Who Lives in New Housing?

We see lots of new housing going up in high demand places like Metro Vancouver. But are people moving in to that new housing? Well… yes.

We know it can take a while for new housing to fill up (try watching the lights start to come on in a new tower at night). But we also know housing doesn’t tend to stay empty for long. How do we know this? Well, we can check into empty dwellings via census comparisons, we can draw upon electricity use data, we can look to new empty homes tax data, or we can look to even newer speculation and vacancy tax data. The story is pretty consistent. Very few dwellings remain empty, and even fewer (generally around one percent) without a decent explanation providing an exemption from our vacancy taxes.

So who lives in our new dwellings?

Generally the census provides our best information on residents. Unfortunately, we don’t yet have public-use micro census data from 2016 that includes the year in which buildings were constructed. But we DO have this data from the National Household Survey of 2011 (replacing the long-form census that year). So for 2011 we can separate out buildings constructed in the last five years (from 2006-2011). We can also break this down by major types of new housing built. Unfortunately this means setting aside most purpose-built rental apartments. When it comes to low-rise and high-rise apartment buildings, all we’ve got reliable data on are condos. But we can also look at the many single-family detached buildings constructed during this time period, as well as suited houses and rowhouses (both condo and non-condo).*

First let’s ask: Where did the people moving into newly constructed dwellings live before they were built?

NewHousing1

Nifty. Most of the people moving into new housing between 2006 and 2011 already lived in Metro Vancouver before their move, either in the same municipality or a different municipality within the region (colored green here). So new housing is mostly serving locals first and foremost. No surprise given that most moves are local moves. A much smaller proportion of people moved from outside of Metro Vancouver, some from elsewhere in BC, some from another province, and some from outside of Canada (in blues and purple). Yay for Gateway Vancouver!**

So what would’ve happened if this new housing hadn’t been built? Where would these people have lived instead? Maybe they would have lived in the old housing that the new housing replaced, especially in the case of single-detached houses, where new often simply replaces old, just at a higher price and quality. But often new housing is built more densely, enabling more people to share the same parcel of land, as with condominium apartments and rowhouses. Without this new housing, would the people who moved in have left Metro Vancouver entirely? That’s unlikely. Instead, they would have competed with everyone else trying to move into older housing. And because those moving into newer housing tend to have higher incomes than those moving into older housing, families further down the income ladder likely would’ve been pushed out. We can demonstrate differences in market position by comparing adjusted after-tax family income decile distributions. That’s a long way of saying, how do “economic” families rank in incomes compared to other families (here including non-family households), in particular, how do those moving into new housing compare to those moving into older housing?

 

NewHousing2a

As suspected, those moving into newer dwellings tend to be of higher income ranks than those moving into older dwellings, just as those moving into condos tend to be of higher income ranks than those moving into non-condo apartments and rowhouses. Without new dwellings, these movers don’t go away. Instead they join the competition for older housing stock, where they tend to push out those further down the income ladder who might be attempting to move at the same time. In some cases, they may directly displace families who didn’t plan on becoming movers, as when buyers claim tenanted condos and secondary suites for their own use.***

Finally, let’s visualize who might be living in new housing a bit more by giving them some ages.

NewHousing3

Are there children involved? You bet there are. Add any of the kinds of dwelling tracked here, and you’ll also be providing homes for kids (in green). That said, condo apartments, both low-rise and high-rise, tend to house more young adults (in blue) and retirees (in yellow). All kinds of households need places to live, including the lower-income households likely displaced when we stop adding new housing. So when you see someone make a claim like:

There is no point to housing construction in Metro Vancouver. It’s almost all unaffordable & it’s being sold overseas where the market price gets set…

Remember that the data we have suggests this is wrong on basically every count. The details of what new housing replaces matter, as does whether the new housing includes condos, purpose-built rental, or non-market social housing. But when we build housing in a place like Vancouver, it gets lived in. In general construction of new and denser forms of housing does double duty, giving real people real places to live and protecting lower-income folks from getting displaced.

 

*- I dropped new building types where I had less than 10,000 estimated dwellers for data quality issues.

**- Some people show up as non-movers, meaning they probably moved into their new dwelling in the window in 2006, just after it was built, but before triggering a move recorded in the last five years from the date of the census. Or they just misreported, which also happens!

***- Always important to remember both that income and wealth are related, but different measures of market position, and that there is a lot of wealth collected here in Vancouver!

Property Tax Snacks

co-authored with Jens von Bergmann & cross-posted over at MountainMath.

 

Residential Property Taxes have been rising in Vancouver. As always, we’re seeing a lot of sturm and drang about the rise. But we think it’s ultimately a good thing. Why? Here’s three perspectives. From a fiscal perspective, property taxes pool our resources to enable our government to pursue projects and provide for the common good. They’re a big component of how we take care of each other and set priorities. From a social equity perspective, property taxes are directed at wealth, which is highly unequal in its distribution. Property taxes are also – at least around here – mostly a tax on land value, the rise in which is socially produced and largely unearned by any landowner. We should definitely be looking to redirect the massive gains in real estate wealth in this province toward the common good (Henry George for the win!) Finally, from a financial perspective, higher property taxes increase the carrying cost of treating housing like any other investment. They also work to stabilize the market to the extent they counterbalance the weight of shifts in interest rates. In this sense, property taxes and prices are endogenous.

Also worth noting: Vancouver’s property taxes are very, very low. Measured as the “mill rate” – or the rate of taxes owing per $1,000 in property value – the City of Vancouver’s rate is far below most other municipalities in BC (and further afield), especially outside the Lower Mainland.

prop-tax-1

Within municipalities, property taxes hit real estate wealth, but they’re basically “flat taxes”, set at the same proportion to property values regardless of underlying disparities. What’s more, looking across municipalities, there’s a perverse regressivity to property taxes. The wealthy people (e.g. living in Vancouver or West Vancouver) pay lower tax rates on their properties than those generally less well-off (e.g. living in Nanaimo, Port Alberni, or Prince Rupert). Measures like the School Tax, progressively applied to properties over $3 million, only partially counteracts this underlying regressivity at the Provincial scale. Still, we should be looking at more ways to bend property taxes in a progressive direction, and perhaps even use them to provide relief for income taxes. In short, we can definitely make property taxes a better tool for promoting a more fair BC.

The comparison between places like Vancouver and places like Prince Rupert also helps demonstrate the endogeneity of property taxes and prices. Someone owning a $1M property in both municipalities pays different tax rates. The present value of that tax break the property in Vancouver gets above the property in Prince Rupert, assuming the spread stays constant, is $229k. That serves to inflate property values in Vancouver. Which in turn serves to depress the mill rate in Vancouver. Rinse and repeat.

Let’s briefly touch on property taxes in terms of fairness between the City’s renters and property owners. The city has been working on making itself more fair to renters, who make up the majority of its population but find their options for remaining in the city increasingly constrained. Here we want to provide a simple comparison of property owners to renters in terms of rising costs they face. What’s risen faster, rents or taxes? We also don’t want to forget about rising asset prices too! After all, most property owners have reaped enormous gains in wealth that haven’t been available to renters. Here we’ll set aside other benefits available only to owners (including homeowner grants reducing property taxes, the complete absence of capital gains taxation on sales of principal residence, and even the lack of taxation on the imputed rents home owners pay to themselves) and just look at the rise in property taxes paid and gains in property values relative to median rents over the last few years. What’s that look like?

vancouver_price_tax

Here we’ve drawn upon a representative sample of detached properties and apartment condos and used their actual property taxes paid for the property tax data, and used repeat-sales HPI for single family and apartment condo within the boundaries of the City of Vancouver. The rise in property taxes paid by owners of detached properties slightly exceeds, but otherwise more or less matches the rise in median rents over recent years. The property taxes paid by apartment condo owners has had a more complicated journey, ultimately remaining below the rise in median rents (and remember, many of those condos are being rented out!) Overall, property taxes and rents have pretty much kept pace with one another. Property values, on the other hand, are through the roof! Up until very recently, we saw especially strong rise in the value of detached houses. Rapid price appreciation in the detached market (2010-2016) pushed property tax growth higher for detached houses than for condos, who are only recently catching up. The expansion in municipal budgets has driven recent property tax growth, but it remains in line with the increase in rents being paid by representative residents of the City.

Given our low vacancy rates, there is little doubt that rents would’ve risen much quicker without provincial rent control. But regardless, rents have still kept pace with rising property taxes. We still have lots of room to raise our property taxes on all of the grounds mentioned above. We could also use more progressivity in our property tax rates, working to counteract their regressive tendencies. Unlike for renters and rising rents, the research indicates that property tax increases seldom result in displacement of home owners. That said, if property owners feel their budgets squeezed too tight, the province also provides a wealth of opportunities for deferring payments. That’s yet another benefit that’s just not available to renters. But if the province wants to start supporting tenants who need a break to catch up on their rent payments, it might help put a big dent in the sky-high proportion of BC’s residents who feel forced to move.

 

As usual, the code for this post is available on GitHub for anyone to reproduce or adapt for their own purposes.

Fun with Real Estate Wealth

Let’s take a moment to talk about real estate wealth! It might be a handy cure to perennial bellyaching about property taxes.

I’m going to pull from the public tables of Statistics Canada’s Survey of Financial Security, a great source of data on wealth in Canada. The data, asking Canadians for detailed information about their collected assets and debts, run from 1999 to 2016 (with the newest data being collected now!) And guess what? They’ve got real estate data in there! So cool. We’ve used this data before to help question the popular narrative in Vancouver that “foreign investment” in Vancouver real estate should be our primary concern (we’ve got a whole lot more domestic investors… why give them a pass?)

Here let’s just look at data on real estate wealth by overall wealth quintile (From StatCan Table 11-10-0049-01) . That means we’ll divide economic families (and those outside of such families) into five groups ordered by their total net wealth. What’s the average real estate holdings in each total wealth quintile, both in terms of their principal residence and any other real estate they might own? First let’s look at Canada as a whole, then specifically at Metro Vancouver.

Real-Estate-Wealth-Canada-Qs

Real-Estate-Wealth-YVR-Qs

Here I’m taking average real estate holdings for each quintile by multiplying the proportion of those who own the asset by the average asset value of those with the asset. You’ll notice I’ve dropped the lowest two quintiles, either because there’s not enough property holders in these quintiles to provide reliable estimates (for Metro Vancouver), or the estimates are consistently below $10k (lowest Quintile) or $100k (2nd Quintile) in all years (for Canada as a whole).

What do we see? In Vancouver, no surprise, we see very heavy real estate wealth. The upper middle (4th Quintile) here looks a lot like the top quintile in the rest of Canada. The top quintile here is loaded with wealth both from their principal residence and from other real estate holdings beyond. Effectively the property tax here is a flat tax on wealth. Hooray! We’re doing a wealth tax! And while it’s mostly flat, we actually do get a bit of progressivity in this tax, both through the provincial School Tax kicking in over $3 million and the Home Owners Grant providing relief toward the lower end.

Raising property taxes on our extraordinary unearned and unequal real estate wealth: what’s not to like?

Mapping Four Blocks of Vancouver Neighbourhood Change, 1889-1920 (or so)

Guess who’s been playing around with Fire Insurance Mapsagain?

This time, let’s use these brilliant old maps to zoom in on a recognizable Vancouver intersection: Granville and Robson. What did the four surrounding blocks look like back in the day (i.e., 130 years ago)? Worth remembering, this is a scant three years after the incorporation of the City of Vancouver, the raging fire that burned it all down, AND the subsequent passage of the City’s first Fire Bylaw (hence the importance of fire insurance maps…) So we’re looking at a very new city in 1889.

GranvilleStrip-1889

By 1889, Granville & Robson was still pretty sparsely developed. Only one corner of the intersection contained a building, with a storefront (S) recorded as “vacant”, just like the storefront next door. But as it turns out, the surrounding four blocks contained a major Vancouver landmark in the brand new (1887) Hotel Vancouver (upper right), as constructed by the Canadian Pacific Railway (CPR). The Hotel contained a billiard room and saloon as well as an expansive kitchen and dining hall, with servants’ quarters and a laundry below and rooms extending up a towering five floors above.

Across the street from the Hotel Vancouver were three-story buildings containing eight store fronts, offices, and dwellings, with only a few floors vacant. Though the offerings along Granville grew increasingly spare further away from the hotel, it’s already clear by 1889 that Granville had been targeted to become a commercial thoroughfare, complete with a brand new electric streetcar line. “Mixed use” was the norm, with lodging rooms or apartments frequently appearing over top of saloons and storefronts, generally built out to lot lines on the front and sides. Off Granville, along Howe and Seymour, appear some sixteen houses with smaller footprints. That said, these were not the “single-family detached” houses protected by the zoning of today. Instead, they included semi-detached (wall-sharing) houses (as in the lower left), and multiple shacks mixed in with sheds but used as dwellings on the alley (like the “accessory dwelling units” or “laneway houses” of contemporary policy-speak!)

Browsing the National Archives, we see find the Goad’s Fire Insurance Plan put on-line for 1897, as updated with revisions to 1901. Let’s revisit the block some 8-12 years after our first image and see what’s changed!*

GranvilleStrip-1897

The Granville strip is fleshing out, with the assistance of an expanded streetcar line now extending further beyond the Hotel Vancouver. The left side of the intersection with Robson now contains a butcher, two grocers, a hay & feed store, and a fancy drug store, as well as a variety of other shops. A handful of other shops also now decorate the Granville strip, mixed in with dwellings over top for the three-story Vermilyea Block, though numerous empty lots remain a part of the urban fabric. Closer to Georgia, a brand new “Opera House” is now tucked in next to the Hotel Vancouver, which has also grown considerably in size by way of additions. The Waverly Hotel appears at the lower right corner. Kickstarting higher education in the province, Whetham College took over the upper floors of the building on Granville & Georgia, across the street from the Hotel Vancouver, apparently sometime in 1891, but it only ran as a college until 1893, when one of the real-estate investing brothers who founded the institution died. While the lower floors housed a grocer & offices, the upper floors still bear the College’s name by the 1897 map.

Off the Granville Strip, the number of houses has more than doubled along Seymour & Howe, and despite the demolition of at least one older house, some thirty-nine houses now appear. It becomes more difficult to categorize these insofar as most no longer bear “dwg” for dwelling as an indicator of use.

Let’s jump forward to the Goad’s Fire Insurance Map from 1910, as updated with revisions to 1920 (Vol I). This takes us forward another 8-18 years, passing through an enormous period of growth.

GranvilleStrip-1910

Boom! Not a single lot along the Granville Strip remains empty. Transformations abound. The First Hotel Vancouver has been torn down and replaced by the Second Hotel Vancouver, wrapping around the former Opera House, now turned into the Orpheum Theatre (it would later move down the street). Down the street, the Vermilyea Block has transformed into the Palm Hotel. Across the street, Whetham College has been transformed into the Birks Building, with the Vancouver Block building going up nearby. Uses remain decidedly mixed, with shops, restaurants, bars, plumbers, tailors, and banks below, and offices, lodging rooms and apartments above. New theatres include The Maple Leaf and The Allen Theatre, then under construction, but offering a deluxe new movie experience. Fittingly, Globe Motion Pictures appears to have been housed just down the street near the Palm Hotel. The awesome folks at Changing Vancouver provide more information about the 700 blocks (East and West) and 800 blocks (East and West) of Granville, already a booming thoroughfare for entertainment in Vancouver by 1920.

What about our residential thoroughfares on Seymour and Howe? Houses have been diminished by nearly a third. Though new houses have been built, older houses have been torn down, with only around twenty-seven remaining. New shops, billiards halls, rooming houses and apartment buildings have gone up on the corners with Robson. Tailors, hotels, bakers, apartment buildings, plumbers and tire stores (with rooming house over head) have gone in on Howe & Seymour proper, complicating what had been residential landscapes. Two houses to the left of Robson & Howe appear to have been surrounded and subsumed by commercial outbuildings, including a tailor (with dry-cleaning) and a shop carrying out auto-repairs off the lane in the back.

This returns me to a point I repeat often. Prior to the arrival of use-based zoning later in the 1920s, residential neighbourhoods largely remained part of the urban fabric, open to change. The process of neighbourhood change, often referred to as “succession” by sociologists of the day, was a normal part of urban growth. Use-based zoning would seek to freeze this process in place, in particular in the service of defining and protecting neighbourhoods of single-family detached houses from change. Quoting Harland Bartholomew, the planner hired by the City of Vancouver to assist in modernizing its zoning bylaw:

… Largely to prevent the intrusion of apartment houses in single or two-family residential areas, an interim zoning bylaw was prepared and approved by the Town Planning Commission, recommended to the Council, and became law on 5th February, 1927.

I think this was probably a mistake. As I’ve written in my book, we could do a lot better by re-integrating single-family detached neighbourhoods with the broader urban fabric and returning to the vibrant mixed landscapes of the past. As it is, we’re largely still stuck with the interim zoning map of 1927, though Vancouver has recently re-legalized many of the flexible housing options that once adorned its residential streets (e.g. duplexes & laneways & secondary suites).

But let’s set aside lessons from history for more fun looking back, and animate the four blocks of neighbourhood change surrounding Granville & Robson. Thirty-odd years of neighbourhood change, commence!

Granville-Robson-1889-1920

Returning back to 1889, apparently the remote location of the First Hotel Vancouver from the original townsite to the east was already remarked upon at the time. Indeed, despite being built and owned by the CPR, it remained some distance down Granville Street from the CPR’s railway station, constituting the western terminus of Canada’s Pacific Railway. But the CPR had in mind a plan to encourage the westward expansion of the city toward its considerable land holdings west of downtown (then centred on Gastown). Over time, it would successfully tug and pull downtown in the direction of it real estate holdings, even as it moved the Third Hotel Vancouver elsewhere, eventually leaving a giant mall in its place. Indeed, now the “Vancouver City Centre” skytrain stop is right outside the old Hotel Vancouver’s door.

What did this stretch look like back in the day?

Sit back and relax with this super-awesome old motion picture taken from the front of streetcars in Victoria and Vancouver back in 1907. Starting at the 3.13 mark, you’re in an electric streetcar right outside the First Hotel Vancouver (on your left) headed toward the old CPR station at the end of Granville Street. See, it really did take awhile to get there!

For urban history junkies, you’ll continue to turn off Granville onto Hastings headed East at 4.30. From there, you’ll stay on Hastings, heading East till around 6.45, making your way toward Carrall Street, at which point the video will jump you further North to Carrall turning onto Cordova, and head you back West, turning onto Cambie toward Hastings (I used landmarks including the Hotel Metropole, the Hotel Eagle, and the Herman House Co. Real Estate, along with the old business directory from 1907 to get my bearings). It’s a sweet ride!**

* Archival Links to full plates excerpted above – zoom in for even more detail:

  • 1889 Dakin (Georgia to Howe to Smithe to Richards)
  • 1897-1901 Goad’s (sheet 18)
  • 1910-1920 Goad’s (plate 18)

Also see Goad’s Fire Insurance Map, Vol II, for Eastside Vancouver, and note that the somewhat less detailed 1912 Goad’s has been fitted to VanMap under aerial layers!

** dial back to the beginning of the video to start in Victoria, where after a few turns, you’ll head down Government Street and stop in an admiring pan of the Empress Hotel, Provincial Parliament Building, and Victoria Harbour. [UPDATE: You can also check out a great documentary of the 1907 streetcar ride through Vancouver from the vantage point of 2007, put together by the Vancouver Historical Society)

 

Running on Empties

(co-authored with Jens von Bergmann and cross-posted at MountainMath)

 

A spectre haunts housing policy. The spectre of empty homes. So how many empty homes are out there?

Unfortunately, inept analyses of census data often leaves us with incomplete, or even worse, completely wrong answers to this question. When we get data on empty homes for a given city, they’re seldom put into comparative perspective. What’s worse, sometimes when they’re put into comparative perspective, they’re compared with the wrong data and picked up by credulous media, spreading misinformation. So let’s try to do it right!

Here we want to compare some big metro areas and cities in Canada with similar metro areas and cities in the US. As a bonus, this comparison sheds some light on our incomplete data in Canada, and why empty homes have managed to become so central to Canadian housing discussions.

Empty homes

In Canada we only have one national measure of empty homes, the Census. It estimates the number of dwelling units that are not occupied on census day. It does not offer any insight to why those homes are not occupied. Nor is it part of the standard release data, for most censuses it is only available as a custom tabulation. However, the related number of homes not occupied by usual residents is part of the general census release data and available down to the census block level. It is given by the number of dwellings minus the number of households (aka “occupied dwelling units”), so it includes dwellings that are occupied by people who usually reside in a different “household.” To understand what that means we need to remind ourselves that the census counts people, and tries to count them only once. And each person belongs to exactly one household. This gets tricky for people that call several places their “home”, for example a student that rents an apartment near university but also lives with their parents during summer, or someone working in Fort McMurray for months at a time but lives with their family elsewhere during work breaks. These people may think of their family’s home as “home”, and the other place as “temporary”. In the census, the “temporary” home will be counted as “occupied by temporary residents” and not count as a “household,” as their main household is elsewhere.

Canadian numbers

Canadian data is pretty simple. To start off we look at Canada’s major census metropolitan areas by their share of unoccupied dwellings. For context we also show the temporarily occupied units. We get a range of unoccupied households somewhere between roughly 2% and 10%, with most bigger metros hanging toward the middle, between 4% and 8% (or what the Lincoln Land Institute considers the desirable range of “reasonable vacancy”).

 

Fig1

We can also look at municipalities, keeping in mind that the comparison across municipalities is inherently difficult as different municipalities play different roles within (or outside of) metropolitan areas. Here’s a selection of municipalities, including the boundaries for the old (pre-amalgamation) City of Toronto, just for kicks. Note that municipalities still tend to hang between the 4% to 8% reasonable vacancy range, but the high share of temporarily occupied homes in Waterloo stands out, likely a function of students making up a large share of the town’s population.

Fig2

US Data

US data on unoccupied homes is available from multiple places. Here we use the American Community Survey as similar to the Canadian Census. (But see also the American Housing Survey for fun cross-referencing).

Fig3

US data is great in that it adds important context to unoccupied units, specifying the reason the unit is unoccupied. This context is often completely absent from Canadian housing discussions. It clearly splits out the transactional vacancies, (units for rent or for sale), from moving vacancies (units sold or rented, but not yet occupied), from recreational vacancies (units for recreational, seasonal or occasional use), from other vacancies (not otherwise accounted for).

The range for US Metropoles is also much higher than for Canada, running 12% and higher in the seasonal vacation-oriented metros of Florida, Arizona, and Southern California. Just below these metros sit some of the rust belt metros (Pittsburgh, Detroit, St. Louis) that have lost population, resulting in higher “other vacancies” from homes left behind. Houston seems driven by a high proportion of dwellings available for rent. Overall the data show that many empty homes may be accounted for by these kind of transactional vacancies and moving vacancies, together comprising vacancies we might also think of as good vacancies insofar as they enable people to move between homes to find the best fit. Down toward at the bottom we see just under 5% in the Twin Cities of Minnesota.

Overall, vacancies tend to be higher in the US than in Canada. As unoccupied dwellings rise much above 5%, they seem to be increasingly explained by recreational vacancies and other vacancies. A baseline of other vacancies remains largely unavoidable (e.g. homes under major renovations, tied up in court cases, etc.), and also appears to include people showing up as temporary residents in Canada. We can use ACS data on Usual Residence Elsewhere to provide figures similar to what we get in Canada, comparing all North American metros on roughly the same basis. Here we’ll just show the 14 biggest US metros along with the 6 biggest in Canada.

Fig4

Overall Canadian metros tend to have lower vacancy rates (combining unoccupied with temporarily occupied) than US metros. Seasonal destinations (Miami and Phoenix) – that also provide second homes for many Canadians – top the vacancy rates for large metro areas, followed by a diverse mix of large metros. Edmonton and Vancouver, though high for Canada, fit very comfortably in the low end for the US (running from Seattle to Boston), while Toronto, Calgary and Montreal occupy the bottom.

What of the bad kind of vacancies, often associated with second or higher order homes for the wealthy or holding properties off the market for speculative purposes? Empty Homes Taxes and Vacancy Taxes in Vancouver and BC attempt to target just these kinds of dwellings, and so far they indicate that just over 1 in 9 unoccupied units end up getting taxed as second homes or otherwise vacant without defensible cause. Vacancy data from the US suggests that were such taxes imposed in places like Miami, that figure would likely be a lot higher. But Miami markets itself as a seasonal or vacation destination.

Vancouver’s Empty Homes Tax covers the City. BC’s speculation tax covers a region larger than cities or even any given metropolitan area. Just for kicks, let’s peek in on counties, a unit of governance in the US with no firm equivalent in Canada. Weirdly, counties can contain portions of cities, like New York County, which contains only the island of Manhattan within NYC. Sometimes counties are the same as cities, as seems to be the case for San Francisco county. Other times counties are a little larger, as with King County (containing Seattle). Sometimes they’re much larger, as with LA County. How heavily would vacancy taxes likely fall in these various counties? In the counties acting like metropolitan areas, including King County and LA County, overall unoccupancy rates are similar to Metro Vancouver. Vacation homes would likely be hit unless deemed ineligible for year round use. Some, but not all, other vacancies would likely be taxed. The vast majority of empty units probably wouldn’t remain empty long enough to trigger taxation. Counties containing Manhattan and San Francisco, with much higher seasonal use, would probably be hit much harder.

Fig5

Altogether, unoccupied dwellings are broadly similar between the US and Canada, with slightly more dwellings showing up as unoccupied in most metro areas to the south. Lots of municipalities, regions, and counties might profitably consider Empty Homes or Vacancy Taxes. But most unoccupied dwellings in most metros wouldn’t be much affected by them.

Code linked at GitHub!

Taxing Toxic Demand: Early Results

(co-authored with Jens von Bergmann & cross-posted over at mountainmath)

 

The province has released (via press release) the first data on its Speculation and Vacancy Tax (SVT)! Huzzah!

Previously, we’ve speculated on what this data would show. In particular, we estimated that around 8,800 dwellings would show up as empty in a way likely to be taxed by the speculation tax. How close were we? Well, the speculation tax has so far identified 8,738 owners of empty properties. Hot damn! We’re on a roll!

But wait! No celebrating yet. It’s early days, and two issues remain to be resolved:

 1. The province seems to identify owners owing taxes in its press release rather than properties owing taxes. There can be more than one owner per property! (And more than one property per owner…). On average, CHSP data suggests that there appear to be about 1.58 owners per property in major metro areas covered by the tax (e.g. family members co-owning properties, investors, etc.). That may mean that the 8,800 dwellings we thought would appear empty should correspond to 13,904 owners – and so far we’ve only found 8,738, so we’re still short!

2. There are around 23,000 undeclared taxfilers out there, so figures for owners of empty properties may rise. We really don’t know anything about these undeclared filers. The province, so far, has not identified them as likely speculators. Instead the press release goes out of its way to reassure those who haven’t filed that they’ll be contacted by the Province about applying for an exemption. It’s possible that late declarations are late for reasons unrelated to the tax (e.g. forgetfulness, hospitalization, death), in which case undeclared filings will probably come in similar to declared filings, with maybe another 180 taxed owners added. Similarly, it’s possible that late declarations reflect overlapping ownership claims and property owners’ assumptions that someone else had already declared on their behalf. Or it could be that late filings disproportionately reflect owners with limited ties to the province, boosting the number of vacancies likely to be discovered. It would appear that over one-fifth of late filers of the City of Vancouver’s Empty Homes Tax, for instance, ultimately ended up paying the tax (a much higher proportion than for those who filed on time). This kind of ratio, of course, could add another 4,500+ owners of empty properties if applied to the late filers. In other words, we’d end up pretty close to the 13,904 owners we initially projected (based on 8,800 dwellings showing up empty).

So we’ve learned that our estimates are at least going to end up in the ballpark in terms of vacant properties declared to the province. In addition, we’ve got data on where owners of vacant properties appear to reside as citizens (within BC, elsewhere in Canada, or outside of Canada) and we get our first look at declared satellite families. To date, we’ve had very few ways of estimating the size of the latter population. The tax defines satellite families as those earning more than half of their combined spousal incomes outside of Canada (hence undeclared on Canadian income taxes). Rather than attempting to estimate this directly, we mostly played around with the kinds of situations (mismatches between incomes and property values) likely to trigger audits in case people didn’t file as satellite families. As we discuss in our earlier post, there are many reasons why people may end up in satellite family arrangements. It is probably more productive to think of the component targeting satellite families as complementing federal tax law that is quite ineffective in taxing worldwide income of residents, although the SVT can only capture homeowners and determining residency for transnational families is inherently complicated.

The data that we’ve got so far may change, of course, both as remaining undeclared owners file and as audit systems begin to look through cases. But to put the data in context, let’s plot our preliminary declarations data against what we know about properties overall in the areas covered by the tax. Here we compare CHSP data on property ownership, residency of owner, and owner-occupation with the declarations from the Speculation Tax so far. Note that CHSP data and SVT data have different bases, the former is based on properties, while the latter is based on declarations, so property cross owners. This means we can look at all of the properties that are owner-occupied in the taxable region and compare them to the number of owner-occupiers declaring themselves part of satellite families, as in the first two columns below. You have to squint to see that second column, because compared to all owner-occupied properties in the region (800,000+), the number of declared satellite family owner-occupiers is very small (3,241).

 

CHSP-to-SVT-1

We can make the same basic comparison for the number of properties that are investor owned (which we use as a catch-all for any non-owner-occupied property). Through the CHSP data, the non-resident (“overseas”) investor-owners can be distinguished from those residing in Canada. They’re much smaller in number, but they’re definitely part of the mix. We can compare the number of investor-owned properties to the number of owners declaring a vacant property subject to the Speculation and Vacancy Tax. Comparing, it would appear that the vast majority of investor-owned properties are not left vacant for the length of time needed to trigger the tax. Instead almost all appear to be rented out, making up a sizeable proportion of rental stock.

As we also discussed in our Speculation post, we didn’t know the overlap between properties left “empty” and those deemed “foreign-owned.” Now we do! It’s hard to see it in the figure above because the declaration numbers are so tiny, but owners declaring vacancies that show up in the Speculation Tax data look like they’re just over half foreign (see also figure below). Some owners may be holding for purely speculative reasons, some may be running short-term rentals, some affluent investors may have second (or third) vacation homes in the area. Other owners may be stuck in transitions of various kinds not covered under the Speculation Tax exemptions. What’s clear from the figures is that owners of vacant properties are few in number compared to investor-owned properties overall. Of course, some properties may have been rented out as a means of avoiding the tax, and as with the City of Vancouver’s Empty Homes Tax, we’d suggest that this aspect of the tax is worth supporting, even if the overall numbers of people paying remain small. As a bonus, the proceeds from the tax are earmarked for affordable housing!

Let’s return to our fudge factor to put properties and owners are the same footing. If we assume, based on estimates from CHSP data (detailed below) that there are 1.58 owners per property, then we get a total of 1,655,243 owners overall required to make declarations, using 1,048,290 residential properties from the CHSP data as a base. That probably over-estimates to total number of declarations required, as not all residential properties are required to declare their SVT status. Still, this matches reasonably well with the “1.6 million” letters on how to apply for exemptions it appears the government expected to send out back in January. Using this figure as our base, we can estimate the percentage of all owners who’ve so far declared themselves as members of satellite families or owners of a vacant property. What’s that look like?

 

CHSP-to-SVT-2

Declared satellite family members make up less than a quarter percentage point of owners overall. Owners of vacant properties make up just over half a percentage point. Together, taxed owners are less than one percent of owners overall. While these numbers might still change, depending on the late declarations (<1.5% of owners) and possible audits, as well as variations in number of owners per property in each sub-category, the findings so far demonstrate a much broader point: The situations subject to the Speculation and Vacancy Tax probably are rare, and probably aren’t contributing a great deal to BC’s housing crises.

It would appear that “toxic demand” in the form of Satellite-Family-Foreign-Owned-Empty-Dwellings just aren’t all that big a thing, and we should probably stop blaming foreigners and transnational families for our housing woes (especially given the toxicity such blame spreads to discussions of race and immigration in Vancouver). As always, there remain caveats to our assessment. The data isn’t final yet. And there may be some geographic clustering, or clustering by property types, so the impact may be somewhat bigger in very specific sub-markets. Single family homes on the west side of Vancouver, or in West Vancouver, have been identified as especially subject to “toxic demand” before. Once we get better numbers we will have a clearer picture of this, but these sub-markets that soak up most of the attention aren’t the main battle grounds of our affordability crisis, but rather speak to a crisis of certain professionals’ sense of entitlement. Until we learn more, let’s keep our vacancy tax. But let’s also keep our eyes on the prize of achieving broad regional affordability across a diverse housing stock, moving forward to provide serious answers to the questions of how we should make room, meet housing needs, and build enough housing to promote a more inclusive BC for everyone.

 

Appendix

To get our fudge factor we look at the differences between CHSP data on owners and data on properties. On average across our CMAs there are about 1.58 owners per residential property, which may be a slight under-estimate as the data does not provide details for properties with more than three owners on title.

CHSP-to-SVT-fudge1

A quick check across metro areas affected by the SVT confirms that there is little geographic bias. In summary, there are no significant differences in how many owners are on title across CMAs or residency participation.

CHSP-to-SVT-fudge2

There also seems to be little variation across residency types, except that properties owned purely by non-resident owners have fewer owners on title, while properties owned by mixed resident and non-resident owners have more. But that’s expect. The share for non-resident participation properties confirms that the differences from the average are almost entirely due to conditional bias. Thus there should be little issue with applying the same fudge factor across the board.

As usual, the code for the analysis is available on GitHub.

 

Gateway Communities of Vancouver

Gated Communities are kind of awful, but the communities that form at GateWAYS are actually pretty cool. In a world of immigration, that’s where we tend to get a lot of our diversity.

As Canada’s Gateway to the Pacific Rim, Vancouver is fortunate to be full of Gateway Communities, both as a central City and as a broader Metropolitan Area. Nearly half of Vancouver’s residents were born outside of Canada. Where do they come from? All over, but we get especially large representation from across Asia. Media stories tend to focus on Chinese immigrants to the area, where Mainland immigrants have recently overtaken historical streams from Hong Kong and Taiwan. But the streams from China constitute only a minority of Asian immigrants overall. Large streams from the Philippines, India, Iran, South Korea, and Vietnam also pour into both the City and Metro region of Vancouver. Other streams from the UK and Europe, the USA and the Americas, and Oceania (especially Australia) build upon the proximity and colonial legacy of Canada. Relative to the descendants of settlers past, First Nations and other Aboriginal identified Canadians make up only a small proportion of the area’s residents, though their cultural impact is profound and local First Nation bands are emerging as a development powerhouse in the area.

Let’s draw upon Statistics Canada’s community profile data from the last Census (2016) to put this all up for comparison:

Metro-City-Immig-2016

The City of Vancouver and the Metro Region have similar aboriginal identified populations. There are slightly more settler descendants in the surrounding municipalities than in the City of Vancouver proper. Non-permanent residents, including those on student and work visas, round out the population, and are slightly over represented in the City of Vancouver relative to the Metro area as a whole. In terms of immigrant Gateway Communities, the City of Vancouver and the Metro Region as a whole are relatively well-matched. The big exception is that the City of Vancouver has historically added more immigrants from China than the region as a whole, which has added more immigrants from India. For recent migrants, this trade-off has shifted. Now the City of Vancouver and the Metro Region add about the same proportion of immigrants from China, but where the City of Vancouver loses immigrants from India, it adds immigrants from Europe and the Americas (especially the UK and the USA).

Metro-Suburbs-RecentImmig-2016

We can break out a selection of suburbs by their recent immigrants to see where people are going. Immigrants from India tend to favour Surrey as a destination. Richmond received outsized attention from Chinese immigrants. North Vancouver selects for Iranian immigrants. Also, North Vancouver, like the City of Vancouver, seems to select for immigrants from Europe and the Americas. As pointed out recently by Kishone Roy and in the past by others, American immigration to Vancouver probably hasn’t received as much attention as it should! Especially since the USA’s Federal Voting Assistance Program believes Vancouver houses more American citizens abroad than any other world city! (Given that the Census only shows 26,445 immigrants to Vancouver born in the USA, many of these Americans abroad are undoubtedly dual citizens who were granted citizenship from past residency in the USA or from their parents).

OverseasAmericans-2016

As demonstrated by the difference between citizenship and place of birth in the case of ties to the USA, just looking at place of birth doesn’t fully represent the nature of Gateway Communities. The same issues certainly arise in comparing those born in Hong Kong to the much larger community claiming ties to Hong Kong. Aside from place of birth and citizenship, there are other ways to think about and chart the diversity gathered in Vancouver by virtue of its Gateway status. Immigration often produces linguistic communities, that are sometimes (but not always) passed between generations of immigrants. How many languages have 5,000 or more speakers in Metro Vancouver?

Metro-LinguisticCommunities-2016

The wonderful thing about looking at languages is that it helps break down nations into their component parts. Cantonese, once the dominant Chinese linguistic community in Vancouver, must now share with Mandarin. But Wu and Min Nan linguistic communities also remain vibrant and point toward the diversity within China as well as the Chinese diaspora. Similarly, we get a lot of immigrants from India, but we get an especially large number from the Punjab. When they arrive, they pass on Punjabi between generations. Far fewer speak Hindi, despite its dominance in India. We also see multiple linguistic communities from the Philippines, with both Tagalog and Ilocano having over 5,000 speakers. The vast majority of residents speak English, but French is also relatively common and a diverse cast of other European languages find a home in Vancouver.

Let’s look at the diversity of Vancouver in one more way. Instead of thinking about how different communities measure up to one another in Vancouver, let’s see how they measure up to their sending countries. In some ways this is similar to the study of Americans abroad carried out by the USA’s FVAP above, but we’ll put it in context of the population of sending country. How many people immigrate to Metro Vancouver per million people living in their homeland (i.e. country of birth)? This gives us a rough sense of the “risk” of moving to Vancouver and/or its “pull” upon various places around the world. We can look at both total immigrants born elsewhere and just recent immigrants, having arrived in the five years prior to the 2016 Census (2011-2016).

Metro-ImmigrantsPerMillionHome-2016

In terms of “pull,” Hong Kong is the hands-down winner. There’s at least one Hong Kong transplant living in Metro Vancouver now for every one hundred residents of Hong Kong. The pattern is similar, if less pronounced, for Taiwan. But Hong Kong and Taiwan are also (kind of) cheating. They are both still considered part of China in many respects, though their historical patterns of connection to Vancouver are far more intense. For more recent immigrant streams, the connection is less pronounced, but still there. The recent pull from the Philippines contends with Hong Kong, and along with South Korea and Iran, conspires to beat the pull for recent immigrants from Taiwan.

In terms of “pull” for recent migrants, about twenty-six Chinese in a million immigrated to Metro Vancouver between 2011-2016. This means Mainland China lags far behind Hong Kong, Taiwan, the Philippines, South Korea, Iran, the United Kingdom, and all of Oceania in terms of risk of immigrating into the region. But, of course, there are a lot more people living in Mainland China than any of these other places.

There aren’t that many more people in China than in India. India’s patterns of immigration to Vancouver are somewhat deceiving. Most arrivals are from the Punjab region, and the numbers belie the importance of Vancouver to the Punjabi Sikh diaspora. Looking just at residents of Vancouver with knowledge of Punjabi who were born abroad, the estimate for how many Punjabis have moved to Vancouver sits around 3,000 per Million residents of the Indian Pubjab, placing the “pull” of Vancouver for this particular region inbetween the pull for Taiwan and Hong Kong.

Overall, this is a reminder that the Gateway Communities of Vancouver are strikingly diverse. Ideally media stories should strive to avoid erasing this diversity when talking about how immigration affects the City and the region. ALL of these collectives offer the possibility for meaningful communities to form, gathered together here in Vancouver, just inside the Gates to Canada. Considered all together, they help keep the Gates to Canada open.