Photo: Francois Boucher/Flickr
Vancouverites may get first dibs when it comes to purchasing new homes in the city thanks to a new motion from the mayor. But according to one expert, this strategy will not address the root of the problem.
In a press release distributed last week, Vancouver Mayor Gregor Robertson announced he will be introducing a motion at an upcoming city council meeting to create policy that prioritizes sales of new homes in multi-family developments to local residents — people who live and work in Metro Vancouver, regardless of citizenship.
In the announcement, Robertson’s proposed policy is compared to a program implemented by the District of West Vancouver last year where it negotiated an agreement with developer Westbank to prioritize sales of a new condo project to residents residing in the district.
Similar to the West Vancouver policy, Robertson’s proposed policy may require purchasers to prove their intention to reside in the building and not flip their unit.
However, pre-sale flipping isn’t a problem to address, says Thomas Davidoff, a professor at the University of British Columbia Sauder School of Business.
Davidoff, who focuses on housing and mortgages in his research, says pre-sale flippers are being blamed unncessarily for the city’s housing supply shortage.
“If somebody wants to buy a pre-sale agreement and then flip it before the building completes, they’re never taking up space in Vancouver,” he adds.
According to the City’s press release, the policy is expected to be presented by the end of the year as part of the Housing Vancouver strategy, a 10-year plan meant to address housing supply and affordability.
With the city experiencing severe housing affordability issues, Robertson says local employers are struggling to retain workers and locals are forced to move to other areas of the region because they can’t find a place to live.
“At a time when we are seeing record levels of housing construction, local residents should be able to get the first shot at purchasing a home in new developments,” says Robertson, in a statement.
Davidoff, on the other hand, argues pre-sale flipping may in fact increase housing supply in the city, as it allows developers to obtain cheaper financing to build. As a supporter of Vancouver’s empty homes tax, Davidoff says this levy will help keep supply available for residents.
“When units start coming online, the key is to have the empty homes tax in place so that it’s locals occupying the units. Who carries the risk of price growth and price decline through the construction period is not important in my opinion,” says Davidoff.
Implemented in 2016, the West Vancouver program also included other stipulations. For one, the project was only marketed to locals during the first 30 days and then opened up to Metro Vancouver residents in the next 60 days. Another condition was that bulk purchases of units were restricted.
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According to Davidoff, not allowing non-locals to purchase homes right away won’t benefit locals financially because the developer will not significantly reduce unit prices immediately if there’s only a lock-out period of a couple months.
If Robertson’s proposed policy included a ban on non-locals from purchasing property in a certain time period, the UBC professor says it could work but the City would encounter legal and logistical issues on how to enforce it, possibly a more difficult challenge than the empty homes tax.
Davidoff says by having the empty homes tax in effect, the City has addressed a more serious problem affecting housing supply by deterring purchasers from buying property and not living in it.
Mayor Robertson will announce his motion at the next city council meeting on October 17, 2017.