A recent exhaustive report on real estate in Canada isn’t mincing words about the perilous overhang in our residential real estate markets.
Canada: Housing and Finance Turbulence Dead Ahead is Written by Hanson Advisors (www.MHanson.com). After analyzing the unaffordability of Canadian house prices, the unprecedented length and rise of prices in the current boom, record Canadian consumer debt levels relative to income and the all-time high level of home ownership in Canada (higher than the U.S. before it crashed), the report concludes that the Canadian housing market is dangerously overvalued, driven by an unsustainable expansion in mortgage credit and an equally unsustainable and widespread new perception of the “worthiness” of residential real estate as an asset.
“While the rest of the world applauds Canada’s ‘conservative’ nature, Canada steams headlong towards a housing bust, recession and possible credit crisis,” the report concludes.
That’s a very different message from (BIV sister publication) Western Investor’s 2012 prediction that “the current downturn in Metro Vancouver’s housing market won’t continue into 2012, and the recession-like conditions from Vancouver Island to the Kootenays will change to a more balanced market next year.”
Not wanting to wait for housing prices to come down or for government to come to the rescue, a multi-sector group in Metro Vancouver led by the SFU Centre for Dialogue has a plan to kickstart more affordable home ownership options for people with household incomes between $35,000 and $80,000.
Calling itself the HousingNow Initiative, the group (which I’m co-ordinating as a Fellow at the SFU Centre for Dialogue) is looking for three municipalities to put up land at low cost for a design-build competition. Winners of the competition will be chosen in partnership with the participating municipalities based on a number of criteria, the most important of which is providing the largest number of units that can be bought by people in the $35,000 to $80,000 income bracket.
There is, of course, some potential political danger in providing low-cost municipal land for homebuyers rather than renters or people desperate for social housing, even if the buyers’ options for resale are restricted, which they likely will be. But there’s also a political danger in ignoring the brain drain and other economic harm from pricing whole segments of the workforce and their families out of the housing ownership market, which is what is happening now.
Whistler learned this the hard way and came up with a solution that eliminated the phrase “housing crisis” from its last municipal election campaign. More than 80% of its workers now live in below-market housing, many as owners.
Developers of projects such as Verdant at SFU’s UniverCity and Westbank’s restricted-ownership model at 60 West Cordova have proven that it’s possible to provide home ownership at more affordable prices than the unrestricted market can deliver. It takes various blends of relaxed regulations (such as parking), scaled-down marketing budgets, breaks on land prices, creative financing, restricting who can buy and when they can sell, and capping resale prices.
The HousingNow Initiative hopes to showcase these winning formulae by tying this design-build competition to public presentations of the proposals, to better educate developers (private and non-profit), politicians, financiers, architects, planners and potential buyers about what’s possible.
Any municipalities interested in participating should contact SFU at [email protected] or contact me directly.
It will be a lot better for everyone if we can provide affordable home ownership without a housing crash. •
Peter Ladner ([email protected]) is a founder of Business in Vancouver and a former Vancouver city councillor. He is also the author of The Urban Food Revolution: Changing the Way We Feed Cities.
