Tuesday, February 13, 2018

On the housing debate, ask yourself: "What if I'm wrong?"

Photo by MyEyeSees
I'm trying to follow my own advice to jot down ideas on my blog and not just in tweetstorms. Below is the full text of a tweet thread of mine on Vancouver's housing debate.

As with so many debates, I think it would be helpful if those arguing over the impact of foreign buyers on Vancouver’s housing market asked themselves a simple question:

“What if I’m wrong?”

I’ll start. I suspect foreign buyers are much less of a factor than many believe. What evidence we have suggests they are maybe 5% of the market. I think other factors — like domestic speculation and housing supply — are a much bigger cause of high prices.

But: What if I’m wrong?

Maybe the tools we have for measuring foreign buyers aren’t good enough, understating their true numbers. Maybe foreign buyers, while small in percentage terms, create “spillover effects” that inflate the market. What if foreign buyers *are* a huge part of the problem? What then?

Well, then, a solution that focuses only on supply — even a whole lot of supply — probably won’t be enough to make Vancouver housing affordable. Because a big chunk of that new supply will just get snapped up by foreign buyers and prices will continue to rise.

So the best approach, even for a foreign-buyer skeptic like me, is to support smart measures to address foreign demand (like @HousingBC's tax proposal). At worst, they should still help a little bit. And they may be essential to solving the problem.

But the same logic applies to those on the other side. What if foreign buyers *aren’t* the main factor driving Vancouver’s housing crisis? What if, for all the stories about offshore buyers, there just aren’t enough of them to make that big of a difference?

What then? Well, then, even the most extreme restrictions — like banning foreign buyers outright — won’t be enough to bring down prices.

Which means those folks who think the problem is mostly foreign buyers should still support smart measures to address housing supply, such as rental-only zoning and more density. At worst, they should still help a little bit. And they may be essential to solving the problem.

Now, some will say: “Let’s try my thing first. Then, if that doesn’t work, we can try your thing.” There are a couple problems with this. The first, and most obvious, is we then have to wait even longer for things to get better.

The second is that the policies being proposed are probably a good idea even if they DON’T bring down prices. While NIMBY’s hate it, more density in single-family areas should make our communities better: less car dependent, more inclusive and with fewer carbon emissions.

And even if the @HousingBC tax proposal does nothing to bring down prices, it will force rich property owners who don’t pay income tax (whether foreign buyers or drug dealers) to pay their fair share towards government services. That’s a good thing!

Exactly what impact foreign buyers are having on Vancouver’s housing market is unknown. And, more than that — given the limited tools we have for measuring it and the complexities of housing markets — it may be, in a very real sense, *unknowable*.

We know supply and demand are the two factors that determine prices.

We have no way of knowing, for sure, how much of Vancouver’s housing crisis is one or the other.

Should we keep arguing about it? Or get to work addressing both, as quickly as possible?

1 comment:

  1. If the problem's looked at within the context of the overall market then it's a trickle-down problem: a house on Belmont Avenue sells [to a student] for over $30 million so the price on a house on Angus Drive rises to $20 million and a house in Dunbar to $5 million and one in Hastings-Sunrise to $2 million. There are stats saying sales at the Belmont level are heavily weighted with non-residents. It's always been an "argument" about the trickle down phenomenon rather than the percentage of non-resident buyers, at least to my mind it has.