With files from the Jon McComb Show.
Yesterday we brought you the interview with Finance Minister Mike de Jong during which Jon McComb lambasted him for skirting the question of foreign investment that is front and centre in the debate over how to deal with Metro Vancouver’s housing crisis.
de Jong was trying to blame the City of Vancouver for not dealing with supply fast enough, while saying he was waiting for the first batch of data regarding foreign ownership, which he’d be releasing next week.
Today Jon spoke with Tom Davidoff, a professor of Economics at the University of British Columbia and a vocal housing commentator, to find out what kind of data the province has been collecting and where or not it will be effective.
LISTEN to full interview with Tom Davidoff:
Is data on citizenship the way to go?
According to Davidoff, de Jong will be reporting on a form added to the property transfer tax form which includes a check box that asks if the buyer is a Canadian citizen or not, or if the corporation behind the purchase has owners who are Canadians.
“I don’t know how comprehensive that is because property can be bought in many ways….so the devil is certainly in the details. It will be interesting data, but I don’t know if it will tell the extent to which the money purchasing homes here in Vancouver has been earned locally or overseas.”
Knowing where money is being earned vs. knowing citizenship of the buyers
Davidoff suggests there’s another way to gather data in order to determine if foreign money is driving the housing market. It’s data he believes Minister de Jong could gather already has within his own ministry, and it has to do with how much income is being reported by property owners.
“We just need to know, after homes are purchased, especially expensive homes – do we see tax filings from that address that report the kind of incomes that support buying a property like that?”
So if someone buys a $million house in 2013, by 2015 we should see significant reported income or else you have to believe the money was coming from elsewhere.
“To me, that’s the most direct and important question. Is the money bumping home prices in Vancouver coming from somewhere else? The question isn’t (whether) the identity or citizenship of the buyer (is) Canadian.”
The fine line between protecting homeowners, and helping everyone else who needs a place to live
“If you’re a homeowner, then foreign investment in the housing market is a terrific thing because the value of your home goes up.”
Davidoff says he thinks that’s the number one factor during the reticence of the provincial leadership to do anything is homeowner’s equity.
“Because homeowners are making money and a happy homeowner is a happy voter.”
But if you’re a renter, or you have kids you want to live in Vancouver, astronomical price surges are not such a good thing.
Nor is it good for any company looking to recruit the best talent.
“Usually for a good job you’ll take them around with a real estate agent. Of course, these days you’d have to try and tell your recruit “I’m sorry, the real estate agents are all booked when you’re visiting Vancouver.”
Davidoff says that’s the point of the tax proposed by a group of UBC economists.
“We can make foreign investment something where everybody wins. With a high enough tax, you get revenue that can go back to lump sum cheques to renters, lump sums cheques to everybody who lives here.”
So somebody who buys a $4 million house, and they’re kicking in $80K in annual property tax, says Davidoff, “that’s real money.”
And that money could go to help people struggling in the housing market, and then foreign investment becomes a win-win situation.
“Once we implemented the tax by figuring out who has to pay it -which is people who don’t pay income tax here and never did and aren’t landlords – that would give us the data the minister wants in very clear form.”