“During a lecture last fall, I asked my 200 undergraduate students to raise their hands if they believed they would someday own a home. Only about one in 10 thought they would.
My reaction at that moment was shame. I am one of the lucky ones. Born in the great baby boom glut of the ’50s and ’60s, I and most of my peers own a home.
But I fear this will not be the case for my students. Confronted with salaries that have stagnated for almost 20 years, they are faced with a housing market where the real cost of owning a home has increased by 300 per cent during the same time span.”
“Vancouver baby boomers are mostly sitting pretty. While our children struggle to pay high rents, never mind a mortgage, our net worth has risen to a million dollars or more just by sitting in our living rooms. And none of us want this gravy train to stop. City officials in Sydney, Australia, where similar price-to-earnings anomalies have emerged, recently clamped down on house purchases made by outside investors. In Vancouver, to even to mention such a thing is political suicide. Anyone who has bought into the system, however painful the entry fee and however long ago that payment was made, has a deep investment in ensuring that housing values continue their rapid rise.”
“Four units per typical lot. Under present economics, it is just barely possible for the average two-income family to purchase a million dollar home, but only if they have two units to rent out. In most parts of the city, current regulations prohibit subdividing these three units into strata units. This prevents two of the three families from sharing any equity benefits as home values rise. This should be changed as soon as possible. But this is only part of the solution. Given the average incomes in our city, the numbers work out much better if there could be four, not three, units per lot. Given current land prices, this would make it possible to purchase your own two or three bedroom home, with a small garden, in an established neighbourhood, close to schools, for under $500,000. There is a second important benefit as well. Permitting four strata units per lot would allow elderly single family home owners to stay in their home as it is renovated, while liquidating two-thirds or more of the equity they have accrued. Imagine what a benefit this could be to them or their children.”
- from ‘Vancouver’s Demographic Time Bomb’, Patrick Condon (“professor at the University of British Columbia; holds the James Taylor Chair in Landscape and Liveable Environments”), The Tyee, 8 Dec 2012 [hat-tip nonymouse]
1. 20 years in which wages are flat and housing prices are up 300%-real? Anybody really believe that is vaguely normal? Clearly a bubble.
2. The 4 unit standard lot idea is interesting, and this kind of densification has been suggested by some on these pages. Does the math work? At current prices, could you really get 4 townhouses/condos built on a standard lot for $2M ($500K each?)? I don’t think so; definitely not where lot prices are now in the $1M-$1.8M range. So, prices will be significantly more than $500K. Also, how much square footage are we talking about in those ‘two or three bedroom homes’? 1000? 1200? 1400? Lastly, how about build quality. Will you be living in a poorly-constructed wooden structure with two aspects of your home in direct contact with your neighbours? We suspect so. Essentially, all of these kinds of plans amount to people getting very poor value. Very modest digs at very high prices. It still amounts to asking them to accept far less and to pay more. Compare the units that would result from this densification with the recently featured $500K Seattle home, in a good part of town. No comparison.
Many current calls for densification amount to attempts at keeping prices for current product at high levels; if you can chop it up into four parts and sell each for ‘x’, then the current property must be worth at least ‘y’.
3. As regular readers know, we believe that housing is overvalued by a factor of 2 or 3 in Vancouver, and many of these ‘affordability’ issues will rearrange themselves once the speculative mania implodes. The challenges will look very different. If Patrick had asked his students “How many of you plan to own a home if they were selling for 33% of their current prices?”, he would have gotten a more robust response (and one more reflective of future reality).