Purchases of Greater Vancouver homes by those from outside the region have driven up home prices and rents by 5%-10%, according to Out-of-Town Home Buyers and City Welfare, a joint UBC Sauder School of Business-New York University study .
By comparison, out-of-town buyers in New York are associated with a more modest home-price increase of 1.1% and rent increase of 1.6%.
Because the home ownership rate is around 65% in Vancouver, Sauder School professor Jack Favilukis said the study's authors had expected the benefits of the price increases to outweigh the cost, but found this was not the case.
“We were wrong,” he said in a Q&A published on UBC’s website October 18. “While indeed, older households who own their home do benefit handsomely after out-of-towners show up, this benefit is not enough to offset the cost to others.
“Poorer households, younger households and renters, despite being a minority, are more negatively affected because it is much more expensive for them to pay for housing going forward.”
The 15% foreign-buyer tax implemented last year is “better than doing nothing,” Favilukis said, but there would be better ways of promoting affordability.
“Some policies are better than others, and I think the foreign-buyers tax is one of the least attractive options,” he said. “One reason is that, while it discourages future buyers, anyone who has already bought, and who is already taking housing away from the local market, suffers no consequences.”
Favilukis said economists at UBC’s Vancouver School of Economics proposed a better approach last year; this approach proposed a tax targeting property owners without ties to the local economy.
For the purposes of the new study, the authors assumed 10% of homes in Vancouver are purchased by out-of-towners, but this was just an estimate, the authors said, as there isn’t any concrete data available.
The full UBC-NYU study can be found here.
@EmmaHampelBIV
