What should Vancouverites do if they can’t afford to buy in the city they live in?
I’m inclined to agree with Spencer Thompson‘s article “The Problem Isn’t Vancouver’s Astronomical Housing Costs— It’s the People Who Buy“, in which he comments on the cause of, and solution for, Vancouver’s housing market becoming increasingly out of reach for it’s citizens. Thompson purports that when we sell our real estate to foreign investors who don’t want to live here we make “zero-value” people become the only ones who can afford to live in Vancouver which systematically squeezes out high-value people–those who build their lives in Vancouver and thereby increase our economic and cultural landscapes, thus increasing Vancouver’s overall value.
Among other solutions, Thompson proposes we levy a 1x (eg. $1mil for $1mil home) tax to investors with no intention of living in and contributing to our city, with funds allocated to a city trust fund to be managed by a future-focused entrepreneur.
What do you think is the problem? What’s the solution? Do you agree with Spencer about creating a special tax? Leave your thoughts and comments below.
I’ve highlighted some great excerpts, you can check out Spencer Thompson’s full article here.
Cities are nothing more than a collection of individuals who occupy an area based on a number of social factors: family, employment, access to lifestyle, climate, etc… And as a collection of people, the value of a city lives and dies with the quality of those people.
The secret that no-one actually wants to talk about is that the quality of a city is mostly determined by a simple factor — the number of smart, ambitious people who live there. These people are the ones who want to drive that city forward by investing in opening businesses, donating their time to the arts & community, participating in city planning, etc… Without them, growth wouldn’t happen and you wouldn’t get all of the benefits that great cities enjoy.
The biggest contributor to the decline of a great city is simple — it’s the decline of those smart people. When they decide that the cost of living in a place outweighs the benefit, they move. They don’t just take their money with them, they take their intellectual and future capital with them.
He also references a New Yorker article that states:
If there are enough rich people in China who want property in Vancouver, prices can float out of reach of the people who actually live and work there. So just because prices look out of whack doesn’t necessarily mean there’s a bubble. Instead, wealthy foreigners are rationally overpaying, in order to protect themselves against risk at home. And the possibility of losing a little money if prices subside won’t deter them. Yan says, “If the choice is between losing ten to twenty per cent in Vancouver versus potentially losing a hundred per cent in Beijing or Tehran, then people are still going to be buying in Vancouver.
Here Thompson describes his proposed tax:
IF you want to buy a home in Vancouver to “park” your money here (aka you won’t live here and you won’t create any value) then we are going to force value out of you. I propose that we create a “tax” equal to 1x the value of a home that goes straight into a fund that will encourage small businesses to start up. The average cost of a home in Vancouver is now $1,000,000. So for every million dollar home sold — $1M will go into the fund. Don’t like it? Go park your money somewhere else — the nice effect is that this should also decrease the demand for houses and naturally decrease prices. BUT, if people feel that the cost is still worth it — we will add millions of dollars to a fund that will go straight to the people adding value in the city. The key here must be the people actually managing the money. They need to be entrepreneurs themselves, not risk-averse accountants or consultants who don’t know anything about business.