Intrepid local reporter Christopher Cheung, a former student of mine who now often walks the housing beat in Vancouver, has a new piece in the Vancouver Courier on the local scale model building industry. It’s fun! And he came to me for some quotes, so I’m mentioned in there too. Why? Because the model industry has taken off in no small part due to Vancouver’s move away from the standardized single-family detached house.

The model-building industry is important precisely because of its role in providing tangible evidence for what new developments will look like – from the wide-angle view of a towering and all-powerful giant. Fortunately, this point of view is appreciated by developers, by financiers, by city officials, planners and regulators, and even by angry NIMBY neighbors. But let’s set aside for a moment how model-builders further stoke ego-inflation. What’s also key, I think, is understanding their role in almost totemically reducing the enormous uncertainties involved in development across a wide range of parties. As revealed in an earlier (and also quite good) piece on model builders in Vancouver, by Jesse Donaldson, this includes the set of pre-sale buyers increasingly needed to make a go of condo development.

In an early draft of my forthcoming book on the single-family house in Vancouver, I actually used a brief discussion of the model-building industry’s role within the complicated development industry as an entry into describing the very limited traction we get with rational choice and related rent gap models that assume everything can be costed out ahead of time in urban development. It can’t. It’s messy. There’s just way too much uncertainty involved (see, for instance, Shelley Kimelberg‘s great stuff for more on this). And in that sense, it’s often quite different from the more highly standardized detached house building industry.

Lots to play around with here, and hopefully some day I’ll get back to it! (I had to cut out about a third of my early manuscript, which really was WAY too long).  In the meantime it’s great that people keep writing about this stuff. And it’s also worth reading both articles on model-builders, in part because it’s just awesome that B&B Scale Models (profiled in the earlier Donaldson piece) has found its fiercest competitor in AB Scale Models (profiled in the Cheung piece).  Here I wish Chris had been just a little more hard-hitting in his reporting. What I want to know is:

Did AB Scale Models really choose its name just get under the skin of B&B Scale Models (and appear earlier in the phone book)? And are there secret scale model wars that take place between the two companies on the city streets at night? If so, who wins?

I recently criticized the somewhat xenophobic sales pitch for Progressive Property Taxation while admiring the substance. Now let me praise Marc Lee, from the generally praiseworthy Canadian Centre for Policy Alternatives (CCPA), for getting the balance about right.

In Lee’s new report, Getting Serious About Affordable Housing: Towards a Plan for Metro Vancouver, he offers up a worthy policy agenda, that acknowledges the problematic role of non-local investment in Vancouver’s residential real estate market without descending into anything like immigrant-bashing (indeed, Lee supports new funding for housing many immigrants, including our recent Syrian refugees!)

There is lots to like here in terms of providing a comprehensive housing agenda, and I like just about all of it. I’ll save what minor quibbles I have for another day, and for now just express my admiration for what Marc Lee’s brought to the table.  If you’re reading this, you should read the whole thing!

Before we moved to the townhouse in Vancouver where we live now, we had a two bedroom apartment on the top (fourth) floor of a low-rise building in Kitsilano.  We had fabulous neighbours in the building, and have remained close to at least a couple (knowing we were bike commuters, they all pitched in and bought us a chariot bike trailer after we had our first kid!  Such a sweet gift!)  My partner and I lived there together for about seven years.  For about five of those years, we shared the place with at least one kid.  For somewhere between three to four of those years, the apartment downstairs from us remained gloriously empty.

An unoccupied housing unit!  Right below us!  We weren’t going to question our good fortune too closely, but for the most part, we remained at a loss to explain why it remained unoccupied so long.

That said, we had at least some idea why it became unoccupied in the first place.  We lived in a strata (condo) building.  The strata association, after struggling to figure out how to deal with a couple of bad tenants living in the building, decided to pass a no-rental by-law.*  The apartment downstairs from us had been rented out by its owner(s), and when the tenants left after their contract ended, they couldn’t be replaced.  We figured it was only a matter of time until the landlord sold the place.  But we had no idea just how MUCH time would pass.

Lots of things happened.  To our knowledge, it seems the owner may have received the apartment as an inheritance.  They tried to sell at some point after their tenants left, but the deal fell through.  The owner may, it seems, have had some major medical issues that kept them from paying attention to the apartment.  Then the building had a major repair scheduled, and everyone had a hard time selling until it was done.  In fact, the place downstairs from us was never sold.  Instead, the owner eventually managed to get a hardship exemption and rent to a new tenant.**

So there you have the messy story behind at least ONE of the empty apartments showing up in the City of Vancouver’s new report on unoccupied housing.  An anecdote, to be sure, but possibly a helpful one.  There are all kinds of reasons why housing units can remain empty.  To be sure, these reasons no doubt include speculation, shoddy real estate practices, and also the second (or third, or fourth, etc.), but seldom visited home ownership practices of the ridiculously wealthy.  But they also no doubt include things like inheritances (that may or may not be contested), landlords coping with (and/or contesting) no rental provisions newly imposed by their strata corporations, owners coping with illness (which can be quite long-term), plain inattentiveness, and a host of other reasons that might puzzle the neighbours without seeming especially nefarious.

To return to Vancouver’s new report on unoccupied housing, which I’ve been trying to puzzle out (just like everyone else, it seems!), the big finding is the stability we seem to be seeing in terms of a relatively large (but not outstanding) proportion of the City’s apartments left empty – especially, it seems, in my old neighbourhood of Kitsilano.  Here’s where my anecdote (apparently drawn from the dataset under analysis!) may come in handy.  The sheer diversity of reasons the apartment below us remained empty for three to four years may reflect a broader diversity of reasons properties across the city often remain empty.  That diversity, in turn, may help explain the striking overall stability we seem to be seeing in occupancy.

*- I learned the other day, via a visiting scholar, that no rental provisions are apparently illegal for condominium associations in Australia.  This was especially striking to me because we get our Strata legislation from Australia (they call their condos “strata” too!)  Incidentally, we lost some good neighbours over that no rental provision…

**- The new tenant who moved in was awesome!  The poor guy had moved hoping to get some peace and quiet after experiencing a noisy upstairs neighbour in his old apartment.  But he was EXTREMELY good-natured about our kid(s).  He attributed this to the fact that he could (almost) always count on everything quieting down around 8pm, when we put all the noisy folk to sleep.

I looked into the new interface for CMHC’s Housing Market Information Portal today (new to me, anyway!)  My review so far: it’s pretty handy.

Here’s a chart I put together illustrating what I think is an important (but sometimes overlooked) aspect of urban housing markets: they are often highly detachable.

Urban real estate is heavily regulated.  Zoning is hugely important across North America, setting up distinct land markets.  Single-Family Residential takes up the most urban land.  But there are further regulatory protections of interest, including residential rental contracts and rent control.  Together with less formal market segmentations and protections, regulation creates an environment where there is little certainty how what’s going on in one little sub-market will translate into another little sub-market.  In other words, there’s no such thing as one big market (take it from Polanyi, if not from me).  Instead there are many little markets with often arcane connections between one another.

For much the same reason, there’s no such thing as one Vancouver real estate market.  Market rents for rental units already need to be subdivided into primary markets (rental only buildings) and secondary markets (here condo rentals, but theoretically also including secondary suites).  Even with the shaky secondary market data we have available from CMHC surveys (see the blue line from 2007 onward) we can already detect how the more closely observed and regulated primary market differs from the condo market.  BC’s rent control (restored by the NDP in 1992) probably has something to do with the slow and gradual rise in market rental rates (I’m setting aside, for the moment, broader arguments that it might also have diminished investment in new rental stock).  With the data we have on it, the condo rental market looks much more volatile.

But an even larger gap can be observed between what’s going on between apartment rental markets and single-family detached sales markets.  Where rents have risen gradually across the entire time period observed, the sale prices of single family detached houses went boom and bust in the 1990s, and (as everyone knows) have since boomed without stop. Fortunately (I think), there isn’t much of a relationship between the crazy things single-family sales prices are doing and what renters are feeling.  At least not yet.

That’s not to say there aren’t real problems with what’s going on in the single-family detached market.  And it’s not to say there aren’t other real problems with the rental market (we still have nearly a third of renters living in Core Housing Need).  But the complex regulatory environment, that both constrains and enables urban real estate markets, keeps these problems somewhat distinct.  It may also explain why those outrageous single-family house prices aren’t (yet) leading to a loss of “Vancouver’s life blood.”

Still, we could, and should, work on making our regulatory environment better.  But we should focus on making things better for those most in need.  As it pertains to the relationship between different markets, in my ideal world we’d be looking to bring the apartment rental and detached sales markets closer together by further relaxing the regulations fencing off single-family detached houses from internal subdivision, gentle densification, and redevelopment.  It wouldn’t do much to bring the price of single-family houses down, but it could bring in a lot of new rental supply.

Of course, my ideal world would also contain a lot more non-market housing options, especially cooperatives!  But that’s perhaps a different story.

On the face of it, probably not.  Indeed, maybe the blame runs in the other direction – perhaps, the former US Supreme Court Justice’s death was hastened by glancing at the price of a detached house on the West side of the City.  But bear with me…

Scalia’s death opens up a spot on the Supreme Court, and the ensuing nomination contest should prove… interesting.  Republicans are, predictably, arguing that President Obama shouldn’t make any nominations, leaving the Supreme Court pick to his successor.  One argument is that there simply isn’t enough time.  The New York Times put this argument to rest today with a handy graphic revealing that Obama has 342 days left in office, and its never taken the Senate more than 125 to confirm (or reject) a nominee. Plenty of time!

But which former nominee took the longest to get confirmed?  A quick scan reveals it was none other than Louis Brandeis.  Probably because he was an incorruptible progressive, and also Jewish.  I’ve long been fascinated with Brandeis.  Initially this was just because of his association with the eponymous University (yes, it is named after him), and my difficulty in deciding how to pronounce his name (rhymes with bran-face?).  But then I discovered he was part of the Supreme Court during a decision of particular interest to my research.  He was part of the Euclid v. Amber Realty court majority deciding in favor of the legality of use-based zoning by municipalities in the USA in 1926.  This was actually quite a close decision, despite only three judges formally dissenting, and had Brandeis not been there, it could easily have gone the other way.*  But he’s also notable for co-authoring a relevant defense of the right to privacy that predated his time on the court.

I’d suggest that the basic logic of Brandeis’ right to privacy argument (from 1890) also motivated the legalization of zoning, especially as it pertained to the establishment of single-family detached residential areas.  To quote the former:

Recent inventions and business methods call attention to the next step which must be taken for the protection of the person, and for securing to the individual what Judge Cooley calls the right “to be let alone” [10] Instantaneous photographs and newspaper enterprise have invaded the sacred precincts of private and domestic life; and numerous mechanical devices threaten to make good the prediction that “what is whispered in the closet shall be proclaimed from the house-tops.”

Ha!  1890!  Good thing we nipped the threat to privacy from those newfangled mechanical devices in the bud.  Anyway, the City itself was often seen as a threat to privacy, as well as to peace and serenity.  Turning to the Euclid decision, zoning for the segregation of uses was understood to:

increase the safety and security of home life; greatly tend to prevent street accidents, especially to children, by reducing the traffic and resulting confusion in residential sections; decrease noise and other conditions which produce or intensify nervous disorders; preserve a more favorable environment in which to rear children, etc. With particular reference to apartment houses, it is pointed out that the development of detached house sections is greatly retarded by the coming of apartment houses, which has sometimes resulted in destroying the entire section for private house purposes; that, in such sections, very often the apartment house is a mere parasite, constructed in order to take advantage of the open spaces and attractive surroundings created by the residential character of the district.

The big thing legitimized by the Euclid decision was the segregation of single-family detached houses from apartment buildings.  The legal legitimacy granted to single-family residential zoning in the US spread to Canada via consultants like Harland Bartholomew, primary author of Vancouver’s planning from the late 1920s.  Our zoning legislation has increased in complexity since then, but there’s been strikingly little erosion in the single-family residential zoning (RS) setting aside the City’s land to support only single family houses in the 1920s.**

As I like to think of it, we put in place a Great House Reserve around the urban core(s) of Vancouver, and it’s pretty much still in place today.  Once the City’s middle class felt they could afford the price.  Now, for a great many reasons (here are only a few), that’s no longer the case.  But due to the maintenance of existing zoning restrictions, we’re still reserving the vast majority of the City’s residential land for single-family houses.  Effectively, we’re now only allowing multi-millionaires to play there.  No wonder they’re dominating the news.

Still, protecting the exclusive rights of millionaires is the sort of thing Scalia might’ve liked.  Maybe we can blame him for the high cost of our real estate after all?

*see, for instance, Baar, 1992; Power, 1989; and Valverde, 2011 (I can provide full cites on request!)

**of course now you can usually add a secondary suite and a laneway house to single-family residential lots in Vancouver if you really want to, so that’s something!

Frances Bula has a nice piece following up on transnational investments in Vancouver’s real estate market, in particular including the big commercial and industrial properties, like the Molson Brewery.  Are purchases being crowdfunded?  If so, what does that mean? Are all of the investor/buyers being told about the planning restrictions in place?

There are lots of interesting points to draw from all of this.  One point, a point that sometimes gets lost in simplified political economic analyses of urban affairs, is that developers don’t always get their way.  There is little reason to suspect that either the City or Metro Vancouver are bluffing in their commitment to keeping the Molson Brewery zoned for light industrial land use.   Municipal regulations and their regulators still have power, even in the face of the “sharing economy.”  The Province has even more power, which is why we don’t yet have Uber in Vancouver.  It’s also why the BC Securities Commission is apparently looking into some of these crowdfunding advertisements.

Another and perhaps more disturbing point concerns the potential for crowdfunding (and other forms of investment) to operate as scams.  We know they’re out there (we’re definitely not getting straight stories from all the parties involved in the “Sun Commercial real estate brewery project”).  This is, of course, a problem for investors – mostly, it would appear, operating out of China – some of whom are undoubtedly more deserving of sympathy than others.  But scams are also a problem for Vancouver.  In a local sense, they potentially tie up properties (big & small) in litigation, leaving them unattended for years.  In a larger sense, the more of them there are out there and the more of them buying and selling to one another, either by design or by accident, then the more the market as a whole looks and feels like a giant pyramid scheme.  It’s a long, long way down to the bottom, and getting longer by the day.

*** Ummm… And here is more on pyramid-building practices via Kathy Tomlinson at the Globe & Mail.  Read the whole piece!  It’s worth it!