Pricing drops fail to defuse Metro housing affordability concerns

Still not affordable

The ongoing slide in the benchmark price for a residential property in Metro Vancouver is approaching the point that will make headlines: the million-dollar mark.

When the benchmark price broke through $1 million in July 2017, it confirmed the sense of crisis around the local housing market. Now, with prices heading south, will there be a collective sigh of relief that properties are again affordable?

Recapping the 2018 housing market, Ontario economist Will Dunning writes in the latest report from New Westminster-based Landcor Data Corp. that Vancouver is not like other markets.

To be sure, there’s some stickiness in the benchmark price. Activity in February shifted it $1,800 below where it was in July 2017. It could dip below $1 million this month, or spring housing activity could support it for another month.

But the curious phenomenon in Dunning’s analysis is that for every 5% increase in house prices, there are 1% fewer sales than if prices didn’t change. This contrasts with other B.C. cities, where a 5% increase in prices boosts buying by upwards of 15%.

When prices decrease, on the other hand, it’s not enough to make them affordable.

“Changes in prices do not materially affect resale activity [in] Vancouver,” he concluded. “The level of house prices is preventing [potential buyers] from acting on their desires.”

RBC Economics called for more housing choices in its own report. Price is important, but it follows supply.

“What millennials in Vancouver and Toronto really need is more inventory of homes they can afford, and a better mix of housing options – be it to own or rent,” RBC senior economist Robert Hogue said.

Triple threat

Vancouver renters are often price takers. The city, meanwhile, is the price maker, because it governs housing supply by approving projects and, in the case of its rental incentive program, establishing a maximum for what it considers affordable rents.

The latest guidelines for affordable rents in the city drew hooting and guffawing from the usual quarters, but this year there’s some good news. Recommended rents for two- and three-bedroom units are down from last year.

A year ago, monthly east-side rents for a two-bedroom unit fell to $2,457 from $2,505 (down 1.9%). Monthly rents for three-bedroom units fell to $3,235 from $3,365 (down 3.8%). (West-side rents for both types are 10% higher.)

The changes indicate that the city’s efforts to offer more family-sized units seem to be working, but that’s cold comfort for those facing smaller units, by choice or availability (read: necessity). The maximum rents for both studio and one-bedroom units considered to be affordable increased 7.4% and 8%, respectively, on both sides of the city. This works out to $1,607 a month for an east-side studio, and $1,869 for a one-bedroom unit (west-side rents for both types are 10% higher).

However, the news gets worse for those seeking smaller units. The increases in the maximum rents are approximately triple the province’s 2.5% maximum allowable rental increase within tenancies.

Claiming authority

The First Nations Housing & Infrastructure Council of BC hosted a two-day forum in Richmond last week as part of plans for a new First Nations housing and infrastructure authority to oversee programs and services currently delivered by Ottawa.

A timeline has not been set for the creation of the authority, the first of its kind in Canada. It will play a role in housing similar to that of the First Nations Health Authority, established in 2013 after eight years of work, in health.

Part of the work includes developing an inventory of First Nations housing stock, both the number and condition of units, and the infrastructure supporting it.

The authority will not be responsible for development lands held by First Nations, such as the Jericho lands, whose future is the subject of a public engagement process that launched March 2.