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Affordable homes strategy

Affordable homes strategy

British Columbia’s issues related to housing are multifaceted. Issues related to housing and affordability include three key components:

  • Runaway real estate prices, mostly in the Lower Mainland and Victoria.

  • The inability of many young people to afford to buy a home due to this rapid increase in house prices, coupled with stagnant or declining incomes.

  • A shortage of affordable housing for seniors and others on the low end of the income spectrum.

Vancouver’s red-hot housing market has garnered international attention. Various studies have deemed it the second- or third-least affordable city in the world. Now, as homeowners who were fortunate enough to enjoy a windfall in Vancouver property market move to less expensive markets, other communities across the province, from Nelson to Victoria, are also experiencing rapid increases in home prices.

This is compounded by the fact that B.C.’s economy has been called Canada’s worst-performing economy for young people, whose incomes have fallen despite an increase in the province’s GDP. B.C. also has a highly unequal distribution of housing wealth, with 68% of the net worth of principal residences being owned by the top 20% of households.

In January 2017, the Liberals introduced the B.C. Home Owner Grant and Equity Partnership to assist first-time home buyers to make a down payment. This program is potentially financially ruinous to families who are only marginally capable of servicing a mortgage in the event of interest rate increases or other unforeseen circumstances. Moreover, it places greater demand on an already hyper-competitive housing market, further artificially buoying home prices.

Amidst these mounting pressures, people who rely on affordable housing face insecurity from renovictions, rent increases and a lack of availability. For the most vulnerable, this means a greater risk of homelessness. Studies have shown that the two greatest causes of homelessness are low income and high rents. The shortage of affordable housing also puts further pressure on transit and by extension the province’s emissions as fewer people are able to afford to live near their work.

The B.C. Greens believe that government has one job that is more important than anything else: the health and wellbeing of the people it serves. We also believe that every person has a right to reasonable accommodation.

A B.C. Green government will introduce a comprehensive housing strategy that recognizes that the primary purpose of housing must be to provide homes first, and a means of investment second.

Our strategy is based on evidence and will:

  • Cool the housing bubble and stop the irresponsible speculation that is driving up the costs of homes.

  • Invest heavily in affordable housing and rental housing.

  • Give breaks to those who are struggling to afford reasonable accommodation.

  • Ensure that all British Columbians, regardless of their background or income, can afford to live in this province that they love.

Cooling the market for residential real estate

Proposed PTT Changes

Range

Current PTT rate

Proposed PTT rate

0 to $200,000

1%

0%

$200,001 to $500,000

2%

2%

$500,001 to $1.0 million

2%

2%

$1.0 million to $2.0 million

2%

6%

$2.0 million to 3.0 million

3%

10%

$3.0 million+

3%

12%

 

Examples of impact on tax paid

 

Property Value

PTT Current

PTT Proposed

Home type

Median March 2017

Amount

%

Amount

%

Victoria condo

$354,500.00

$5,090.00

1.4

$3,090.00

0.9

VI single family

$728,500.00

$12,570.00

1.7

$10,570.00

1.5

N Van townhouse

$979,500.00

$17,590,00

1.8

$15,590.00

1.6

N Van single family

$1,725,000.00

$32,500.00

1.9

$59,500.00

3.4

W Van single family

$3,500,000.00

$83,000.00

2.4

$236,000.00

6.7

Results
  • Reduction in speculative activity.
  • Reduced incidence of vacant properties.
  • Increased revenue which will permit investment in affordable housing.
  • Reduced real estate prices that ease barriers to entry into the housing market for British Columbia residents.
  • A progressive property taxation framework to reduce wealth inequality.
Background

Foreign buyers

  • Despite evidence that speculation by non-resident investors was contributing to the rapid increase in home prices in Vancouver, the B.C. government instead blamed low interest rates, the strong local economy, the desirability of Vancouver as a place to live, the limited land base for residential purposes, and other causes.
  • In July 2016, the province announced it would impose a 15% tax on foreign buyers of real estate, effective August 1, 2016. The jury on the effectiveness of the tax is still out, largely because poor government data did not permit the establishment of a baseline for comparison.
  • The B.C. government anticipates that it will receive increased revenue from the foreign buyer’s tax over the course of the next year and a double-digit decline in B.C. housing starts and property transfer tax revenue. Revenue from the foreign buyer’s tax is expected to hit $150 million annually over the next three years.
  • This suggests that the government is not anticipating a decline in the purchase of properties by foreign buyers and implies that the tax is viewed as a revenue source at a time when there is projected to be a slowdown in the B.C. housing market.

Speculative forces

  • Some analysts have spoken of a real estate bubble and the likelihood of a market correction. This has potential dangers for British Columbians who have bought into the housing market while it is inflated, who may see the value of their property decline. If the decline is steep, and/or coincides with a rise in interest rates, and/or a change in employment status, it can be financially disastrous.
  • Notwithstanding the impact of external demand, the North American real estate market is generally more volatile than markets in some other western countries. About 70% of Canadians own their own homes. However, home ownership is not necessarily an indicator of a strong economy. For example, about 53% of Germans own their own homes.

Vacant properties

  • In February, the Vancouver Sun reported that “the latest census numbers for 2016 show there were 25,502 unoccupied or empty housing units in the City of Vancouver.” This number was more than double the number identified by a City of Vancouver study in 2016, however, the measurement methodologies used were different. In November 2016, Vancouver City Council voted to approve a tax on empty homes, the first in Canada.
  • The census also showed that out of 49,212 dwellings in Victoria, 3,540, or 7.9%, were found to be unoccupied.

Home owner grants

  • In January 2017, the government announced it was increasing the home owner grant threshold from $1.2 million to $1.6 million, a 33% increase.
  • The government expects to spend $821 million on home owner grants in 2017-18, compared to $809 million in 2016-17. According to a government press release, 91% of B.C. homes remain below the threshold, while 83 percent of Metro Vancouver homes are below the new threshold.
  • Many housing experts and economists have criticized the current structure of the home owner grant, arguing that it primarily benefits already well-off people.
  • An income-based approach to home owner grants will ensure those struggling to make ends meet are able to afford to stay in their homes, while also freeing up funds for investments in affordable housing.

Budget implications:

Estimated revenue and savings:

  • PTT and capital gains tax initiatives: up to $400 million per year
  • HOG changes - $200-$500 million per year
  • PTT and capital gains tax measures would be effective immediately.
  • Revenues from PTT will decline as the real estate market cools.
  • HOG changes would be over several years.

Increase the supply of affordable housing

Results
  • Increase the supply of both public and private affordable housing.
  • The property tax initiative described in the previous section will also improve the supply of accommodation.
Background

Homelessness

  • Homelessness describes a range of physical living situations. According to the Canadian Homelessness Research Network, homelessness and housing exclusion include being unsheltered, emergency sheltered, provisionally accommodated and insecurely housed.
  • Anyone can become homeless in the current economic conditions. Homelessness is not a static state but rather a fluid experience, where one’s shelter circumstances and options may shift quite dramatically and with frequency. Experiences of homelessness are unique and each individual or family will have a story about their pathways into and out of homelessness.
  • Homelessness is an outcome of the complex interplay of structural factors, systemic failures and individual circumstances.

Core housing need

  • According to the CCPA: “Housing affordability is generally defined in terms of income. For renters, a conventional definition is that the cost of housing should not exceed 30% of gross income. Above this amount, households are considered to be in “core housing need,” while those spending more than half their income on housing are in “severe housing need. However, these cut-offs are arbitrary and not empirically derived.” Households with high incomes have many more options at 30% of income than those with low incomes.”
  • The broader topic of housing affordability is thus intimately connected to the widening gap between income and wealth. Casting housing primarily as a market ignores that housing is a human right whose neglect has adverse impacts on marginalized communities.
  • Many low-income households have been priced out of the few new “affordable” units being built. Monthly welfare shelter allowances are only $375 for a single person.

Factors affecting supply

  • Many urban centres have seen a loss in the availability of public and private affordable housing since the 1990s. Major federal programs to build new non-market housing (co-op or social housing) ended in 1993, and provincial programs in 2002. Federal tax incentives for purpose-based private rental construction were eliminated in the 1970s and early 1980s. This increased the reliance on private rental accommodation, however, this is often costly and out of reach for people on low incomes.
  • The supply of affordable rental accommodation is impacted y the cost of real estate that drives landlords to seek the highest possible rents in order to reduce the opportunity cost of renting the property. Many landlords have been renovating their properties in order to increase rents, so-called “renovictions,” that leave those with low incomes with nowhere to go.

Extent of the problem

  • The 2017 B.C. budget promises $855 million to support the construction of 4,900 units of affordable housing, but this is spread over five years and does not come close to addressing the level of need.
  • A 2016 CCPA report estimates that there 3,000 homeless people in Metro Vancouver and about 145,000 in “core housing need.”
  • An April 2016 report estimates there are 1,386 people experiencing homelessness in Victoria.

Budget implications:

  • $750 million per year in capital.
  • $100 million in operating budget.

Protecting tenants and landlords

Results
  • Maintain the existing stock of affordable accommodation.
  • Protect tenants from eviction and unmanageable rent increases.
  • Protect landlords from destructive tenants.
Background
  • Many news articles have addressed the issue of “renovictions” and “demovictions” designed to rent or sell units at rates much higher than that of prior tenants. In the Metrotown area alone, up to 6,000 low income people face losing their homes due to demovictions.
  • There are two approaches to protecting renters:
    • Renovictions: tenants must be given first right of refusal to return to their suite upon completion of renovations, and landlords must apply to the residential tenancies branch for approval of rent increases with proof of actual costs incurred. Rent increases must be reasonable. This approach is legislated in both Manitoba and Ontario, and has been advocated for by Jenny Kwan.
    • Demovictions: developers must reinstate a percentage of lost affordable housing in new developments and all prior tenants must be given first right of refusal for those suites. Rent prices must be monitored by the residential tenancies branch to ensure affordability.
  • Even with a fixed term lease, a landlord should have a valid reason for ending the term, such as owner occupation or extensive renovations. Tenants should be protected from fixed term leases that are used to simply to drive up rental prices the following year. Tenants should not be at risk of eviction at end of lease in favour of higher paying tenants, even if a fixed term lease is in place.

Budget implications: none for this initiative.

Maintain and enhance housing support programs

Results
  • To ensure that support for low income people is maintained as we reform the social security net.
Background
  • B.C. Housing provides a suite of programs to help low income working families, seniors and those in need of housing adaptation to live safely and independently.
    • The Rental Assistance Program provides eligible low-income working families with cash assistance to help with their monthly rent payments.
    • Lower income seniors renting in the private market may be eligible for a rent supplement through Shelter Aid for Elderly Renters (SAFER).
    • The Homelessness Prevention Program provides rent supplements and support services to help access rental housing in the private housing market.

Budget implications: within existing budget.

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