Canada's Housing Bubble

Sep 30, 2010 Don Cayo Vancouver Sun

now it's time to do something real

Housing Minister Rich Coleman and B.C.'s municipal leaders are demonstrating an unusually solid -- for practising politicians -- grasp of the obvious on at least one aspect of affordable housing.

Judging from Coleman's speech and other talk at the Union of B.C. Municipalities convention in Whistler on Monday, they've realized their own red tape, fees and taxes really do add costs. And that if they reduced these five-or six-figure charges, new homes and maybe homes in general might be a bit more affordable.

Damn! Why didn't I think of that?

But I should bite my sassy tongue. Because, when bad policy needs fixing, the obvious isn't such a bad place to start. And because the not-so-obvious can be much more complex, and often requires a carefully nuanced response.

So these government representatives have in fact taken a worthy step by acknowledging their policies are a big part of what drives housing costs.

"Every dime we put on someone's shoulders is a piece of the mortgage that they have to pay, and it means something else in the household goes away," Coleman said.

Just so -- though he then soft-pedalled concerns about the province's property transfer tax, on the grounds it adds only about $5,000 (that's 50,000 dimes, Mr. Minister) to the cost of a $500,000 house. He argued this is much less than fees and development charges -- a claim that conveniently overlooks how its impact doubles or triples as properties change hands during the development process, and how it compounds over the life of a mortgage.

Coleman also noted that forfeiting the tax would mean forgoing hundreds of millions of dollars the government needs for health and education. This, too, is sort of true -- but he could just as easily claim the lost revenue would simply mean smaller ministerial expense accounts, or fewer subsidies for movie moguls, or no more bogus "infrastructure" grants to buy political favour, or ... you get the picture.

But this example suggests many more. There's a much broader range of trade-offs that housing policy must consider. It isn't just about helping everybody to buy a home -- the U.S. subprime mortgage lending strategy did just that, and look where it got them.

There are costs that governments impose on new homes and renovations that are 100-per-cent wasteful. They could be cut with an ounce of political will and no ill effects. The big one is red tape, stalling and delay. This isn't to say there shouldn't be any rules for development, but the requirements should be simple, straightforward and clear -- as should the process to determine when they've been met.

Then there are taxes such as the PTT. They can certainly be cut by any government that wants to, though not without some pain. A government will, indeed, have to live on less revenue if it turns off this tap. But if it really can't live on less -- a questionable premise, to my mind -- it could at least find a tax that is more fair and less damaging to family finances and the whole economy.

Now, what about trade-offs for amenities -- both those that are off-loaded to the developer of a new project (and ultimately to the buyers) in return for sought-after permissions, and the sunk costs of things communities have had for years?

It costs a lot of money, for example, to set aside the massive amounts of land we use for things like parks, the ALR and on-street parking. Those costs ultimately get added to the price that each of us pays for living in our homes. But would we, as a community, rather pay for them or live without them?

So by all means, Mr. Minister and Your Various Worships, cut your red tape. Streamline your procedures. Lower your taxes and make them more fair. Then settle down for some serious head-scratching and conversations with citizens to figure out where to go from there.

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