What Makes Housing so Expensive?

Foreign investment driving up housing costs is the most recent concern in BC – specifically in Vancouver. There are calls for policies to control foreign investment and its effect on the housing market, as are in place in other countries.

The question is certainly worth more focussed inquiry. A UBC professor who has studied this point notes that other countries know exactly the nature of their foreign investment and identify it as a key factor in price increases. We do not. With no data collected on the question – how can we know its real impact? This work needs to be done in BC and appropriate policy responses should be more seriously considered.

But foreign investment is not the only factor. Other factors include high land costs in locations such as Vancouver and Victoria – with geographies bordered by ocean and mountains. Increased healthy longevity keeping seniors in their homes rather than releasing them to the market, increased divorce meaning that a family with 2 children now needs two homes instead of one, delayed marriage meaning that two people are looking for two homes instead of one. All these factors have increased in significance since our parents were house shopping.

And while municipal governments have a habit of pointing to senior governments for solutions, they play a very big role in housing costs through their share of government imposed charges. Why is it that governments view home purchasers as cash cows for everything the city might want? New parks? New art? Charge it to the developer for the privilege we give them of building in our fair city.

Really? Input costs become a part of the home price and it is home purchasers who lose. A 2009 study in 21 Canadian municipalities showed that government-imposed charges comprise 10 to 19% of total costs. In Surrey, at 19.05%, the charges made up $108,000 on the price of a $567,000 home. That’s a lot.

With so many factors going into housing prices, the solution to controlling costs is complex and all levels of government need to look at their own part in the puzzle. Perhaps we can all start looking at housing as a necessity instead of as a cash cow for government general coffers.

Author – Shannon Renault is a policy and program professional with a strong interest in housing and economic development. Email – sgrenault@gmail.com