Vancouver Housing Affordability – Century Long Crisis or Boom ‘n Bust Cycles?

“On Sept. 30, after months of research, the Mayor’s Task Force on Housing Affordability released its final report, outlining the challenges facing renters and owners in Metro Vancouver’s housing market.
“We know that many people across a wide range of incomes face affordability challenges in our city,” it states, “from those with little income and no housing to those with a higher income but who struggle to find affordable, suitable and adequate housing… How Vancouverites decide to address these challenges is fundamental to the future of our city. Should we simply let the market decide what kind of city we want and who gets to live here? Or should we take the actions needed to increase the diversity of affordable housing options, and maintain the vibrancy, diversity and economic competitiveness of our city?
“We believe that this report provides a blueprint for both short and long-term policy directions to significantly increase affordable housing options in Vancouver, and encourage City Council to embrace the recommendations and take action on the most pressing policy issue in Vancouver today — the lack of affordable housing.”
The report goes on to cite high costs and substandard facilities as particular problems — echoing media rumblings about a city-wide “housing crisis” — and concludes that housing affordability is perhaps the most significant issue affecting Vancouverites at the dawn of this century. As it turns out, a look through the city archives reveals that it was also the most significant issue affecting Vancouverites at the dawn of the LAST century. And quite often ever since then. Hm.”

– from ‘Vancouver’s 128 Years of Affordability Fears’, Jesse Donaldson, TheTyee.ca, 24 Nov 2012 [hat-tip to YVRHousingAnalyst]. Be sure to read the whole article for many wonderful quotes from prior speculative manias in Vancouver housing and land.

Here follows the comment that we posted below the article at The Tyee:

“Century Long Crisis or Boom ‘n Bust Cycles?

Many thanks for this article, Jesse. Anybody following the Vancouver housing predicament will find it very interesting. We’ll definitely reference it at VREAA.
By the way: In your reading related to this, did you happen to see any early mention of the “running out of land” idea? It’d be fascinating to know when that was first expressed.
Also: Did you come across quotes from down-cycles, when housing/land ownership was valued far less? In the thirties, houses in Vancouver could be purchased for the equivalent of three years rent. (That figure gets distorted in the other direction during manias.. currently rent:price ratios on some properties make the purchase price the equivalent of 50 years’ rent!)

Our own thesis is that Vancouver is very clearly currently locked in the jaws of a speculative mania in housing, and that, when the mania collapses (it likely peaked in 2011), prices will fall by very substantial amounts.
This will shake things up, and ownership will become more affordable, again. Rents will, perhaps paradoxically, also come under downward pressure, for various reasons.

Vancouver housing will never be cheap, there will always be a mild-weather, beautiful-vista premium, but the current mania has taken prices to more than twice those supported by economic fundamentals, even when that premium is accounted for.
Until prices reconcile with underlying fundamentals like rents and local incomes, affordability talk and action will be the equivalent of rearranging the proverbial deck-chairs on the Titanic.

A number of local bloggers have been bearish the Vanc RE market for years, for good reason.
At VREAA (the Vancouver RE Anecdote Archive) we collect personal stories regarding the impact of the Boom (and the unfortunate, inevitable, coming Bust).”

Also, here’s an excerpt from another comment at The Tyee:

“There was no housing crisis in Vancouver when we moved there in 1955. My first job paid me $1.35/hr and lasted 5 months. The I went into an apprenticeship for .75 cents/hr.my wife was making about the same in various jobs.
Our rent for 2 nice rooms and shared bathroom was $35./mo. Our grocery bill under $20.wk.
There were ads in the Sun for small bungalows in Burnaby for $1,200. A $5,000. house was really something.
We bought our first in 1966 for $500. down and $45./mo. Nobody complained about housing shortages or unaffordability.”

– Ed Deak (‘Fiat Lux’) at the Tyee, 24 Nov 2012

Extreme example of a down-cycle:


Men by makeshift shelters in the “Jungle” of the unemployed, 1931.
[Major Matthews Collection, City of Vancouver Archives, Re N10.10]

23 responses to “Vancouver Housing Affordability – Century Long Crisis or Boom ‘n Bust Cycles?

  1. Articles like this are just trivializing the current madness. “See, it was always like this, so STFU!”

    • UBCghettodweller

      Taken from another Vancouver internet forum:

      ” Hell I moved here from another country and work in IT and found a well paying job here in no time. Vancouver is expensive, deal with it or STFU.”

      • Yeah, that’s the right attitude 🙄

        Vancouver was always expensive, but now it’s more than double that.

    • I love this anecdotal bit of history.

      “You or your agent hold on to it till property rises, then sell out and buy more land further out of town and repeat the process. I do not quite see how this sort of thing helps the growth of a town, but the English Boy says that it is the ‘essence of speculation,’ so it must be all right. But I wish there were fewer pines and rather less granite on my ground.”

      R. Kipling writing about his speculation in Vancouver real estate.

  2. “We believe that this report provides a blueprint for both short and long-term policy directions to significantly increase affordable housing options in Vancouver, and encourage City Council to embrace the recommendations and take action on the most pressing policy issue in Vancouver today — the lack of affordable housing.”

    Sounds like someone wants to take advantage of high price of housing to justify development of 200-400 sq. ft. condos. These will probably get approved built and bought, and I already feel sorry for all the people who will buy into these “affordable” projects.

    If the conclsion is not enough affordable housing the solution can only be further development, if there aren’t enough family dwellings to house the current population. Othewise the solution should rather be controlling the speculative mania. There are various ways of doing this, but amongst them are:

    1) Educate the people. The idea that being able to afford the monthly payment, means being able to afford the property needs to be cleared out of people’s minds. There should be govt. and city pamphlets explaining the math and the risks to everyone on every street corner.
    2) No bail out of people who get in trouble if the market collapses. If there is a bail out it should be based on repayment of obligation created.
    3) Only approve and build new projects if capacity is needed.
    4) Better controls on pre sales market. Stop tax evasion. Stop illicit funds being laundered.
    5) Residence and ownership linkage.

    I’m sure there are a lot of pro-active steps that can be taken by all levels of government, to alleviate this, if this is really a problem, instead of just approving further construction, which allows the RE industry to make a bit more margin, but provides people with a sub-standard housing option.

    Its like there is plenty of bread in the world but for some reason it is quite expensive, so some people can’t afford it. So instead of finding ways of making this bread cheaper, or figuring out why it got so expensive in the first place, we pay the bread manufacturers to produce a kind of bread that does not provide the correct amount of nutrition, so that it could be sold to people who can’t afford the good bread.

    • Confusions -> Thanks for the comment; some great points.

      re Education -> Agree completely. We regret not submitting a proposal to the task force titled ‘Educate Citizens About Speculative Housing Manias’, or something like that.

      I like the bread analogy. Vancouver/BC/Canada has an obnoxiously large amount of land per capita. Building technologies should be allowing us to build decent, lasting structures for cheaper. Why shouldn’t housing be abundant and affordable?

  3. Thoughts re supply when the mania stops:
    One component that is hard to calculate is the amount of housing that will become available (increased supply) when prices declare a very definite downward trajectory and almost all buying & holding based on rising price speculation comes to an end.
    In other words, if every dwelling in Vancouver was being used by an end-user (an owner who wanted it as a home, or a tenant paying reasonable yield to an investor-landlord), how much housing surplus would there be?
    How much of an ‘affordability’ problem would we have under such circumstances?

    • We rent a nice 900 feet 2 bed (1 bed and enormous walk-in closet for her to be precise, but that’s just us. It’s a nice 2 bedroom), plus ample storage in the crawl space. Upstairs there is the almost-retired owners, all two of them. 5 bedrooms, 2 1/2 baths (or is it 3 1/2? Lots, anyway.)
      Total of 7 bedrooms, of which 2 are in use! Rooms that no-one has ever slept in. Rooms that might not have the door opened for months.
      How’s that for pent-up supply?

    • 4SlicesofCheese

      I took a look at some Van West open houses over the weekend, they do not look well made at all. Plus most of them have two suites in them.
      That means 3 kitchens.

      My friend bought in richmond recently and complained he could not find anything in Vancouver that did not have a suite built in or 6-9 bedrooms with all chopped up floorplans and closet bedrooms.

      • Ironically (what, with all the ‘affordability’ and ‘densification’ talk) we fully expect a good number of homes to deconstruct their suites as this all unwinds.

  4. Maybe the city should quit trying to use policy to create affordable housing?

  5. The Mayor’s task force on affordable housing was a joke as it ignored big contributors to the problem and instead pretended we could just build our way to affordable housing, Of course, what was to be expected when the panel was stacked with developers?

  6. I am sitting in the Driftwodo Inn in Sechelt BC right now. Drove thru YVR from the airport today to Horseshoe Bay, and took the ferry here.

    Vancouer is beautiful. I just flew in from from snowy and cold Calgary. The “sunshine coast” is also……in a word…..awesome.

    But for a premium 3 times the price of YYC (which is overvalued by 200%) I’ll shovel our snow, thank you very much. Almost wrote of the Budget Rent a Car twice today……..DWA was the culprit.

  7. Again with the “affordability” thing, Vancouver! I constantly remind people that there are two issues, one is affordability to buy, the other is affordability to live. The two are not exactly the same. One is much more difficult to solve than the other.

    It is one thing to complain about high prices and willingness or unwillingness of some residents to take on a long-term commitment for high debt loads with low but resettable rates.

    It is another thing to complain that rents are expensive and the City is driving away people because of this. I have not seen much to convince me Vancouver proper can reduce its rents. It may be able to for a small swath of its populace but the vast majority will be paying market rent, unless there is a paradigm shift in supporting subsidized housing in a big way, likely something a magnitude larger the city has ever seen in its past.

    There is subsidized housing. Pardon me if this sounds “bourgey” but there are more affordable rents outside of Vancouver in its suburbs. One will need a two or three zone bus pass, however. Point is, to try to move rental affordability in any measurable way in the short or even medium term is Herculean. Further, flooding the city with more rental housing may not reduce rents; in markets in the US where newly-built supply was measured in years, not months, rents didn’t end up moving down by all that much. I’m thinking San Diego. Just saying. More supply doesn’t necessarily mean lower rents. It’s worthy asking what one means by “affordability” and this article on the Tyee points out all too clearly that Vancouver can be pricey.

    I do agree with bubbly above, though; perspective is in order that current levels of ownership affordability may be off the charts compared to past episodes of speculative excesses. If so, looking at Vancouver’s past is not going to help us resolve plus ca change on the current scenario, so long as we’re talking about prices. Rents are, as I mentioned, IMO a different matter.

  8. Vancouver will never be “affordable” until/unless it becomes a very dirty ugly and destitute town. I’m sure the rents in Detroit proper are low – but that is only because it is not a desirable place to live.

    • I don’t think anybody expects Vancouver to ever be ugly or destitute or cheap.
      The thing is that currently rents are modestly higher than other Canadian cities with similar income levels, and prices are very, very expensive. Both of these can be expected to correct to fairer value in the down-cycle now apparently underway.

      Perhaps Vancouver is doomed, however, to cycle through booms and busts for eternity.

      • had a daydream realization while back that present situation, to whatever extent prices resolve, is simply ‘new normal’ for yvr … rest of developed world progressing through middle class atrophy and income bifurcation between those favored vs impaired by loose credit policies, large corp/govt ‘favoritism’ … why any different here? … most of the sentiment i detect appears to be backlash against that from demographic less accustomed to seeing it up close … process likely no longer reversible absent or until some extremely dramatic outcome(s)

  9. Pingback: “Vancouver has a finite amount of land. The prices are only ever going to go up.” – Douglas Coupland, 2000 | Vancouver Real Estate Anecdote Archive

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