# UBC Talk: Planning, Building, Dwelling

There’s a talk at UBC Sociology here in Vancouver this week that’s right up my alley!  Honorary Research Associate Martin Fuller will be speaking to his research on Baugruppe (see here and here), with a lovely riff on Heidegger for the title of his talk. Come check it out!

Title: Planning Building Dwelling: On the Activities of Housing

Abstract: This talk will outline a sociological approach to inhabitation that treats housing as a verb, housing as an activity. It does so through building up some of the lessons learned from an in-depth case study of a new residential building in Berlin. This building is unique for two reasons, firstly it was produced by a so-called ‘Baugruppe’, a group of people who are involved in the participatory planning of the building that holds their future homes, and secondly this group includes both private owners and a co-operative housing association. This talk looks into some of the dynamics of participatory planning, building and dwelling.

Martin Fuller is a researcher at the Technische Universität Berlin (Berlin Institute of Technology) in the Department of Sociology. His main research interests are in cultural and urban sociology, often looking at the intersections of the two. His PhD was completed at the University of Cambridge and researched early career visual artists in New York and Berlin. Today’s talk draws upon his recent research on housing, architecture, space and home.

The talk will be in ANSO 2107, from 11:00-12:20 on April 25. Lunch will be provided.

# A visit to Union St.

The resumption of Spring in Vancouver found me biking down to Union St. to grab some delicious Portuguese sweet bread from Union Market (near Hawks Ave). Highly recommended! Union Market is one of these old store fronts that popped up along an otherwise residential street prior to the advent of zoning. It was grandparented into the neighbourhood’s current RT-3 zoning through allowing:

“Dwelling Units, up to a maximum of two, in conjunction with a neighbourhood grocery store existing as of July 29, 1980, subject to the provisions of section 11.16 of this By-law.”

For anyone in love with these little corner grocery stores (and there are a lot of us), it’s striking and bizarre that we don’t allow them in residential zones anymore. But Union Market isn’t actually a corner store. Why? Because this beautiful old townhouse complex right next to Union Market occupies the corner.

To those of us who love townhouses, it’s striking that this form of housing is also forbidden from the majority of residential zones in Vancouver. Here it’s grandparented in with RT-3 zoning to preserve the pre-1920s cityscape of Strathcona. It’s even got heritage designation. It’s clearly a valued streetscape. So why isn’t this form of housing allowed on other residential streets?

Just down the street I passed another old store front. This one is also heritage (if you squint, you can see the marker near the door). But it’s no longer being used as a store. It’s been turned over to residential use. The whole lot was redesigned to support three different residential units about twenty years ago (1999). One in the back (along the laneway), and two up front. (UPDATE: as noted by an observant twitter user, the storefront portion seems to be AirBnB‘d, so it retains an ironic (?) commercial use…)

The history of this lot is fascinating, as revealed in a staff recommendation to City Council from 1999 supporting variance from existing RT-3 zoning to enable its renovation:

Heritage Value: The site at 658 Union Street is listed in the “B” category on the Vancouver Heritage Register and is noted as being an “unique example of [an] early multiple structure”. Three distinct structures were built on the site between 1893 and 1913:

· middle dwelling: the earliest structure was a one-and-a-half storey dwelling built in 1893 and situated in the middle of the lot; only the foundations and wall fragments remain;
· rear dwelling: the next was a one-and-a-half storey end-gable frontier-style structure erected sometime between 1901 – 1912, along the rear property line; and
· grocery store: the final addition was made in 1913, after street levelling activities in Strathcona were complete; it is a two-storey clapboard-sided grocery store with tin cornice, which abuts the Union Street edge of the property.

The latter two extant buildings are representative of architectural and historical themes unique to Strathcona including: Strathcona’s working class heritage; urban change/street levelling activities and community response; and vitality of neighbourhood through grocers and other home-based business.

Of note: the valuable “working class heritage” of Strathcona is precisely what was zoned out of single-use residential neighbourhoods of all sorts (RS, RT, and RM) in subsequent years. And supporting the renovation of the old store front required all sorts of variances from the RT-3 zoning currently in place. The administrative staff helpfully catalogued all the variations proposed:

That’s a lot of variance! It also demonstrates nicely just how many restrictions around development are currently in place in zoning by-laws. And this, of course, is simply to restore the “working class heritage” of the lot. Were there objections?

Oh yes:

As part of the Development Application review process, a sign was placed on the site and 47 surrounding neighbouring property owners were notified. Eight neighbours responded. Four support the project in its entirely, including the immediate neighbours to the west. The four others support the conservation component of the proposal, but have the following principal concerns:

· the proposed site coverage leaves little useable outdoor space at grade;
· the building length next to the east property line is excessive;
· entries, decks and coach house configuration would significantly detract from the privacy of the property to the east;
· the extent of proposed changes to the existing rear structure is excessive;
· the configuration of the front unit lends itself to conversion to an illegal secondary suite;
· the current difficulty of finding parking on the street will be exacerbated; and

· the proposed development is too dense relative to the single family dwellings typical of this block.

Strikingly, the neighbourhood association supported the retention (with some caveats) and the half of respondents supported the project in its entirety, with the remainder supporting parts. The most pertinent objections came from the property to the East of the lot. A variety of alterations were made accordingly. But the basics of the renovation remained, and ultimately the lot provided room for three units, subsequently stratified, and now assessed as worth $832k,$868k, and $1,100k. That’s a lot for twenty year old dwellings, and probably well beyond “working class” territory. But most of the value, as always in Vancouver, is in the land. What do we get in allowing three households to split the cost of the land rather than one? Well, the single structure beat-up house next door (to the West, partially obscured by the tree above) is assessed at$1,568k. Even taking into account a bit of land lift, each of the three twenty year old units created remains far cheaper than the nearly hundred-and-twenty year old unit (likely in need of some repairs?) next door.

What about that persnickety neighbour to the East? Well… about that… some dozen years after the old store front building was re-done, the lot to the East was entirely re-developed through a lot assembly with the adjoining house. Now the redevelopment of the two lots support and serve as their own heritage infill case study.

It’s pretty fancy! What’s striking is that the two lots together now support SEVEN different dwelling units, centred around an interior courtyard.

And how much are these new (2013) units? They’re assessed from $523k all the way up to$1,259k (I’m assuming for the big laneway house at the back). In other words, none of these practically brand new units reach the price of the run-down old house on the lot two down. Why? Because they’re sharing land costs. Here’s what the four lots in question look like from the back, via Google Maps satellite view:

Even though there’s been uplift in the land value with the permission of extra density on the two redeveloped lots, the uplift still doesn’t come anywhere near cancelling out the benefits of sharing. From left to right for the lots centred above, beginning with the partially shaded lot containing the old car covered in vegetation, here are the assessed land values for the lots:

• one lot with one dwelling*: $1.523 million =$1,523k/unit
• one lot with three dwellings: $2.291 million =$764k/unit
• two lots with seven dwellings: $3.878 million =$554k/unit

Despite the benefits of sharing land, none of the ultimate unit prices (ranging from $523k to$1,259k) seem likely to provide stable and affordable housing for the working class households of today. For that, we’ll need more purpose-built rental and social housing. But both of these things become more viable when land costs can be shared across units. Maybe the best way to insure that the working class heritage of Vancouver continues on into the future is to enable and support purpose-built rental and social housing everywhere – especially in the places this kind of housing has historically been excluded. Vancouver’s re-legalization of duplexes on RS zones and moves forward on Making Room are probably good steps along the way.

*- It’s actually unclear how many dwellings are contained in the dwelling with the car in the backyard because we don’t know whether it’s been subdivided to contain one (or more) suites. Legally there is only one dwelling available to be owned.

# Tax Speculations

co-authored by Jens von Bergmann & cross-posted at MountainMath

BC has introduced the Speculation and Vacancy Tax and instructions for filling out the declarations are in the mail. The tax targets homes in major urban centres that are left empty, or that are owned by “foreign and domestic speculators” that “don’t pay [income] taxes” in BC. The tax rate is 0.5% of the assessed value in 2018. From 2019 onward rates increase to 2% for foreigners (not permanent residents nor Canadian citizens) as well as citizens or permanent residents that are deemed members of “satellite families.” A “satellite family” is defined as a family – combining spousal incomes – where less than 50% of total worldwide income is declared (and taxed) in Canada.The portion targeting empty homes follows along similar lines as the City of Vancouver Empty Homes tax, with similar exemptions. Homes are generally exempt from the tax when owner-occupied or rented out for at least half of the year. Importantly, foreign and satellite family owners face additional burdens in renting out homes. Tenants must either be arm’s length, meaning they have no special relationship with the landlord, or, if non-arm’s length, they must be permanent residents or Canadian citizens with Canadian income at last three times the annual fair market value of the rent for the entire residential property.

### Home-value-to-income based triggers

Assessed home value to income ratios could serve as a trigger for consumption based audits. But what’s a good ratio to use? For a foreigner renting out their property to a non-arm’s length tenant, the tax requires the income of a tenant to be at least three times the (fair market value of the) rent in order for a foreign owner to be exempt from the tax. We take this as a hint we can use this as an implicit definition of a satellite family. A satellite family may be identified as a household with declared income taxed in Canada that is less than 50% of three times the imputed rent. Why? There’s the expectation encoded in the non-arm’s length definition that housing costs will take up no more than one third of income. And if more than 50% of the household’s combined spousal worldwide income is declared outside of Canada, one is considered a satellite family. To estimate imputed rent we use a gross cap rate of 3%. This test is effectively asking that owner households spend at most two-thirds of their total Canadian income on shelter cost based on imputed rent.

However, this will catch quite a few “house-rich but income-poor” people. Take for example a senior that bought their house a long time ago for a lot less money than it would take today. If their house is now worth, say, $2M, then the imputed rent comes out to be$5k a month, or $60k a year, requiring an total annual income of at least$90k to pass our test. Given the fairly large appreciation of property, especially in the years before the census, it seems reasonable to adjust the trigger by how long the property has been held. The province will have the exact time the property was purchased to fine-tune this, but using census data we can only check if the person lived in the same residence one and five years prior. As we are exempting people that moved within the year before the census (analogous to the Speculation Tax exempting properties in the year they transacted), this leaves us with the five year timeframe.

Given the explosive rise in property values in the year before the census, we discount the imputed rent by a factor of 0.8 if the household maintainer moved into the property between one and five years before the census, and by a factor of 0.5 if the maintainer moved in more than 5 years before – reflecting the roughly doubling of property values within the five years before the census. We call this the adjusted imputed rent test.

Of note: our data is top-coded for dwelling-values above $2M, which can lead to some mis-classification for some properties with very high dwelling values, but ultimately different ways of adjusting for this have little big impact on the high-level numbers. We added an additional filter excluding households with household income above$90k, which softens potential issues around top-coded dwelling values.

Combined spousal income determines satellite family status under the Speculation and Vacancy Tax, so we separate out our estimate of those failing our adjusted imputed rent test (and hence at risk of being audited) by marital status. This yields an almost identical number of single vs married or common law households failing the test, combining for around 45,000 in total. While only married (or common-law) people would seem to be at risk of being labeled satellite families given the focus on combined spousal incomes (“gifts” to children and other family members don’t count the same), it’s possible that auditors will still include single people in the pool of those at risk of being audited for tax evasion and failing to accurately report worldwide income. So we’ll keep both singles and marrieds in the analysis, but treat them separately.

#### Household Status

We also want to look at other statuses that might matter. Students and seniors come to mind as being particularly vulnerable to audit because of their lower incomes. In addition, seniors may be especially likely to have purchased their homes long in the past, meaning their homes may have done much more than double in value since they’ve lived in them. So let’s see what happens when we separate out these groups.

We see that in particular single seniors make up a good portion of households at risk of being audited, but the bulk is taken up by working age population that is not attending school. Household type gives a different way to understand the makeup. If satellite families mostly involve an overseas wage earner supporting a spouse and children, do we see a lot of these types of households?

As it turns out, there are relatively few people who report being married but living as a lone parent who fail our adjusted imputed rent to income test. There are only around 2,400 married or common law household maintainers that show up in lone parent households, making up a small proportion of those failing our test overall. But it’s possible that many respondents filling out census forms still report their spouses as belonging to the household, even if they spend a significant amount of time working overseas, so we shouldn’t count out other married and common-law categories, split between those with and without children, from being considered satellite families.

#### Dwellings

What kinds of dwellings are people who fail our test living in? First let’s talk about dwelling values. By our metric, the disjuncture between dwelling value and reported income triggers possible audits. Higher dwelling values have a mechanical effect on increasing the income needed to avoid an audit, so we’d expect households with higher dwelling values to be more likely to fail our test. Is this what we actually see?

As one would expect, relatively few lower dwelling value homes are impacted. But each half a million dollar value bracket between $500k and$2M seems fairly evenly filled by about 4,000 households, jumping to higher number for homes above $2M, especially those occupied by married or common law household maintainers. Those most at risk of being audited would appear to be those living in the most expensive homes. What structural sorts of dwellings are the people who fail our adjusted imputed rent to income test living in? Condo apartmentsSingle detached homes? Both dwelling type and condominium status will be available to government auditors. Our data only has three dwelling types: single detached, apartment and other. In our focus on owner-occupied dwellings and taken together with the condominium variable, we’re mostly separating condominium apartments from single-detached houses, with the latter showing up either as a single-detached house or a non-condominium apartment (i.e., house with a secondary suite or “duplex”). But there will be some other types of non-condo apartments and other types of structure (e.g. rowhouses) showing up as both condos and non-condos. Most of those at risk of being audited would appear to live in single-detached houses, with or without suites, with condominium apartments taking a distant second. It would appear that not too many other kinds of housing will be targeted, or at least we don’t see enough of them to provide reliable estimates of their frequency. But this analysis by itself is interesting in policy terms. As a reminder, some condominium apartments will be temporarily exempted from the tax if they have restrictions on rentals – an out not available to other dwelling types (and also not available for long!) Detached houses with secondary suites have another potential loophole. Regardless of their status, property owners might be able to avoid paying the Speculation and Vacancy Tax on their house as a whole so long as they rent out one of the suites on the property to an arm’s length tenant, pointing toward the categorical flexibility houses with suites repeatedly demonstrate in policy terms. #### Immigration In the context of satellite families we often think of immigrant households. These are the households expected to maintain transnational connections, though overseas income earning may diminish with time (and generation). Of course, non-immigrants can also find themselves earning incomes (or partnered to those earning incomes) outside of Canada. Moreover, we know Canadians of many stripes and backgrounds attempt to evade taxes, just as they also have “bad years” where their incomes may drop out of the normal. So let’s look into immigration by period, including non-immigrants in the mix. How does immigration relate to risk of being audited as a satellite family using our adjusted imputed rent test? Higher numbers of non-immigrants (i.e. Canadian born) fail our test than any ten-year immigration arrival bracket. Non-immigrants especially dominate the set of single people with lower incomes than expected by housing values, but they also appear in great numbers for married people. This is a striking finding, but also reflects the greater overall size of the non-immigrant population. Looking at immigrants by period, we tend to see what we expect: recent immigrants fail the test more often than more established immigrants. Recent immigrants failing our test also tend to be dominated by married couples, unlike what we see for non-immigrants, but this gap diminishes over time as immigrant patterns come to look increasingly like Canadian born patterns. Looking at the share of owners failing our test in each immigrant category, as opposed to their total numbers, helps clarify these patterns further. Here we see that higher proportions of recent immigrant owners fail the adjusted imputed rent test than for non-immigrant owners or more established immigrant owners. Reading shares by period of arrival sideways, the evidence would suggest that more recent arrivals owning homes will likely move toward non-immigrant patterns for home owners the longer they remain in Canada. But culture and wealth of immigrants may vary with period, so there may be other explanations at play as well. Where are those who fail our test coming from? Let’s take a look, using place of birth! Of note, sending countries vary from period to period, meaning the period analysis (above) influences the place of birth analysis (below) and vice-versa. Arrivals from China, in particular, tend to be more recent. We should remind ourselves that place of birth is not necessarily the same as the place people immigrated from. In particular in the case of China, sizable portions of immigrants arriving from Taiwan and Hong Kong were actually born in China. Here Chinese born and Canadian born household maintainers contribute the most to owners failing our adjusted imputed rent test. But other sizable contributors to possible audits include those from Hong Kong, other East Asian countries, and the United Kingdom. The United Kingdom may seem unexpected as a group likely to face audits, but we have already seen some of the relevant cases documented in the news. Let’s look at share of owners failing our adjusted imputed rent test by place of birth. Diving into the share of owners likely to trigger audits, we see in all cases that it’s a minority of owners at risk from each country. The uncertainty ranges are too large to sensibly rank the data by place of birth. We grouped immigrants from birth places with fewer than 30 (unweighted) combined cases into larger groups. Nevertheless there are sizable proportions of owners arriving from China, Hong Kong, and Other Eastern Asian countries at risk of being audited. This likely reflects Canadian immigration programs selecting for wealth, like investor class programs, popular in these countries. Comparing investor immigrants living in the speculation tax regions to all immigrants by place of birth, we notice how the investor program leans heavily toward Pacific Rim countries. We know just over 22,000 property owners in Metro Vancouver were identified as investor class immigrants in 2018 CHSP data. We also know that the incomes of the investor class immigrants reported in Canada have tended to be lower than for other streams, as confirmed in the 2016 census data below. Looking at the adjusted family income deciles, the bottom decile is very strongly represented, with incomes slowly rising the longer the immigrants have been here. While we don’t know how these roughly 62,000 investor immigrants group into households and household types and break up into renter and the 22k owner households, this does provide more circumstantial evidence that a fair number of investor class immigrants will get caught by the adjusted imputed rent audit trigger. East Asian ownership patterns may also reflect price discrepancies that make Vancouver real estate seem especially cheap to immigrants arriving from across the Pacific Rim. Arrival with wealth, whether from the sale of a pricey residence overseas or other sources, enables movers to quickly purchase housing in Vancouver. Once arrived, they could become satellite families by returning income earners to countries of origin where they see stronger job prospects (and less discrimination), or they could simply be living off of their savings as they adjust to life in Canada as homemaking migrants (ungated version). In this, immigrants may constitute a special case of income volatility in the years after their arrival. And of course let’s not forget that where there is wealth, no matter the source, there are likely to be attempts at tax avoidance and evasion! #### Regional Variation Lastly we quickly check on how properties likely to be declared as satellite families or audited for lifestyle discrepancies are distributed over the CMAs that we consider. Not surprisingly, in terms of sheer numbers, the Speculation and Vacancy Tax is overwhelmingly going to target Metro Vancouver. Almost all of the properties failing our test are in Metro Vancouver. Which isn’t too surprising since it’s where all the people live. But what about in terms of share? Metro Vancouver is also where the highest value homes are located and the area with the most transnational ties. So perhaps it’s not surprising that the share of households likely to declare as satellite families or be audited as such looks highest in Metro Vancouver. But by share it’s more clear that Victoria, Kelowna, and Abbotsford pull at least some weight. #### Comparing to Shelter-cost-to-income triggers Another measure that has been in the public discussion regarding satellite families is the shelter-cost-to-income ratio. Instead of (adjusted) imputed rent, we can take the actual shelter cost from census data. This won’t be directly available to the government for audit purposes, but the government could try to approximate this using the mortgage registered against the property from their land title database. Replacing our adjusted imputed rent with shelter cost we now can ask that owners have enough income to cover three times their shelter cost. Folding in the Speculation Tax definition of spouses having to declare at least half their joint spousal income in Canada we arrive at a shelter-cost-to-income cutoff of 66.7%. That’s something that’s reasonably easy to check in Census data, just like we did for renters near the top. The total numbers of owner households failing the shelter-cost-to-income test is very similar to those failing our adjusted imputed rent test, but the populations don’t fully overlap as the following graph demonstrates. This shows that the tests are quite sensitive to the definitions, and using these kind of tests for audits will not be entirely straight-forward. Provincial auditors will likely be busy, and will require a robust data-driven audit system in order to be effective. ## Rental Income Tax Reporting Compliance Reading through the requirements one can’t help but think that the BC government will make use of detailed individual tax return data to enforce the regulation. They may be able to use rental income on tax returns to verify the that arm’s length tenancies were correctly declared. At the same time, this should prove a very effective measure to ensure rental income is properly declared by landlords, which in turn forces proper declaration of capital gains taxes in case of a sale of a secondary residence, both of which are suspected to have low compliance. To get a rough idea of the impact, we use census data to estimate the total rent being paid by tenants. The aggregate shelter cost of tenants not in purpose-built, social housing or basement suites in our regions is$3.09B. Here we exclude basement suites because they are affected differently by the speculation tax. Rent is generally a bit lower than shelter costs, because rent may not include utilities. Combined with this, as well as tax write-offs, we assume an effectively 15% of this total is due as tax on rental income. If we take the current compliance rate to be 50%, the compliance rate that was recently estimated for artisanal landlords in London, and assume that the speculation tax increases compliance to 100%, this would generate an additional $232M of tax revenue at the federal and provincial level, which is the same order of magnitude as the projected direct tax revenue from the Speculation Tax. On top of this, declaring rental income makes it harder to evade capital gains tax at the time of sale of as secondary property. ## Conclusion The BC Speculation and Vacancy Tax has been reported to affect about 32,000 homes, about 20,000 of which will be British Columbians with the remaining 12,000 foreigners or residents of other provinces, and generate around$200M in revenue. While we’re not certain where these figures come from, given our estimates above they actually seem pretty reasonable. We’re guessing about 8,800 properties will be considered vacant and non-exempt from the tax, overlapping with 46,000 properties owned by “foreign” owners and subject to the tax if left unattached to a decent rental contract. A sizable 45,000 households may be at risk of being identified (or audited) as satellite families, mostly living in pricey single-family detached (or suited) dwellings. As we note, around a third of these households will be headed by Canadian-born residents, but it’s likely many investor class immigrants will also be hit, and the vast majority affected will be in Metro Vancouver. Finally, the tax will probably generate a lot of revenue indirectly by increasing income tax compliance, quite possibly topping its direct revenue. We’ll be watching to see how it unfolds!

For those interested in more details on our methods, or people that would like to make different assumptions and continue to investigate along these lines, the code for the analysis is available on GitHub.

# What does livability mean?

Livability is a big, important concept in both planning and housing. But what does it mean? As it turns out, the concept of livability gets articulated in lots of different ways, and there’s not a great deal of agreement. In no small part, this is because people are different and want different things out of life, creating a definitional conundrum. But livability is also a really important concept. Livability sits at the heart of articulations of human rights, including the right to housing. It’s used to rank cities and set them competing with one another. It’s a key concept in planning, and embedded within a wide range of hyper-local by-laws determining how people can live.

I was recently asked to write a book chapter discussing the concept of livability, and it was actually pretty fun. Here I just want to make public my basic takeaways (spoiler alert*).

I explored conceptualizations and metrics of livability across different scales and agencies, moving from the United Nations articulation of housing as a human right (with origins in the Habitat ’76 conference right here in Vancouver!) through the various international rankings of livability (Economist, Mercer, Numbeo) that often rank Vancouver near the top (except Numbeo), through the nation-state of Canada (that relies upon Core Housing Need as its key measure of livability as it applies to housing) to Metro Vancouver and its Livable Region strategy (again back to the 70s!) to the City of Vancouver and its by-laws specifying livability as it pertains to housing via minimum dwelling standards (applied to the whole city) and even more hyper-local zoning standards (applied lot by lot). I compared all the ways livability gets conceptualized, articulated, and put to use, as well as all the different dimensions captured by each conceptualization. Like I said, fun! Here’s the big takeaway table:

Don’t stare too long or you’ll hurt your eyes (though you should be able to click for a bigger version). But there are some interesting points from this comparison that reflect the fundamental tension at the heart of defining a singular concept of livability across the differences that make us human and speak to issues if scale.

At the international level, the differences between people and their living situations are all too plain. The only way to really harness livability to a common, culturally and socially inclusive definition of human rights is to keep definitions ambiguous and aspirational. As we move over into different uses for livability (e.g. commercial uses) and down in scale, we tend to get clearer articulations of livability that speak to more specific standards. Correspondingly, we start to lose some of the cultural openness to difference. We also start to see real closure emerge, with Metro Vancouver using livability as a control upon growth and the City of Vancouver’s by-laws outright excluding versions of livability deemed unacceptable. Ultimately, as livability becomes more carefully defined, it also becomes increasingly exclusionary. Put differently, the standardization of living overwhelms acceptance and inclusion for different lifestyles.

What’s that you say? Put it into an animated .gif?

So be careful in working with livability as a concept. Think hard about both the inclusionary and the exclusionary aspects of relevant definitions. At the international and national levels, livability often works toward shoring up a right to housing, which is super-important.** I’m a firm believer that housing should be a right! But it’s not at all clear how you move toward defining precisely what that right entails on the ground. And in practice, the closer we get to local specifics, the more we see the articulation of livability twisted away from inclusion and toward exclusion.

*- for the seven people that might actually read my book chapter besides the very patient editor!

**- Notionally, that’s the work that Core Housing Needs should be doing within Canada, though it mostly just directs funding priorities. I’ve elsewhere written about both the promise and some of the problems of the Core Housing Needs measure.

# There is no Brain Drain, but there might be Zombies

co-authored by Jens von Bergmann & cross-posted at MountainMath & (as of Feb 8th) updated with slightly better mortality estimation

Zombie attack! Zombies fleeing Vancouver want to eat your brain… drain… or something.

A couple of weeks ago The Canadian Press reported a story asserting that young professionals were leaving Vancouver because of the high cost of housing. This fits in with a common zombie refrain that we hear from the media. It’s a story that just won’t die, no matter how many times it’s proven wrong: Millennials, or young people, or boomers, or people important for some other reason are leaving Vancouver because of housing. Usually there are supporting anecdotes, and indeed, it’s not too hard to find people leaving Vancouver who will tell you about their frustrations with housing. But here’s the thing: there is almost never supporting data that actually indicates a decline in people worth caring about. Why? Two reasons. First, in growing cities, like Vancouver, when some people leave, even more people come in to replace them. Second, ALL people are worth caring about.

If we set aside that ALL people are worth caring about – just for a moment – we can take up some important questions about differences in in-flows and out-flows of people in Vancouver. Maybe there are aspects of in-flows and out-flows that should trouble us. In The Canadian Press story, we’re led to believe Vancouver is experiencing a brain drain, so that all the smartest and best people are somehow leaving and they’re either being replaced with people who are not so smart OR they’re not being replaced at all. As noted above, Vancouver is growing. So we know whoever leaves is being replaced, and then some, by new people coming in. But are the people arriving in Vancouver somehow less brainy than those leaving? We’re both immigrants to Vancouver, and quite frankly we find that a little offensive. Everyone arriving in Vancouver has a brain, so population growth cannot result in a brain drain. But we set aside, for a moment that idea that ALL people were worth caring about. So let’s try putting differences in in-flows and out-flows in slightly less offensive terms by returning to the “young professional” framework. Are people arriving in Vancouver unable to do the same kind of professional work as those who leave? Are we losing out on educational credentials?

Ideally we could easily access direct information on in-flows and out-flows to Vancouver (and in some places with population registry data, this is easily accomplished). In Canada we work mostly with census data, and the out-flow data, in particular, isn’t generally made public. But as we’ve demonstrated previously, we can compare across censuses to get net migration data broken down by age group. We just age people forward from one census to the next and compare how many we see in the next census to get a sense of how many people – in net terms – must’ve moved in or out over the years in between.

Now if we’re interested in education then it complicates age-based net migration models. After all, people can and do acquire new educational credentials as they age forward in time. That said, we can probably assume that most people who acquire university degrees and more advanced credentials do so by age 25. We’ll leave out some late achievers, for sure, but if we assume we have a pretty stable division into those with a completed Bachelor’s degree or more, and those without by age 25, then we can get a sense of how those populations change as they age forward in time. So, with apologies to late achievers, that’s what we’re going to do.

We’ve got ten year age groupings by education to work with in 2016 data. So let’s go back to 2006 data for comparison. Is it plausible that we lost a bunch of “young professionals,” defined as people with university degrees, who weren’t replaced as they aged forward and left Metro Vancouver between 2006 and 2016? Data says… nope.

As a matter of fact, Vancouver added a lot more young university graduates than left. Young people with university degrees continued to arrive in greater numbers than they left well through their thirties and on into their forties (we like to think of forties as young). The age labels here refer to people’s “in between” age, that is the ages they mostly passed through between 2006 and 2016 (i.e., the age range each group was in 2011). It’s only once those with university degrees hit their fifties that we start to see a roughly even net flow out of in Vancouver. What’s more, this pattern looks very similar in other major Canadian metro areas. The only exception is Montreal, where people with university degrees really do stop arriving in their forties. But it’s probably not a housing crisis driving them out.

Strikingly, across the board, young people with university degrees are far more likely, on net, to move into our major metro areas than people without university degrees. In many respects, we should expect this. Professionals, in particular, are often drawn by their economic opportunities. Once they arrive anywhere, they’re often paid well enough that they have an easier time navigating local housing markets than non-professionals. Yes, professionals may also have higher expectations about what kinds of housing they deem acceptable than others, but people adapt. One of us has written a book with that theme. In the same way that professionals may drive gentrification, professionals are actually at LESS risk of displacement out of expensive places, like Vancouver, than are non-professionals.

Let’s double-check the results for Vancouver by looking at in-flow data. The Census provides information about where people lived five years before arriving at their current destination. Do we really see a lot of professionals moving into Vancouver through their thirties and forties? Yes. In fact, for “Skill Level A Professionals” this is exactly what we see. We don’t know how many are leaving from this data, but we know a lot of professionals are arriving – more so than in other occupational skill-level categories.

For mobility data the age group labels refer to people’s age in 2016. For an alternative view we can group non-movers and non-migrants (people that did move but not to a different city) together and show the makeup of each skill level by mobility and age group. Again we see that professionals tend to have higher shares of migrants than other skill levels, especially in our lower two age brackets. Those in occupations requiring only a high school degree or on-the-job-training are actually the least likely to come from afar.

Takeaway: we do not have to worry about a “brain drain” in growing cities like Vancouver. Moreover, we don’t have to worry about professionals leaving. Due to better pay, professionals are better equipped to deal with a tight housing market than most others. Building more housing would certainly give professionals more options to choose from, and we might want to relax our millionaire zoning to direct professionals toward competing with the independently wealthy rather than the poor and working class. But it’s the poor and working class we should really be worried about losing. More housing can lead to a more equitable city with room for people who aren’t well-paid professionals or independently wealthy. And if we want to prevent displacement, we should focus more on those actually at risk. That suggests both building more and promoting a LOT more non-market and rental housing.

## Methods

There are some details to be explained when computing net migration data for professionals. We already noted that professionals might get degrees at some later stage in life, but that tends to bias our estimates toward lower professional in-migration. Furthermore, when computing net migration one needs to kill off an appropriate number of professionals to account for mortality as Nathan has explained in details before. We use BC mortality rates for the appropriate years and age groups for this, but that probably over-estimates mortality as educated people tend to have lower mortality rates. This would bias our estimates toward higher professional in-migration. We could adjust for that by reading into the literature to figure out the appropriate fudge factor, but the effect is so small that we just ignored this. We made some adjustement to how we compute mortality rates and now assume a 20% reduced mortality rate for people with bachelor or above, and according higher mortality rates for people below a bachelor. This is a very rough approximation of the impact of educational attainment on mortality.

Those interested in even more details we direct to the code for the analysis, where Jens is teaching Nathan how to code with R.

# Ottawa Talks Housing

Back in November of 2018, I visited Ottawa for the CMHC’s National Housing Conference and presented preliminary results from my working paper (co-authored with Jens von Bergmann and Douglas Harris) on Who lives in Condos? In my last blog post (also up at MountainMath), we detailed how condos were used for metro areas across Canada, as well as how we arrived at our estimates. Here I’m following up with video of our full panel at the conference, “Building an Affordable Future for Rental Housing,” as well as our full powerpoint, both made available via CMHC.

My talk runs from the 10.00 minute mark till about 19.15. Other panelists include Marika Albert, new policy director for the BC Non-Profit Housing Association; Catherine Leviten-Reid from Cape Breton University; and Jacob Cosman from Johns Hopkins. The panel was moderated by Zahra Ibrahim. It was a great panel, even though I had a nasty cold and I wish we’d had representation all across Canada.

In case my talking head doesn’t do it for you (with a wicked cold, no less), here are the slides I refer to during my talk (or tap image below).

Here’s the full program with links to all of the other great panels.

And for good measure, here’s a picture I took in Ottawa outside of the Arts Centre hosting the conference. Ottawa, you’re beautiful! Though you are also very, very cold in November.

# How are condos used?

Comparing How Condos are Used Across Canada

Co-authored by Jens von Bergmann; Nathanael Lauster; Douglas Harris (Cross-posted at mountainmath.ca)

Condominium apartments are fascinating! At their heart lies a relatively recent legal innovation enabling individual ownership of units in multi-unit developments. Since their arrival, condominium apartments have become places to build homes, sources of rental income, sites of speculative real estate investment, and experiments in private democratic government. They’re also in the middle of many on-going debates about housing and the future of cities in Canada and around the world. In 2018, we formed a team to study condominium apartments and how they were being used in order to better inform public and academic debates. Team members include data analyst and mathematician Jens von Bergmann, sociologist Nathanael Lauster, and law professor Douglas Harris. We recently presented some preliminary findings at the National Housing Conference in Ottawa and we’re looking forward to continued research collaboration.

Here we make public some basic information about the development and use of condominium apartments across different metropolitan areas in Canada.

The first thing to note is that the legal architecture of condominium is deployed across a broad range of structure types. In addition to apartments, developers commonly use the condominium form to subdivide row houses, and occasionally single-detached houses (as in some gated communities). Nevertheless, condominium is used most commonly to subdivide ownership in low-rise and high-rise apartment buildings, and that’s what we focus on here.

The next thing worth noticing is that condominium is much more common in some metro areas than others. Vancouver jumps out for the proportion of its apartments – and housing stock overall – owned within condominium. Calgary and Edmonton also rely heavily on condominium to subdivide apartment buildings, although these sprawling metro areas are dominated by single-detached houses, much more so than Vancouver, reducing the overall prevalence of condominium.

We know that condominium apartments are exceptionally flexible forms of housing, but how are they being used across different metro areas? What proportions are owner-occupied? Rented? Occupied temporarily? Unoccupied?

We couldn’t extract data to answer the last two questions from the census because condominium status is recorded by respondents. However, using a variety of datasets, we figured out a transparent and replicable (if somewhat complicated) method for estimating temporarily occupied and unoccupied condominium units.

The answers to these questions about how condominium apartments are used speak to important elements in popular discourse and public debate. Since provincial governments introduced a statutory form of condominium in the late 1960s, developers have built condominium buildings rather than purpose-built rental apartments across much of Canada. Does this also mean that the proportion of owner-occupiers increases while that of renters decreases in cities where condominium developments proliferate? Or do owner-investors rent out their condominium units, augmenting the existing rental stock?

Our findings on how condominium apartments are used are really interesting! In all the metro areas we analyzed, the modal use of condominium apartments is owner-occupation. As a result, it appears that condominium apartments are enabling more homeowners to live in increasingly dense cities.

However, condominium apartments also make up a substantial proportion of the rental stock in many metro areas. While many condominium apartments are rented, relatively few show up as vacant (i.e. empty but listed as “for rent”) at any given point in time. Here we distinguish these rare vacancies, which are good for renters, from unoccupied condominiums. In tight markets such as Vancouver and Toronto we see effectively non-existent condominium apartment vacancy rates, comparable to purpose-built rental vacancy rates.

The least common use of condominium apartments is as a temporary residence (where owners declare their principal residence as somewhere else in the census, but occupy the unit occasionally).

Finally we get to the “empty condos,” or those that show up as unoccupied in the census. Overall, we estimate that between 10% to 23% of condominium apartments were unoccupied in 2016, depending upon the metropolitan area. We don’t know why so many condominium apartments appear to be unoccupied, but it likely relates to their newness and to their inherent flexibility as property. Flexibility can show up in the census as “unoccupied” directly, as when owners use condominiums as second homes, and indirectly, as when condominium apartments are left empty in order to facilitate transactions between uses. We suspect that condominium apartments may cycle more frequently than other forms of property between different uses and occupants, thus creating transition periods without occupants and inflating the proportion of unoccupied units. For instance, condominium apartments can more plausibly be re-claimed for owner’s use than purpose-built rental apartments, cycling in an out of rental supply and potentially creating less stable rental housing.

Strikingly, Vancouver and Toronto stand out as having the lowest proportion of unoccupied condominium apartments, a finding that may be somewhat counter-intuitive given the public attention that vacant units have received, rightly or wrongly, in both cities. When metropolitan areas rely upon condominium apartments as a key form of new housing supply, they should take the flexibility of the form into account. However, it appears that the proportion of unoccupied units in the housing stock will rise as the proportion of condominium apartments in the housing stock increases because condominium apartments are more likely to be unoccupied than purpose-built rentals, a pattern also noted with respect to other flexible housing forms, such as secondary suites (especially basement suites, which show up as units in a “duplex” in the census). This means that even though a smaller proportion of condominium apartments are unoccupied in Vancouver than elsewhere in Canada, a larger proportion of Vancouver’s housing stock shows up in the census as unoccupied.

In Canada’s three largest metropolitan areas, a pretty simple rubric applies: for every ten condominium apartments built, six are owner-occupied, three are occupied by renters, and one is unoccupied. In Calgary and Edmonton, add a renter and take away an owner-occupier. The data for the other cities we surveyed is available in the graphic above. As a bonus, we also provide a comparison with estimations from 2011 data to show changes over time in the graphic below.

In Vancouver, where condominium apartments have been an established part of the housing market for longer than in the rest of the country, there is very little change in the occupancy pattern between 2011 and 2016. In other big metropolitan areas, it appears that condominium apartments are increasingly used as rental stock. In most cases, the proportion of empty condominium apartments appears to be decreasing, something that may reflect the lingering effects of the 2008-09 property market crash. However, this is all very preliminary. But we’ll keep looking at the details as we proceed!

## Methods

We mixed two data sources to arrive at these estimates–the Census and the CMHC Rental Market Survey–and that made coming up with the estimates a little more complicated. There are several assumptions that go into the estimates, and there are several issues with mixing the data that we set out below.

### Overview

We cut the condominium stock into five different categories. The numbers of units occupied by owners and renters are straight-up census estimates from 98-400-X2016219 and 99-014-X2011026. To estimate the unoccupied units and the units occupied by temporary residents we used a custom tabulation of Structural type by Document type. We received this cross tabulation from Urban Futures, which one of use has worked with before on secondary suites. Both of those variables–the categorization of the dwelling type as well as the decision to label a unit without a census response as empty or occupied by someone who did not respond–is made by the enumerator. This allows us to ascertain the structural type of unoccupied units, and we can also get that information for units that are temporarily occupied.

So, we know how many apartment units were classified as unoccupied or temporarily occupied. To estimate how many condominium units fall into that category we need to make some assumptions. First, we assume that the apartment stock consists of three distinct type of units: condominium units, purpose-built rental units and non-market housing units. That’s not quite accurate. For example a single-family home with two secondary suites will be classified as an Apartment, fewer than five storeys if the census found the suites. These do exist in Vancouver, and elsewhere, but their numbers are small.

Given those three types of apartment units, we need to understand how many of the unoccupied and temporarily occupied units fall into each category. The CMCH Rental Market Survey has annual estimates of vacancy rates and universe size for the purpose-built rental stock. We take those estimates, only counting apartment units, to attribute unoccupied units to the purpose-built rental stock. In Vancouver, with its extremely low vacancy rates, this is a fairly small number. In Halifax, that number is comparatively larger. Further, we assume that the non-market units have a vacancy rate of zero, so that there are no empty non-market units. What’s left over we assign as empty condominium apartments.

Finally, we use the estimate of vacant condominium apartments and those on the rental market from the CMHC Secondary Market Rental Survey, using their estimates of the condominium vacancy rate and the condominium rental universe. The vacancy rate is not available for all years and all CMAs. We have marked the CMAs with an asterisk in case the data was not available and back-filled it with our estimate of the condo rental universe and the Rms vacancy rate. We have seen previously that the Rms vacancy rate tracks the secondary market vacancy rate reasonably well.

Attributing the temporarily occupied units gets even harder, but the numbers are smaller so getting things a little wrong has less impact. Here we again assume that no temporary residents live in non-market housing, and we assume they are equally likely to live in a condominium apartment (as owner or renter) or rent in purpose-built. That is a bit of a judgement call, but the details of these assumptions don’t make much of a difference to the numbers, and we invite people to grab the code if they would like to adjust the assumptions.

There are several issues when mixing CMHC Rms data with census data. For one, both are point-in-time estimates for slightly different times. The census is pegged in early May, the Rms for October. There may be fluctuations in temporary and unoccupied units, in particular in areas dominated by universities such as Waterloo, with the census being outside of the regular semester and the CMHC survey within.

Next comes the geographic problem, with CMHC switching to new census geographies at the end of the year, so the rental universe still reflects the previous census geography. Montreal is one such example where the CMA changed 2011 to 2016 as we have explained before. That leads to problems when estimating the rental universe, but the effect is moderated when focusing on the empty units.

Another issue is that the definition of apartment that CMHC uses differs slightly from the census.

Finally, for estimating the vacant condominium apartments that were on the rental market we used the CMHC rental condo universe estimate and not the one we derived from the census. There appear to be some differences in how CMHC and the census estimate rented condo units, with CMHC relying on surveys of property managers. In BC that likely involves tallying up units for which Form K was filed, likely leading to CMHC under-estimating strata rentals.

It is instructional to compare the two different estimates.

With the exception of Hamilton, the census condominium rental estimates are higher, in some cases substantially so. To shed more light on this we also compared the estimates of overall condominium apartments.

We looked at two separate census estimates: the occupied (by permanent residents) units that come straight from the census by filtering occupied units for apartments that are stratified, and the overall condo estimate that we derived by adding in vacant and temporary units. With the exception of Montréal the census estimate of occupied units only comes quite close to the CMHC condominium universe estimate. The differences are worth looking into in more detail at some point.

### Waffle graphs

To communicate the makeup of condominium apartments we settled on a custom version of a waffle graph. Displaying proportions on a square grid makes it easier to read them compared to pie charts or tree graphs. The 10×10 layout rounds numbers to percentage points, which is the appropriate level of accuracy given the uncertainty in the data and is intuitive to understand. When rounding to the nearest percentage, the numbers don’t always add up to 100. So we don’t do traditional rounding but round with the constraint that the total adds up to 100 while minimizing the $$l_\infty$$ error.

This does introduce potential problems when comparing across time or across geographies, where theoretically we could see an increase in the number of squares in one category although the actual estimated share dropped. This will only happen under very specific circumstances, and we checked that this did not occur in our graphs.

## Reproducibility

The code underlying this post is available on GitHub, as are the parts of the custom tabulation for 2016 and 2011 used in this post. Part of the Statistics Canada data we used requires conversion from XML into more manageable data format which, for performance reasons, requires python to be installed next to R that runs the rest of the code.