.  For example with our real estate market, buyers shifted away from single family homes into an already hot condo market, which just made things worse for potential condo buyers.

My favourite part of the forum was about the supply side, discussion about what government can do to help and what type of buildings should be approved.

What can the government do to help first time buyers with affordability?

They need to cut down on regulation and move faster with zoning changes.  One of the panelists was a developer and he told a story of how he approached a municipality and proposed rezoning an area to high density as it was next to a Skytrain route.   The city responded by saying that they would consider the zoning change but would need at least two years to further study the proposal. When I heard the city’s response, I thought “two years to study what? Density around transportation hubs is a no brainer as there is a huge demand for this type of housing and limited supply.” Projects like these should be given the green light faster.

There was also the discussion about different types of housing.  We need all sort of housing at different price points.  If we continue to pack in as many units in as possible by only building bachelor, 1 or 2 bedroom units, pretty soon the demand for these types of units will dry up.  What about families?  They need space and if they can no longer afford a single family home, then they will be looking to buy 3 bedroom condos or townhouses. Builders need to anticipate this demand and plan accordingly.

What else can the government do to help with affordability?

They can stop charging us so much.  A recent report out of Toronto showed that government fees, taxes and charges add $121,000 to the cost of an average new condo and $186,000 to a cost of a new single family home.  It’s like seeing one of those pie chart which illustrate cost breakdown of a liter of gasoline.  One of the bigger wedges is the cost of government tax.  From this standpoint, housing and gasoline have a lot in common as a large portion of the expense is due to the government.

And then there are the delays. Permitting takes forever, 4-6 years for a big development and about 18 months for a house.   If a developer decides to go through with a project and he/she must secure the land, outlay a bunch of money, service the debt for years and now pay the new speculation tax as the land is likely more than $3 million.  All these costs add up and have to be passed down to the end buyer.

If government was really concerned for first time buyers, a good start would be to reduce the cost to develop housing. To me $121,000 of government fees, taxes and levies on a condo just seems excessive.

Do you have any idea why government charges and levies are so high?

A large part of it is due to excessive regulations.  Vancouver wants to be the “greenest” city in the world and this means making any new construction as “green” as possible.   But for the most part, “green “materials are priced at a premium, but we are told they are worth installing because “over time” they will pay for themselves through energy savings. The problem is that “over time” can be years, even decades, away.

It is like forcing everyone to buy a Telsa.  Yes, electric cars are good for the environment but they are expensive and not everyone can or should buy one, particularly if a Honda Fit would do.  I would prefer to see housing offered in the similar way to cars. I’m not against eco-friendly homes, but I feel that it should be one of many options, with cheaper alternatives available.  The consumer should be given more choice on how to spend their money.

Any other highlights of the forum that you would like to mention?

One of the panelist mentioned that we should learn from other world class cities who have already gone through a housing crisis. For example Singapore has a very strong and well run social housing program. The homes are simple, safe, clean, clustered around amenities and public transport so people want to live there.  Families have to adapted and accepted density as, like Vancouver, they are land locked.  Compare that to Los Angeles which just sprawls, I would use L.A as an example of “what not to do.” They have too many single family homes, refuse to allow density even around transport hubs and endless traffic jams.

Listen to the full interview here with CBC’s On the Coast. The interview with Mark Ting starts at the 1-hour 27-minute mark.