Vancouver’s economy is at risk because of the city’s out-of-control housing costs, so Ottawa needs to make sure it is doing the maximum to prevent fraud in the real estate market, Mayor Gregor Robertson is warning the federal Finance Minister.
“I often hear from residents about fraudulent practices connected to home purchases in Vancouver. Though many of the stories shared may be anecdotal, they speak to a growing anxiety that warrants a robust response to ensure the public has full confidence in our regulatory systems,” the mayor wrote in a recent letter to Finance Minister Bill Morneau.
Mr. Robertson, who wrote to request a special meeting in British Columbia with Mr. Morneau and provincial representatives to discuss housing solutions, also warned that housing prices in Vancouver are still disconnected from local incomes.
“As a result, many businesses are struggling to recruit and retain talent, which is putting our economy, currently the strongest in Canada, at risk,” he said.
The mayor emphasized that agencies such as the International Monetary Fund are issuing warnings about the housing markets in Vancouver and Toronto.
“If we are to ensure the future prosperity and inclusiveness of our city, a proactive approach that creates long-term stability and resiliency in the housing market is essential.”
The mayor’s letter comes after Mr. Morneau had special talks with Ontario and Toronto politicians in April to address the skyrocketing housing market there.
After those talks, Ontario introduced 16 measures to try to cool the housing market. There was also a promise among the three levels of government to share data more regularly.
Vancouver hasn’t seen special attention paid to its housing problems by the federal government since June of last year, when Prime Minister Justin Trudeau spent an afternoon listening to various experts in the city – some of them contradicting others – about the nature of the problem and various solutions.
B.C. introduced a precedent-setting foreign buyer’s tax on housing in July, which appeared to send a signal back east that the problem was solved.
But the tax, which slowed down sales volumes in the early months, appears not to have had an effect on prices, except at the very high end.
In fact, condo and townhouse prices, which had been relatively flat for several years while single-family-house prices took off, have risen dramatically in the last year.
The federal government has announced some measures to address concerns about the housing market, committing to $240-million for housing research in its last budget and promising to crack down on people avoiding capital-gains taxes when they sell a house by illegally claiming it is a principal residence.
There is a belief among some in Vancouver that buyers from China, in particular, take advantage of the principal-residence exemption to avoid taxes when they flip properties for large profits.
The government has also changed reporting requirements, so that those selling their houses have to formally declare on their income-tax return that it is a principal residence to avoid capital-gains tax.
But there are concerns that the Canada Revenue Agency doesn’t have enough resources to go after cheaters effectively.
And local experts have doubts about how much of an impact federal-government measures can have on the local housing market.
“The person who could do the most to improve affordability in Vancouver is Gregor Robertson,” said Tsur Somerville, a real estate expert and professor at the University of B.C.’s Sauder School of Business. “I don’t think the federal government is the solution.”
Dr. Somerville said the city can’t buckle all the time to pressure from residents who object to new developments and then claim that the problem is lack of federal regulation.
He did agree that it’s important for Ottawa to be aggressive about fraud in the real-estate market.
“It’s important for governments to be as proactive as possible on that,” he said, otherwise the general public’s suspicions about the impact of foreign money on the housing market continue to fester.
Article written by Frances Bula on The Globe And Mail Website. Original article here.