Written for Daily Hive Urbanized by Andrey Pavlov, a professor of real estate finance at Simon Fraser University’s Beedie School of Business.
“The BC Housing Minister disagrees with you, prof,” said one of the many bright students in my real estate finance class at the Beedie School of Business at Simon Fraser University.
The article in question quotes me as saying that “measures like the speculation and vacancy tax, the flipping tax, the short-term-rental ban, and many others sound good on paper, but in reality they increase the risk of housing investment and, consequently, only worsen our housing shortage.”
BC Minister of Housing Ravi Kahlon disagreed as the article noted.
Politicians disagreeing with me is nothing new, but when a student brings it up, I
pay attention. A few downloads later, the following picture emerges:
- Metro Vancouver Homes Completed in 2017: 21,806
- Metro Vancouver Homes Completed in 2018: 24,555
- NDP’s 30-point Housing Plan: 2018
- Metro Vancouver Homes Completed in 2023: 20,797
In case you were wondering, this is not a data anomaly. Fewer homes (21,440) were completed in 2022 as well. The year before was slightly better (25,229 completions), although still well below historical trend and certainly below need.
Metro Vancouver’s population has grown by over 350,000 people since 2017.
But in case you were also wondering, the drop in housing completions is not due to the pandemic or the high interest rates.
Data from the Federal Reserve Bank of St. Louis shows that completions in the US grew by over 25% since 2017. Every year our southern neighbours complete more homes than the last, regardless of interest rates or the pandemic.
However, we don’t need to look elsewhere to identify the spectacular failure of our recent housing policies.
Completions in Metro Vancouver grew at 6% annually between 2013 and 2018 (peak to peak). Growth between 2015 and 2018 (through to peak) was an astonishing 12%. Applying the conservative 6% to the 2018 peak implies 32,783 Metro Vancouver completions for 2023.
Had we stayed on trend, we would have completed nearly 12,000 more housing units in 2023 than we did (a 57% increase).
This housing shortfall is also evident in vacancy rates and rents. The latest rental market report by Canada Mortgage and Housing Corporation (CMHC) shows a vacancy rate in Vancouver of just 0.9% for both purpose-built and condominium rentals. This is even lower than the 1% vacancy in 2018, the earliest year CMHC report history is available.
For reference, a normally functioning rental market needs a 3% vacancy rate. The same CMHC report shows an astonishing 32% increase in rent for a two-bedroom apartment (from $1,649 in 2018 to $2,181 today).
If any of this comes as a surprise to you, you’re not alone.
Given the countless heavy-handed taxes and restrictions of the past seven years, many people expected a boom in our ability to house people, and to do so for less. In reality, it turns out taxes, regulations, and restrictions cause the opposite.