Without affordable housing, Vancouver risks becoming an economic ghost town(business.financialpost.com)
business.financialpost.com
Without affordable housing, Vancouver risks becoming an economic ghost town
http://business.financialpost.com/entrepreneur/fp-startups/without-affordable-housing-vancouver-risks-becoming-an-economic-ghost-town
608 comments
It seems like many major cities of the world are experiencing this problem, and no city has been able to come up with a good solution. It always leads to displacement and newspaper articles about displacement, but no real solutions.
Here are a couple of solutions:
1. Build really tall. Hasn't worked out all that great in Hong Kong, though.
2. Rent control. This is often unfair and inflates price of non-rent controlled apartments.
3. Tax the living crap out of property speculation. Not sure if this has been tried anywhere, and I'm sure it would be unpopular among many middle class home owners as well. I'm still rooting for Georgism.
4. Accept that it's a lost cause and move on to the next underdog city that will stay un-gentrified for the next 10 years.
Here are a couple of solutions:
1. Build really tall. Hasn't worked out all that great in Hong Kong, though.
2. Rent control. This is often unfair and inflates price of non-rent controlled apartments.
3. Tax the living crap out of property speculation. Not sure if this has been tried anywhere, and I'm sure it would be unpopular among many middle class home owners as well. I'm still rooting for Georgism.
4. Accept that it's a lost cause and move on to the next underdog city that will stay un-gentrified for the next 10 years.
If having essentially no affordable housing rendered a city an economic ghost town, then much of the Bay area and Manhattan would be "ghost towns" - which, in turn, would lower housing prices radically.
What might happen to Vancouver is probably similar to other major cities with housing crunches but an otherwise desirable economic climate: lower wage workers will be displaced further from the city and forced to commute, housing prices will remain astronomical and suck much of the gains from the area.
What might happen to Vancouver is probably similar to other major cities with housing crunches but an otherwise desirable economic climate: lower wage workers will be displaced further from the city and forced to commute, housing prices will remain astronomical and suck much of the gains from the area.
As someone who just moved from Vancouver to the Bay Area, it's obvious the issue isn't housing. It's income. My apartment in trendy yaletown was $2350/month for a very nice 2 bed, 2 bath place within 10 mins of anything in downtown. Try finding something even remotely as nice around Silicon Valley.
The issue we should be tackling is the low wages seen in the area. The same developer who could make $100k USD in the valley makes $60k CAD in Vancouver.
The issue we should be tackling is the low wages seen in the area. The same developer who could make $100k USD in the valley makes $60k CAD in Vancouver.
Vancouver real-estate is like buying gold for foreign investors, without paying tax.
"suggesting the typical wealthy foreign family buying Vancouver real estate pays little or no income or capital gains tax"
http://www.theglobeandmail.com/report-on-business/economy/ho...
"suggesting the typical wealthy foreign family buying Vancouver real estate pays little or no income or capital gains tax"
http://www.theglobeandmail.com/report-on-business/economy/ho...
> There are already enough houses and condos in the city with no lights on because no one actually lives in them.
To me, there seems to be a pretty obvious public policy response. Institute a very high property tax, which is abated on some kind of curve according to the amount of time the owner or tenants spend living in a property, with no tax being due if the property is legitimately occupied for more than, say, ten months.
It might not solve the problem entirely, but at least you would reduce the effect of a diminution of housing supply that is driven by these kinds of absentee owners, and that must be driving up rents, at least.
To me, there seems to be a pretty obvious public policy response. Institute a very high property tax, which is abated on some kind of curve according to the amount of time the owner or tenants spend living in a property, with no tax being due if the property is legitimately occupied for more than, say, ten months.
It might not solve the problem entirely, but at least you would reduce the effect of a diminution of housing supply that is driven by these kinds of absentee owners, and that must be driving up rents, at least.
It blows my mind that the internety tech industry, of all industries, is so heavily concentrated in a handful of physical locations around the world. There's this vicious cycle where companies think they need to be in one of these places to attract the best talent, and employees think they need to live in one of these places to have the best career options.
Sometimes when I'm at Red Door in SOMA, overhearing twenty different conversations about startups, I want to scream "We have this thing, it's called the internet, it makes it super easy to communicate from anywhere! Let's go! Let's disperse across the globe!"
I mean, I get it. Face-to-face in-person communication is powerful for building trust, and the valley runs on trust, but still.
Sometimes when I'm at Red Door in SOMA, overhearing twenty different conversations about startups, I want to scream "We have this thing, it's called the internet, it makes it super easy to communicate from anywhere! Let's go! Let's disperse across the globe!"
I mean, I get it. Face-to-face in-person communication is powerful for building trust, and the valley runs on trust, but still.
I live in Vancouver. Well, Burnaby.
Like many Vancouverites on HN I am studying for a comp sci degree, and want to work as a developer.
I accept that I have to make sacrifices to keep living in Vancouver, such as:
-Living in a suburb (like Burnaby) -Getting roommates/a shared room -Living on a bus route instead of being a 5 minute walk from Skytrain
With those sacrifices, I can find rents for $750-1000/month. $750 is the lowest one will get for a place relatively close to Skytrain, not too far from downtown (e.g. Burnaby/New West), and in a clean, low property crime area.
More and more companies are paying $70K+ for new grads (something I wouldn't have admitted in say 2012), which is about $45-50K take home assuming you max out your RRSPs. Assuming a "35% of take home salary on housing" rule, you can afford rent of $1350-1450/month (higher if you gross more).
You can get a lot for that kind of money, like a big 1 bedroom (full lease) that's 15 minutes to downtown by transit. I dare you to find something similar in the Bay Area or Seattle, especially with commutes as short and crime rates as low as Vancouver's.
If you absolutely must live in the downtown core, studios start at $1000-1200/month in the West End. There is lots of shared accommodation in Yaletown for <$1000.
I was watching CBS This Morning on Wednesday on the Seattle channel (KIRO), and there was a story about the nuns having the rent on their soup kitchen in San Francisco increased by 50%. In BC, the provincial government restricts annual increases to 2.7% (for 2016) and Vancouver does not have a ward-based system of city councillors, limiting the influence of NIMBYs far more than in SF.
Like many Vancouverites on HN I am studying for a comp sci degree, and want to work as a developer.
I accept that I have to make sacrifices to keep living in Vancouver, such as:
-Living in a suburb (like Burnaby) -Getting roommates/a shared room -Living on a bus route instead of being a 5 minute walk from Skytrain
With those sacrifices, I can find rents for $750-1000/month. $750 is the lowest one will get for a place relatively close to Skytrain, not too far from downtown (e.g. Burnaby/New West), and in a clean, low property crime area.
More and more companies are paying $70K+ for new grads (something I wouldn't have admitted in say 2012), which is about $45-50K take home assuming you max out your RRSPs. Assuming a "35% of take home salary on housing" rule, you can afford rent of $1350-1450/month (higher if you gross more).
You can get a lot for that kind of money, like a big 1 bedroom (full lease) that's 15 minutes to downtown by transit. I dare you to find something similar in the Bay Area or Seattle, especially with commutes as short and crime rates as low as Vancouver's.
If you absolutely must live in the downtown core, studios start at $1000-1200/month in the West End. There is lots of shared accommodation in Yaletown for <$1000.
I was watching CBS This Morning on Wednesday on the Seattle channel (KIRO), and there was a story about the nuns having the rent on their soup kitchen in San Francisco increased by 50%. In BC, the provincial government restricts annual increases to 2.7% (for 2016) and Vancouver does not have a ward-based system of city councillors, limiting the influence of NIMBYs far more than in SF.
I'm curious how this problem is unique to Vancouver. Berlin's real-estate values have risen some 40% in just the last 7 years or so. New York City, in the 10 years I lived there, had an enormous escalation in what you get for the same rent payment, even adjusted for inflation. Big cities deal with this all over, so how do they deal with this "problem," or is Vancouver somehow unique in other ways?
I live in Vancouver. I rent half an old house built in 1941 on a big lot.
It sold twice recently, within a couple months, by the same realtor. They always collect the rent in cash, never issue a receipt. I know a racket when I see one, so I had to figure it out.
First, somebody buys a house in cash but puts it in somebody else's name, like a child or spouse. They get lots of mail sent there. This is to establish primary residence exemption on capital gains when the house is sold. They make it look like that person is living there, when it's actually being rented. Two untaxed sources of income: undeclared cash rental income and the inevitable capital gains on the sale.
As far as investments go, its a sure win. And I have reason to believe I'm renting one of these properties. It happens to work out well for me though cause rents pretty reasonable.
It sold twice recently, within a couple months, by the same realtor. They always collect the rent in cash, never issue a receipt. I know a racket when I see one, so I had to figure it out.
First, somebody buys a house in cash but puts it in somebody else's name, like a child or spouse. They get lots of mail sent there. This is to establish primary residence exemption on capital gains when the house is sold. They make it look like that person is living there, when it's actually being rented. Two untaxed sources of income: undeclared cash rental income and the inevitable capital gains on the sale.
As far as investments go, its a sure win. And I have reason to believe I'm renting one of these properties. It happens to work out well for me though cause rents pretty reasonable.
> are warning that it’s going to be nearly impossible to develop this business into anything meaningful unless the affordability question is addressed.
one way to address it, and I know this is crazy guys just bear with me, is that these tech leaders could start paying more money. No hope to afford a condo at 75k a year? how about at 150?
Vancouver is simply not that much better than Seattle that I would go back. The salary difference is just too high, especially with the favorable tax situation in washington and the lousy dollar.
one way to address it, and I know this is crazy guys just bear with me, is that these tech leaders could start paying more money. No hope to afford a condo at 75k a year? how about at 150?
Vancouver is simply not that much better than Seattle that I would go back. The salary difference is just too high, especially with the favorable tax situation in washington and the lousy dollar.
I lived in Vancouver briefly and worked as a developer. The salaries are horrible when you factor in living costs. You can get a much higher salary in Toronto, Ottawa, or Waterloo.
Come to Montreal! It's great here. No way would I want to pledge the rest of my life to a bank in exchange for the right to exist. Rent controls here.
It's odd: it's like the state understands that banks are bastards.
Montreal has some issues with organised crime but nothing compared to the organised crime of banking / money laundering through land. I don't have to pay some gangster $1MM for a shack.
Leave the boomers to their trinkets kids. Walk away. They need your labour, the rest is just paper.
It's odd: it's like the state understands that banks are bastards.
Montreal has some issues with organised crime but nothing compared to the organised crime of banking / money laundering through land. I don't have to pay some gangster $1MM for a shack.
Leave the boomers to their trinkets kids. Walk away. They need your labour, the rest is just paper.
Back in the mid/late 90s as Hong Kong was returning to China, the spike in prices started. I recall Condos in Kits for $200k or so, new build later in the 90s was still sub $300k. The victorians around there were still reasonable as well.
In a few short years it went nutty and prices spiked and they've only been going up since.
Those retiring age sold their places in Van, moved to the Okanagan and prices there spiked as well.
Weather is maybe part of it, setting and scenery certainly are too. Easy access to the Pacific Rim is also part of it.
In a few short years it went nutty and prices spiked and they've only been going up since.
Those retiring age sold their places in Van, moved to the Okanagan and prices there spiked as well.
Weather is maybe part of it, setting and scenery certainly are too. Easy access to the Pacific Rim is also part of it.
This is me. I left Vancouver for Toronto 5 years ago. What is not mentioned (that I saw) is that salaries in Vancouver are also much lower than Toronto for the same job. Montreal is even cheaper than Toronto and is probably more fun (if you are bilingual)
If apartments are 25% vacant on speculation grounds, that's quite a bubble.
I don't intend to do it, but for curiosity's sake: How does one go short on houses?
"I'll pay you to let me borrow your house and sell it to someone else. Later, I'll get you an equivalent house." Never heard of anyone doing such a thing, but at the right up-front payment, I bet someone would take the deal.
I don't intend to do it, but for curiosity's sake: How does one go short on houses?
"I'll pay you to let me borrow your house and sell it to someone else. Later, I'll get you an equivalent house." Never heard of anyone doing such a thing, but at the right up-front payment, I bet someone would take the deal.
Vancouver and cities like it became popular because of the critical mass of fun, interesting, creative, hard working young people who moved there and created communities. Once priced out, they will just go elsewhere. Other young people will follow and recreate the same communities with a lower price tag. Depending on local land use restrictions, some amount of gentrification then follows. In other words, this is a problem that takes care of itself, to some extent. Visit Austin or Nashville today and you will see this in action.
San Francisco is an outlier given the extremely dense concentration of high paying jobs which drove housing into orbit. This makes it much ''stickier''. However, this entire model is dependent upon the public markets giving tech companies sky high valuations, which could change. Already I see many of the more proactive venture firms scouring outside of SF for deal flow, particularly in these gentrifying second tier cities like Austin, Nashville, Minneapolis, Kansas City, etc.
San Francisco is an outlier given the extremely dense concentration of high paying jobs which drove housing into orbit. This makes it much ''stickier''. However, this entire model is dependent upon the public markets giving tech companies sky high valuations, which could change. Already I see many of the more proactive venture firms scouring outside of SF for deal flow, particularly in these gentrifying second tier cities like Austin, Nashville, Minneapolis, Kansas City, etc.
Where does the youth diaspora in Vancouver lead to? The suburbs? Other cities in Canada or the US?
This is becoming increasingly true of LA too. Unless you're rent controlled and have been there for a while the price for an apartment is further and further out of reach.
There's construction everywhere but the price of living in those new buildings is even more than the increasingly expensive older areas and a lot of new construction has begun with what seems like little to no consideration for its impact on traffic.
Perhaps developers and the city expect people to use the limited metro system and other public transit but few people, in practice do.
I can't be that upset though, my wife and I are leaving for the suburbs soon with no plans to come back.
There's a lot happening in LA in terms of the tech scene, but it's not enough to outweigh the overwhelming cost of attempting to put down roots there (home ownership is a largely unobtainable goal, insurance of all kinds is expensive, every neighborhood suffers from traffic congestion and on and on).
There's construction everywhere but the price of living in those new buildings is even more than the increasingly expensive older areas and a lot of new construction has begun with what seems like little to no consideration for its impact on traffic.
Perhaps developers and the city expect people to use the limited metro system and other public transit but few people, in practice do.
I can't be that upset though, my wife and I are leaving for the suburbs soon with no plans to come back.
There's a lot happening in LA in terms of the tech scene, but it's not enough to outweigh the overwhelming cost of attempting to put down roots there (home ownership is a largely unobtainable goal, insurance of all kinds is expensive, every neighborhood suffers from traffic congestion and on and on).
I wonder how much of this and similar cases are based on low interests. You can't keep your money in the bank because you won't get any interests and at the same time leveraging your money and buying housing is cheaper. So maybe the solution to housing prices is significantly higher interest rates?
Vancouver's problem isn't the house prices. The problem is to a large extent caused by the author of this piece, the Hootsuite CEO. The few tech companies in vancouver don't pay. They expect the city to provide them a steady flow of over-educated 20-somethings willing to work long hours for only slightly more than rent. For the last 15 years the city has provided just that. The complaints now are that those 20-somethings want to own stuff. They want a house. They want to own a dog that isn't left alone 10+ hours every day. They want families. So it is time to let them go and demand the city provide a new flock.
What every company in Vancouver seems to want is an employee who is desperate for work but also independently wealthy. That might seem a conflict but in Vancouver it is normal. There are thousands of young people here who are supported by parents who have enjoyed the rise in house prices. They are desperate for work, but don't much care about the pay because they have support. Hootsuite's problem is that many of those kids are now in their thirties, mom and dad have moved, and they want to have an actual life of their own. That cannot happen at 30k in a city like Vancouver.
(Lets see how long it takes for this comment to hit a nerve. Hoot is a social media company with eyes everywhere.)
What every company in Vancouver seems to want is an employee who is desperate for work but also independently wealthy. That might seem a conflict but in Vancouver it is normal. There are thousands of young people here who are supported by parents who have enjoyed the rise in house prices. They are desperate for work, but don't much care about the pay because they have support. Hootsuite's problem is that many of those kids are now in their thirties, mom and dad have moved, and they want to have an actual life of their own. That cannot happen at 30k in a city like Vancouver.
(Lets see how long it takes for this comment to hit a nerve. Hoot is a social media company with eyes everywhere.)
Just realized that a lot of people in this thread may be Canadians looking to shift around.
If you're interested in working on cool engineering problems in Toronto, e-mail me.
If you're interested in working on cool engineering problems in Toronto, e-mail me.
I lived in Vancouver from 2000 - 2005. Left when I got married and worked as a software engineer in southern California until the end of 2010. Got fed up waiting for the green card so moved to Australia (my wife is an Aussie) and currently live in Melbourne. Reading articles like this I'm very, very glad I chose not to move back to Vancouver. Sure it's expensive to buy a house in Australia, but rent is relatively cheap. We're paying $1700/month for a 3-bedroom house in a nice neighbourhood 15 minutes by train from downtown Melbourne. Now that we have 3 boys I would never consider moving back to Vancouver. Low salaries, very high housing costs and non-stop rain in winter. Makes no sense at all if you have kids.
Meh... article is pushed by special interest groups. Their concerns could be addressed very quickly by raising their employees salaries. Especially since vast majority of companies sell services to the US, and get more CADs than before with the current exchange rate.
sure, you can't buy a house in Vancouver anymore on a normal salary, but nothing prevents you from living in Surrey, there are plenty of towers going up around the skytrain at Surrey central and King George where you can get an apartment for less than 200k
Yes, it's not Vancouver city, and yes, it's not a house, however via skytrain you can be downtown in a little over 40 minutes and get work done on your laptop in the meantime.
You don't need a house to survive, it is nice, yes, but many many many millions of people live and bring up families in apartments in Europe, so it is definitely doable.
Of course it's annoying to think that 12 years ago you could get a nice house in kits for 400k, or a 1000+ sqf condo downtown for 200k, but what can you do, same deal as buying a lottery ticket or joining a startup that makes it vs one that doesn't. The mountains and nature and weather are available whether you live in vancouver or in one of the suburbs
Metro Vancouver is over 2m people, Surrey is the largest city in the metro area actually, even if Vancouver proper becomes a "haven for the rich" there's plenty of other areas where one can live, the problem is that a lot of tech companies can't seem to see beyond "gastown is trendy" or "let's go to yaletown" or "downtown is where it's at", when they could easily set up in other skytrain-served area and attract more folks that don't like the commute downtown.
It is true, what you could do 10-15 years ago, buy a house within 30 minutes of downtown on a normal salary is not possible anymore (just like it wasn't possible back then to do that for a house in Point Grey) but it is still quite possible to live here, given the amount of immigration that the area is still getting.
Townhouses and condos in Surrey or Langley are still very affordable, the commute is annoying, but from what I hear from friends in the valley it's not like traffic there is that great either, at least up here you can sit on the skytrain and get things done or read a book rather than be stuck in traffic and have no alternatives because there's no decent public transit.
Yes, it's not Vancouver city, and yes, it's not a house, however via skytrain you can be downtown in a little over 40 minutes and get work done on your laptop in the meantime.
You don't need a house to survive, it is nice, yes, but many many many millions of people live and bring up families in apartments in Europe, so it is definitely doable.
Of course it's annoying to think that 12 years ago you could get a nice house in kits for 400k, or a 1000+ sqf condo downtown for 200k, but what can you do, same deal as buying a lottery ticket or joining a startup that makes it vs one that doesn't. The mountains and nature and weather are available whether you live in vancouver or in one of the suburbs
Metro Vancouver is over 2m people, Surrey is the largest city in the metro area actually, even if Vancouver proper becomes a "haven for the rich" there's plenty of other areas where one can live, the problem is that a lot of tech companies can't seem to see beyond "gastown is trendy" or "let's go to yaletown" or "downtown is where it's at", when they could easily set up in other skytrain-served area and attract more folks that don't like the commute downtown.
It is true, what you could do 10-15 years ago, buy a house within 30 minutes of downtown on a normal salary is not possible anymore (just like it wasn't possible back then to do that for a house in Point Grey) but it is still quite possible to live here, given the amount of immigration that the area is still getting.
Townhouses and condos in Surrey or Langley are still very affordable, the commute is annoying, but from what I hear from friends in the valley it's not like traffic there is that great either, at least up here you can sit on the skytrain and get things done or read a book rather than be stuck in traffic and have no alternatives because there's no decent public transit.
The price-to-income ratio, a good indicator of affordability is quite ridiculous here. It should be around 4, i.e your home value should be 4 times your gross household yearly income, its closer to 12 here. I believe in this, and though my family makes a good income, in order to meet this ratio I had to move further out to Richmond. Don't regret it at all, since it eases the stress of requiring two well paid jobs just to live a decent life. But the lack of available rental properties, rampant foreign speculation, low interest rates is a pretty perfect storm.
Melbourne's just as horrible. So's Sydney. So are a lot of places.
Previous discussion (also today) here: https://news.ycombinator.com/item?id=11086981
Vancouver is becoming a store of value rather than a city.
I see that as a worldwide problem, as interest rates tend to zero.
In Brazil, real estate prices are completely out of touch with median income (at least, the rents are still affordable, because the typical landlord owns only one or two places and simply needs to rent to cover taxes and maintenance, he cannot sit on them).
Economists and governments paid too much attention to the inflation of the Big Mac and forgot real estate and other hard assets. Also, govts have a huge incentive to allow real estate bubbles: tax revenue, abundance of blue-collar jobs while the construction frenzy lasts, illusion of prosperity for whoever already owns the home, etc.
Yet another possibility is that too many people need to put dirty or excess money in a 'safe' investment. I hear that Chinese buy a lot of real estate in London, Vancouver, etc. At least here in Brazil, the money you have in a bank can be frozen in a milissecond if you are suspect of a crime, but controls over real state are very lax, so a lot of corruption money goes into real estate, which fuels the bubble.
In Brazil, real estate prices are completely out of touch with median income (at least, the rents are still affordable, because the typical landlord owns only one or two places and simply needs to rent to cover taxes and maintenance, he cannot sit on them).
Economists and governments paid too much attention to the inflation of the Big Mac and forgot real estate and other hard assets. Also, govts have a huge incentive to allow real estate bubbles: tax revenue, abundance of blue-collar jobs while the construction frenzy lasts, illusion of prosperity for whoever already owns the home, etc.
Yet another possibility is that too many people need to put dirty or excess money in a 'safe' investment. I hear that Chinese buy a lot of real estate in London, Vancouver, etc. At least here in Brazil, the money you have in a bank can be frozen in a milissecond if you are suspect of a crime, but controls over real state are very lax, so a lot of corruption money goes into real estate, which fuels the bubble.
How are property taxes calculated in other places in the world? Vancouver? London? Tokyo?
This is such a hard problem to solve, no one wants to force elderly people to move because of a bull real estate market, but you also need young hard working people in your city for economic growth. My solution would be to jack up the real estate inheritance tax and allocate that money for public transportation and affordable housing.