Renter Displacement – “The cute little 1940s bungalow we’ve rented for the past seven years is for sale; 2,300-square-foot, $2 million, teardown.”

“The cute little 1940s bungalow we’ve rented for the past seven years is for sale, and in the past month the realtor has hosted three open houses. That means we have no idea who’s been walking our hardwood, opening our cupboard doors or peeing in our toilet.
I knew the moment our home went from an exclusive listing to the Multiple Listing Service two weeks ago because that evening I heard voices and looked to find two men and a woman standing in our garden looking in the window. Since then real estate-crazed trespassers have let themselves into our back yard through the side gate, walked across our lawn and flowers and snapped pictures of the house with the glee of paparazzi parked outside Hollywood’s Mr. Chow. The street in front of our home looks like a high-end car dealership with a constant parade of Mercedes, BMWs, Land Rovers, Jaguars, Lexus and Audis. We don’t even blink now when yet another $200,000 black Mercedes SLS stops in front of our home at 10 o’clock at night and the owner gets out to take pictures with their iPhone.
The first open house was as an exclusive listing with one realtor and almost 40 people came through. The second open house was for “realtors” and about 70 people dropped by, while an estimated 200 Lookie Loos were expected for the third open house this past Sunday. It was this last open house that sent me over the top. Prior to vacating for four hours, I printed off signs that read “Please Remove your Shoes” for the front and back doors and “Private” for our closets, which I also tied closed. My thought is that if you have the cash to buy this home I’ll show you my closet, but there is no reason on earth my neighbours or Craigslist followers should get a look at my shoes (or skeletons). I also went completely over the top and wrapped toilet paper around our toilet because I decided no more strangers were going to pee in our home. By this time my partner was beginning to look at me as if I’d lost it, which to be truthful was pretty much the case, but I promise that toilet paper will be coming out again this weekend when the realtor hosts the fourth, and I hope, final open house.
It seems to me the fact the house is going to be torn down makes an open house moot, but hey, maybe that’s just me. After witnessing first hand the extreme interest in this house, I laughed out loud last week when I saw an article in the Vancouver Sun with the headline “More sales listings bring balance to market.” We live in a 2,300-square-foot, $2 million teardown, which to me does not exactly scream “balance.” The article quotes Carol Frketich, regional economist for Canada Mortgage and Housing who says, “typically when prices move higher, listings do come on the market.” According to the Real Estate Board of Greater Vancouver, that trend means a “calmer market” for realtors with fewer bidding wars. Seriously?
I always assumed if I lived in a $2 million home it would include a pool, and more importantly a pool boy, but that’s not the case. Instead, our $2 million home offers well-kept hardwood floors, rounded ceilings and lovely heritage roses planted by the original owner.
In the seven years we’ve lived on our street almost every one of the sweet, little post-war bungalows on our block has been demolished and replaced with a 4,000-square-foot behemoth, which I know is the fate of our place. All of our new neighbours are wealthy Asians, many of whom I’ve never laid eyes on. Just as many seem slow to trust. But in the past year or so I’ve made some headway and I’m now on a first-name basis with two neighbours. Unfortunately, it’s just in time to say goodbye.”
Sandra Thomas, Vancouver Courier, 10 Aug 2011, pg.A08

32 responses to “Renter Displacement – “The cute little 1940s bungalow we’ve rented for the past seven years is for sale; 2,300-square-foot, $2 million, teardown.”

  1. Although intrusive, I think as a renter you have to expect that when the home owner decides to sell the house you are renting, your privacy will be invaded and you can expect a great deal of inconvenience. I find the renters reaction to the invasion of potential buyers and real estate agents comical, slightly over the top (which the author readily admits), if not also somewhat understandable at the same time.

    I also find it interesting that the renter has so much attachment and love for the home she rents. I think that goes to show that you can still have pride of ownership-type feelings for a place, even if you rent instead of own. These renters clearly feel a connection to the home and neighborhood and are finding it hard to accept the inevitable fate of both. I feel bad for them as they are helpless and have no control over what happens to their home. I imagine that, even if they wanted to, they probably can’t even contemplate purchasing the house themselves, given the $2 million price.

    • Nonsense. The renters are paying for the place. There is no reason why anyone should be allowed to go into their closets or use their toilet without their permission.
      As for the trespassing outside of the open house hours – the renters of the house should call the police. Just because they are only renters in the house, it doesn’t give anyone the right to trespass, no matter what the owner says (and I bet that the trespassers have not even asked the owner).

  2. “All of our new neighbours are wealthy Asians…”

    isn’t the wealthy asian buyer a myth? Or simply called overstated? I’m having a difficult time keeping up with the conflicting evidence.

  3. You know it’s the same here in Toronto, one of the most frequently asked questions by renters is “Is the owner planning to sell?” Many house renters have already had to move because the house has been sold even if they are great tenants. It’s hard for landlords to pass up hundreds of thousands of dollars in capital gains in favor of a couple hundred bucks a month of “cash flow” they’ll end up sinking back into the house.

    • “It’s hard for landlords to pass up hundreds of thousands of dollars in capital gains in favor of a couple hundred bucks a month of “cash flow” they’ll end up sinking back into the house.”

      Amen.
      This is how the bubble has put pressure on renters — In ‘normal’ times they are comfortable in a stable situation: they have stable affordable housing at an honest market rate; landlords have sensible investments in their rental properties… — In current times (esp in Vancouver), most renters hope that their landlords don’t do the ‘back-of-the-envelope’ math that would suggest to any sane investor that they should sell, now, asap.
      The irony, of course, is that, if ALL landlords realized this and tried to sell at vaguely the same time (1) the market would crash and (2) there would be a wave of moving-disruptions for renters.
      We suspect that there will be a wave of activity such as this at some point, but likely only once prices start falling and the landlords realize the mistake they’ve made in not cashing in earlier.
      Bubbles really do cause an immense amount of inconvenience. (To put it very mildly).

  4. Buying a house for $2 Million to tear down and build another house for ? $1 Million.

    Except for HAM – who else could afford that? With 25% down, it would need a family income of 600K to justify the mortgage. Crazy!

  5. Of course eviction is always a possibility. I have always advocated if you want a longer term tenure, find a landlord who wants you to stay longer term, and unfortunately this takes a lot time to do. Then sign an agreement that secures your tenure. There is no fundamental reason I can see why longer leases cannot be more prevalent than they are currently.

    I’ve heard that longer term leases can trade at both a premium and a discount. Not sure what to think!

  6. it’s a forgotten cost that renters should have factored in rent vs own calculation.

    • That’s a fair point.
      Many renters do factor in this cost.
      It’s the inverse of one component of the ‘ownership premium’ (the amount that each individual is prepared to pay over the cost of renting to own rather than rent a property). This premium differs from person to person; high for some, low for others. One benefits of ‘owning’ most definitely is that, so long as you pay the ‘rent’ (mortgage payments, taxes, etc) you will never be asked to ‘move along’.

  7. I agree, they need to put their foot down, all open houses require 24 hours notice, the toilet seat should be taped down and the closet doors taped shut

  8. At UBC, the properties are purchased by 100% asian – others can simple not afford it.

    It is a fact of life and we just have to deal with it.

  9. Oops… pressed enter too soon.

    Con’t from post above….

    We just have to deal with the fact that regular wage earners, in Vancouver, would not be able to purchase – the sooner we accept that the better 🙂

    Otherwise all the unnecessary misery of complaining we can’t afford.

    My job exists because of the high real-estate price; sure I can’t afford to buy – but at least I have a job.

  10. I am a first generation immigrant here to Vancouver. I came about 20 years ago with my parents from Asia. This is a beautfiul city and I am proud to say that I am now a Canadian and have completely integrated into the culture. I have a particular perspecutive on the Vancouver real estate bubble as I am very familiar with both cultures. Here are my 2 cents:

    1. Are there rich asians who are buying houses. Yes, there are a lot of it. But they are not the majority of real estate purchasers. They make up purchases in some of the most expensive areas. But it doesn’t justify that all areas should go up by the same percentage. For example, if you go to an open house on some of the Westside neighbourhoods, you’ll be amazed by their purchasing power. It’s incredible, beyond anything that we have seen here, completely consistent with the author’s story. The street is loitered with expensive cars. You can also take a look at the parking lot of of some west side schools, their kids roll in far fancier cars than their teachers. But, if you are to go to an open house say in the commercial area, these guys are nowhere to be found. So it’s not true that they are the single most important factor in driving up house prices in every area, but they do certainly make a difference in some areas. I think across the entire lower mainland they don’t make up the majority as they almost never touch anything in Surrey (except South Surrey White Rock) or Langley. For now they mostly operate in Vancouver, Burnaby, Richmond (until the Tsunami, notice how Richmond’s price stopped flat at the same time as the earthquake), and West Van. As for the 5% foreign buyer stat that have been bandied about here, I would be very curious to ask who is classified as a foreign buyer? Is an immigrant a foreign buyer? Is it simply a non-canadian citizen or a non-canadian resident? That does make a difference because a lot of these rich asians park their wife and kids here. So their family is technically canadian residents, are they still considered a foreign buyer at that point? The final thing is, almost all of them will buy. They will not rent, every investor immigrant that lands here from Asia will buy a property of some sorts. They really don’t care about how high the price is, we have not reached a level that would make them feel that we are expensive compared to a place like Beijing.

    2. About this bubble. Is there a bubble? I would say there probably is. But it is not as big as one may imagine. Here is why. All the statistics that have been gathered have been compared to western stats. Meaning that all rent to own ratios, average cost to income ratios, etc, are all using historical statistics in the Vancouver / Canadian markets. But that’s not neccessarily correct. Because the demographics of Vancouver is shifting. When you look at any given city’s ratios, you need to take a look at their demographics. So for example, if your city is 20% chinese, I would use Beijing’s ratios multiplied by 0.2. If the city is 10% Indian, then use Mumbai’s ratios multiplied by 0.1, etc. Basically, I would take into account the cultural diffferences of these ratios. Taipei’s rent to own ratio is a lot worse than Vancouver’s, to the tune of double or triple as bad. This is just an example, do I expect that Taipei or Beijing will ever correct to Western levels? Not a chance. It’s just the way that different cultures value real estate. I would be curious what that ratio would look like once the cultural differences have been considered. I would imagine that we would still be higher than the number, but it wouldn’t be as astoundingly high as it currently is. So while I feel a correction is in order, I would be shocked if Vancouver housing crashed.

    3. People always ask me this, why do the immigrants come here? Hate to say it, but if I have to explain it it would take an essay. I recently did a quick examination of all the requirements that someone who is rich in China would want in a city, we fit the bill perfect. And no, most US cities flunk these tests horribly, the only one that might work well enough for them is San Francisco. In fact, there aren’t many cities in the world that fit the bill as perfect as we do. So we are kind of caught in a perfect storm.

    So there are my 2 cents, I wish everyone good luck in this market. I am not convinced that the market will go up forever as I am intelligent enough to know that no market acts that way. I expect a correction of about 10% over the period of say 3 years. Then it might still go up a bit after that. But I think it’s unrealistic to expect ridiculous returns that we have seen. I bought my place last year, but I had to search very very hard to find the best possible deal in the market in order to hedge myself against a correction. I am actually really glad that there is this forum as it is good to hear a contrarian view over the normal “yeah it only goes up comments”.

    • Great post. If you have any time to contribute further thoughts (or an essay) on why the immigrants come here, that would be very valuable.

      A couple of points.

      – You are claiming that wealthy asian buyers distort the fundamentals of some, but not all, areas. I would certainly agree. However, price increases have been dramatic in most areas. (For example, $500k homes in Squamish.) So that would suggest that the areas without distorted fundamentals are probably in a bubble and could see large price drops.

      – We’ve also seen that wealthy asians are capricious — the preferred areas of today may not be the preferred areas of tomorrow. As you mention, Richmond was a hotbed of asian buying activity, but now seems not to be; consider their current 11 months of inventory. So an area whose high prices may seem to be justified by distorted fundamentals may suddenly see their fundamentals resort to the plain old price/income, price/rent ratios, leaving the area suddenly in bubble territory.

      – “You can also take a look at the parking lot of of some west side schools, their kids roll in far fancier cars than their teachers.” This is true, but it is not a recent phenomenon. 20 years ago it was kids from Hong Kong and Taiwan in their BMW 3-series.

      – Adjusting local price-to-rent by incorporating 20% of Beijing’s price to rent sounds interesting, but it may be too simplistic. After all, Beijing’s price-to-rent would be averaged across their entire population, where the actual immigrants from Beijing come from a very narrow segment of their population.

    • Thank you for this comment. I found it very interesting and informative.

      If you have time to answer: why does San Fran almost fit the bill but Seattle and/or Portland do not? (Or in other words — what is it about Vancouver that is so ideal for wealthy Asian immigrants, but it sounds like the other west coast North American cities do not fit the bill in the same way?)

      A side note ancedote: in my western Canadian city someone at a tech company was talking about Vancouver and joking about having to live in a basement. Somebody else was commenting that what you could get for 500K in Florida was going for 5 million in Canada. Knowing Florida – I’d say that’s about right, although I’d put it at 500K US to about 1.8 to 2.5 million in Canada.

    • “Taipei’s rent to own ratio is a lot worse than Vancouver’s, to the tune of double or triple as bad. This is just an example, do I expect that Taipei or Beijing will ever correct to Western levels? Not a chance. It’s just the way that different cultures value real estate.”

      Taipei isn’t the best examples because the ownership rate is so high, I think above 85% IIRC.

      Nonetheless, as an investment, there is no reason why Vancouver is trading at the premiums it is, the concept of making shrewd investment decisions –which quite frankly are not exclusive to any culture — are strangely lacking in the city. People cite stability, growth, etc. but the number are the numbers: take a condo — there are far safer and better-returning investments than YVR condos with much better liquidity and zero management overhead to boot. If people seriously think that Vancouver condos are a good investment long-term, they are giving away their money. And for that I thank them. (Same goes for non-condos but condos are the simplest to dissect.)

      Heck some of the wealthiest people in SE Asia have commented that Vancouver real estate looks a bit overvalued. Take heed; they didn’t get rich by falling into cultural stereotypes.

    • Great/interesting piece, Mr. Lee.. and as for, “…why do the immigrants come here… but if I have to explain it it would take an essay.”… well, as it happens, AiWeiWei has a few thoughts to share on that dynamic/subject…

      [DailyBeast/NewWeek] – The City: Beijing – Ai Weiwei finds China’s capital is a prison where people go mad.

      “Beijing is two cities. One is of power and of money. People don’t care who their neighbors are; they don’t trust you. The other city is one of desperation. I see people on public buses, and I see their eyes, and I see they hold no hope. They can’t even imagine that they’ll be able to buy a house. They come from very poor villages where they’ve never seen electricity or toilet paper.”…

      http://tinyurl.com/3kj8bw6

      Now, as regards market outcomes… it is best to remember, prior to ‘going deep down and immersing oneself in the reality’ – that reality is non-linear & complex… More like fractal-QuantumChaos than the ‘cute’ models so beloved of DSGE theorists/adherents. In more practical terms, that means ‘the reality’ can simultaneously manifest in a variety of ways.. including bifurcation; here’s an example:

      [BloomBerg] – Maine’s ‘Rockefeller Country’ Home Values Make the Rich Richer

      “Americans watched their home values tumble an average of 29 percent from the start of the real estate collapse in 2006, according to the Federal Reserve. Mount Desert estates owned by the descendants of oil and industrial barons gained by almost the same amount, according to local records.”…

      http://tinyurl.com/3f57zkv

      As ever, the central challenge [ or would that be ‘trick’] of FortuneTelling is to select the correct unit of analysis… i.e. – are distortions in markets like YVR RE best analyzed through the ‘prism’ of ethnicity/national origins/participants’ cultural biases or are other factors at play [e.g. transnational capital mobility; political risk aversion, macro-economic policy, ‘irrational’ or behaviourally conditioned/motivated actors, etc.]?

      Fundamentals? Yes, but we must choose carefuly… whose… and which. Some actors [variables] are decidedly more ‘important’ than others.

      • A cheerful afterthought [and parting shot] for all those struggling to comprehend non-linear complexity… The same ‘ecosystem’ that yields gulags [and worse]… is also capable of moments like these (thank you, Miss Darnel)… Just Jog/Shuttle to 18:35 into this clip any ‘ol time you FeelTheNeed… the need for a little ‘Star Dust’/welcome respite from ‘life’s dreary dross’…

        http://tinyurl.com/3wrv3md

  11. This happened to our family last year when our landlady decided she didn’t want to be a landlady anymore (apparently the mortgage + strata fees were getting to be too much, and she wanted out). We got sick of the intrusions, so we decided to send her a letter saying that if she reduced our rent, we’d stay until she sold the place, but otherwise we’d be giving our 30 days notice. We also offered to pay MORE rent if she gave us another year lease, but I guess she thought the place would sell before she ran out of money, and she refused both our offers.
    Meh, whatever.
    A month later we moved literally across the street to a nearly identical condo for 5$ less a month with a better view. (Because, you know, there’s no shortage of these places . . . I don’t get why people think renting a condo isn’t “stable” enough for having kids. My kid will stay in the same school with the same friends for as long as we want him to – there’s no shortage of cookie-cutter, landlord-subsidized condos in our very nice neighborhood).
    Four-five months after we moved, we found out our former landlady was foreclosed on. We weren’t surprised; I mean, if she was bleeding more money than she could afford while we were paying her 2k a month, I don’t know how she thought she was going to survive long enough to sell that place without any renters at all.
    I still don’t think anyone’s living in that condo, because whenever I pass by, I can still see the one screen I accidentally left in the bedroom window. It’s got a hole in it and is kind of ugly; I can’t imagine a new owner would want to keep it.

  12. The residential tenancy act states “The tenant’s rights to reasonable privacy and freedom from unreasonable disturbance must be taken into consideration in establishing a viewing schedule”. It doesn’t specify what exactly is resonable however. As a renter, If you feel that your legal entitlement to quiet enjoyment of the property is not being upheld, then you are well within your rights to request compensation for your troubles. A good realtor should know that an antognistic renter can wreck havok on their ability to sell the place. Also keep in mind that the renter has nothing to gain from this exercise; if the house sells, you lose your residence, if it doesn’t you continue having strangers running through your home, risking theft and damage.

  13. Julian,

    thanks for your insight and valuable comments.

    One thing I wanted to shed some light on is your comment:

    “But it doesn’t justify that all areas should go up by the same percentage”

    you’re forgetting the displacement factor. Traditional high incomes from west side can no longer afford the home in their traditional west side neighbourhood. This income/wealth is now diplaced to another area. Typically these are caucasian high earners now looking east to buy. Perhaps this is why we see some east side areas with concentrations of caucasian residents becoming high priced i.e. Main, Commercial.
    So in fact, since you’re adding such high income to lower income area I think this would effect prices to a greater extent, not lesser

    • lol, [expletive deleted. -ed.] you stupid [expletive deleted. -ed.].

      • Actually, CHG – for once, ‘Fusty’ has something of merit to add… it’s a bit like physics… Drop a stone into a pond sometime and watch the ripples spread out.

        As regards housing affordability & patterns of urban development, The University of Chicago’s Department of Sociology had a lot to say about this in the 20’s and afterwards… ah… what a pity, if not for the Friedmanites & his perfidious faculty the WindyCity’s MostExcellent school would be remembered for better things.

        Speaking of WindyCities, am I the only one who ever wondered whether that particular TermOfEndearment had more to do with flatulence than climatology?

      • it’s wu mao dang monday

      • @Nem I don’t think there would be much argument with “displacement” but, still, one must separate the behaviour of the displaced under bubble conditions from the long-term financial trade-offs they make by choosing to buy.

        None of the people involved in the supposed Exodus were ever priced out of living in the City of Vancouver.

        I never did figure out why Northwestern wasn’t in Seattle.

      • Best laugh ‘o TheDay [NWU]!

        Cheers, Jesse!

        ‘Nem’ is so OldSchool… doesn’t ‘believe’ in much, really.. Just GoodManners, the transcendent and redemptive power ‘o “Love&Art”… and BBQ.

        OK, and air-cooled engines, too.

        That’s it.

        PS- HyperFit ‘G3’ man swooped out of the HillBillyRivieria this morning like TomCruise in “TopGun” trying to OneUp “IceMan” [now there’s a BroMance; you should hear Quentin Tarintino’s hilarious deconstruction of the famous ‘locker room’ sequence].

        Back to ‘reality’. Nothing sounds like a pair of RR Speys… you’d have sworn G3Man’s toy had afterburners.

        WealthyF**ker.

      • “Speaking of WindyCities, am I the only one who ever wondered whether that particular TermOfEndearment had more to do with flatulence than climatology?”

        The wind off of Lake Michigan is pretty intense. But perhaps the term also refers to the U of Chicago’s economic department.

  14. “I never did figure out why Northwestern wasn’t in Seattle.”

    heh– The Northwest Ordinance of 1787 included the territory that became Illinois. (Illinois Territory was part of the “Old Northwest” region.) A couple of relatives went to Northwestern including a great-grandfather.

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