COVER

REAL ESTATE Falcon accuses NDP of misdiagnosing the market

The B.C. Liberal leader says the province focused on demand-side measures when we needed more supply

by Charlie Smith

The Georgia Straight initially planned to put B.C.’s minister responsible for housing, Attorney General David Eby, on this week’s cover. We were curious to hear how Eby planned to follow through on his previously stated objective to increase the supply of housing when municipalities have so much control over zoning.

We also wanted to hear Eby’s response to arguments by UBC professor Patrick Condon that asset inflation—in the form of higher housing prices—is largely a result of monetary policy set by the Bank of Canada. In fact, the money supply in Canada doubled from 2009 to 2019 as borrowers enjoyed sustained low interest rates.

But Eby chose to decline the request for an interview. B.C. Liberal Leader Kevin Falcon, on the other hand, was willing to field our questions on how he plans to address the high cost of housing. This explains why he, and not Eby, is on the front page of this newspaper.

When reached by phone in Surrey, Falcon made a point of describing Eby as a “disaster of a housing minister”.

“The NDP’s approach has been just completely wrong-headed,” Falcon said. “And for us to get different results, we have to diagnose the problem properly. The NDP diagnosed it wrong from the outset.”

According to Falcon, Eby and the NDP insisted before forming government in 2017 that foreign Chinese buyers were largely responsible for driving up prices. As a result of this “misdiagnosis”, Falcon said, the NDP’s solution to affordability was to load a lot more taxes onto housing to curb demand from these foreign buyers.

Falcon, however, maintained that foreign buyers have never been a major part of the B.C. real estate market. In fact, he said, they typically comprise less than five percent of all buyers—and even less during the pandemic.

“Here we are, just five years later, and we’ve got the highest housing prices we’ve ever seen in the history of British Columbia,” Falcon said. “In fact, last year in Surrey alone, prices are up 40 percent.”

After stepping down as finance minister in 2013, Falcon worked in the development industry as the executive vice president of Anthem Capital Corp. He thinks that if the NDP had fully acknowledged the magnitude of the shortage of new housing after 2017, prices wouldn’t be nearly as high as they are today.

“We’ve had constrained supply for far too long,” Falcon said. “The demand continues to grow. And in the absence of supply, there is going to be a driving up of prices. This is simple economics and something that the NDP completely misread.”

He promised to take a “totally different approach” if he becomes premier after the next election.

“I will make sure through legislation that local governments are doing their bit to ensure that we get the kind of supply and the kind of housing that we’re going to need,” Falcon said. “Young British Columbians, in particular—first-time buyers—will be able to see a credible path to homeownership.”

He insisted that 25 percent of the cost of every new home or condo is made up of taxes. In making this claim, he included everything from the property-transfer tax to the provincial sales tax to the vacant land tax to the school tax to municipal development cost charges and communityamenity contributions.

Falcon said that if a municipality’s official community plan identifies new density in an area, there should be no requirement for a public hearing. Plus, he thinks that municipalities that fail to meet their targets for population growth under the Livable Region Plan should be convinced to do this with carrots and sticks.

When it comes to rapid-transit projects, Falcon said that as premier, he would “take a much more direct role in determining what kind of density we are going to see around those stations”.

“It is awful that we invest billions of taxpayer dollars in these very expensive transit corridors and then we sit back and watch the municipality do almost nothing to take advantage of the huge demand from people that would love to live near a rapid transit station,” Falcon said.

That prompted the Straight to ask him what goes through his mind when he goes by Nanaimo Station in an area of East Vancouver dominated by single-family homes.

“It feels like we’re just missing this huge opportunity,” Falcon replied. “Like, how is this possible that we haven’t got the kind of density that we should have in an area like that so close to these stations. It’s mindboggling to me.”

Over the past year, Eby has been talking a great deal about the need for a dramatic increase in the supply of housing. That prompted the Straight to ask Falcon if voters who agree that a low supply is driving up prices can now feel safe voting for the NDP in the next provincial election.

Falcon replied that this is “such an important question”. He then declared that Eby has been spending the better part of the past year getting himself educated about housing. How so? According to Falcon, by “having secret meetings with the large developer association called the Urban Development Institute”.

“While I’m happy that in year six of their mandate, they are becoming alive to the reality of how the marketplace works,” the B.C. Liberal leader said, “I would say to people out there: ‘They fundamentally misdiagnosed the problem from the getgo. I don’t trust him [Eby] to bring about the right kind of changes to get the right kind of results in terms of the proposals he’s been talking.”

Last moth, Eby complained that municipal governments have not approved enough housing to serve a growing population. He has suggested that the province is going to need to be “more prescriptive”, possibly through legislation.

Falcon, however, claimed that Eby “essentially borrowed my idea of bringing in legislation to try and force more supply out of local governments”.

“I’m just concerned that he’ll get it all wrong,” the B.C. Liberal leader added.

Falcon agreed that sustained low interest rates and the growing money supply are contributing factors behind higher housing prices, but he doesn’t think that there’s a lot the province can do to address that. Nor did he express any eagerness to tinker with the Agricultural Land Reserve to free up more land for residential development.

He also said that B.C. can expect 70,000 to 100,000 immigrants per year because the federal government has increased its targets to more than 400,000 per year. And many of those B.C. immigrants will settle in the Lower Mainland and look for a place to live.

“If we don’t have the housing stock, that is just going to continue to push that demand and make it very, very challenging,” Falcon said. “So my objective, if I become the premier of the province, is to focus like a laser beam on…Canadian citizens that live in British Columbia [and] that have never owed a home before. And I want to make sure that we can create a path to ownership to them that is credible, realistic, and affordable. And I think I can do that.” g

B.C. Liberal Leader Kevin Falcon (above, with wife Jessica and daughters Rose and Josephine) described the NDP’s David Eby as a “disaster of a housing minister”. Photo by John Lehmann.

If we don’t have the housing stock, that is just going to push that demand and make it very, very challenging.

– B.C. Liberal Leader Kevin Falcon

A Better Way Home for British Columbia: BC REALTORS®’ Recommendations for Improving Affordability and Consumer Protection

by Pearl Zhou ( is story is sponsored by the British

Columbia Real Estate Association.)

When Natalie Holgerson and her husband unexpectedly got an unsolicited o er on their townhome in Steveston—for well over what they’d paid a few years ago—they couldn’t believe their luck. In the hopes of moving into a single-family house, they decided to take a chance on the o er. But, unfortunately, things haven’t panned out as they’d hoped.

Today, they’re renting a er losing out on several properties despite making subject-free o ers. Each time, they found themselves in multiple-o er scenarios where they presented their o er immediately a er the showing. O ers were always well over the asking price, and there was never time for any due diligence like a home inspection. Natalie said, “Unless you’re willing to take on a million dollar–plus mortgage, which we are not at this stage in our lives, it’s a super-challenging situation.” And subjects? Natalie knew their offers would only be considered if they were subject-free.

B.C.’S HOUSING SUPPLY NEEDS TO INCREASE NOW e fact is that in British Columbia, there’s nowhere near enough supply to meet demand. For example, in March 2021, 67,000 buyers searched for homes across B.C. while only 24,000 homes were listed for sale. e disparity between housing supply and demand will continue to rise as the federal government resumes its immigration program. is year alone, the Government of Canada aims to welcome more than 400,000 new permanent residents; 70,000 to 80,000 are expected to settle in B.C. e province already has domestic demand that it can’t meet. B.C. is already home to four of Canada’s fastest-growing cities: Kelowna, Chilliwack, Kamloops, and Nanaimo—and BCREA’s research shows that these cities have a $1-million benchmark for a single-family home or townhome. As the demand for housing grows while supply continues to lag behind, the pressure on potential home buyers will only worsen.

Moreover, British Columbians, whether home buyers or renters, need options in housing type. Building out middle housing—such as duplexes, triplexes, fourplexes, laneway, and secondary suites—can create a much-needed diversity in the housing stock. The diversification and densi cation of housing are essential in cities and transit-accessible population hubs.

When there’s such a mismatch between supply and demand, it’s no wonder that multiple-o er scenarios and even subjectfree o ers are the norms.

BC REALTORS® SUPPORT MORE TRANSPARENCY at’s why the professional association for B.C.’s 24,000 Realtors, the B.C. Real Estate Association (BCREA), has submitted a white paper, A Better Way Home: Protecting Consumers in Real Estate Transactions, to the B.C. government with more than 30 recommendations to improve the B.C. real estate sector and better protect consumers.

In our recommendations, we urge the provincial government to make infrastructure investments to local governments conditional on o cial community plans, housing-needs reports, zoning bylaws, and other local policies to allow for increased density and a mix of housing types. Put simply, to speed up and increase housing diversity and starts.

We have also suggested the creation of a permanent National Housing Roundtable in coordination with the federal government to bring together all housing-market stakeholders to help address these challenges in an integrated manner.

Our other recommendations include making property-disclosure statements mandatory, making all strata documents available upon listing, and giving buyers more insight into multiple-o er scenarios.

see next page

BCREA has presented the BC government with more than 30 recommendations on how to meet BC’s long-term housing supply needs and give consumers in the market today more peace of mind.

Evolve the Real Estate Sector

Improve the Stakeholder Engagement Model

A BETTER WAY HOME:

Improve Housing Affordability

STRENGTHENING CONSUMER PROTECTION IN REAL ESTATE

Enhance Consumer Protection in Transactions

Learn more about our recommendations at bcrea.bc.ca/betterwayhome.

The B.C. government wants to introduce a “cooling-off period” to allow buyers to walk away from a signed contract. But a solution that protects buyers at the expense of sellers is no solution at all. INFORMED DECISIONS, INSTEAD OF REGRETS e mismatch between potential home buyers and available properties means that there are a whole lot of frustrated British Columbians who have been unsuccessful in their home-buying journey so far. According to a survey of unsuccessful home buyers in B.C. since January 2021, by far the most common reason for an unsuccessful purchase was competition from other potential buyers (49 percent), followed by inadequate nancing (31 percent). Similarly, among concerns expressed by successful home buyers, the largest was pressure to make an o er uncomfortably above the list price to be competitive (22 percent).

With erce competition between buyers, subject-free offers and risky financial decisions are being made without proper due diligence. O en, buyers prepare an o er 48 hours a er a showing, and it’s done without an appraisal, inspection, or sometimes even without reviewing strata documents. Like Natalie and her husband, for many buyers, non-subject o ers are a must if they want to have any chance at securing a home. e current real estate market and what it has meant for buyers and sellers have many people worried—from consumers to government to Realtors. e B.C. government, in particular, has taken notice. Concerned that consumers are making increasingly risky decisions, the B.C. government has said it will introduce a mandatory “cooling-off period” in real estate transactions this spring.

A cooling-o period would allow buyers to change their minds and cancel a signed purchase contract with little to no legal consequences—likely leaving the seller in a di cult situation, particularly if they’re buyers in another transaction. A solution that only protects one side involved in a transaction is no solution at all.

PRE-OFFER PERIOD: PEACE OF MIND FOR BOTH SELLER AND BUYER

Another recommendation BCREA has put forward in A Better Way Home is a “pre-o er period”. Unlike a cooling-o period that protects buyers at the expense of sellers, BCREA’s proposed pre-offer period would give both sides of a real estate transaction peace of mind.

During the pre-o er period, a buyer has time to do their due diligence, review documents and disclosure statements, ensure their nancing and insurance are in place, and arrange for a home inspection. en, when they’re ready to make an o er, the buyer can make an informed decision on presenting with or without subjects.

When buyers are allowed enhanced market exposure and opportunities for due diligence—before o ers are considered and accepted—this ensures that they’re not making risky o ers in haste.

On the other side, when the seller receives an o er, they can be con dent that the buyer is serious and has the nancing in place to make sure the deal goes through. It also provides greater transparency in the transaction, in that all parties are aware of what due diligence is being undertaken.

REALTOR AND GOVERNMENT COLLABORATION IS IN CONSUMERS’ BEST INTERESTS

Realtors have unique insights into how to improve consumer protection in real estate transactions. BCREA wants to collaborate with the B.C. government to ensure proper measures are in place to tackle the core problem of B.C.’s housing issues: the lack of housing supply. Progress needs be made to improve housing supply and lessen the impacts of future overheated markets. At the same time, consumers looking for a home today need workable solutions that give buyers and sellers peace of mind and that can withstand the tests of changing market conditions.

Buying a home is one of the biggest financial decisions we’ll ever make. Working with government, consumers, and other real estate sector stakeholders, BCREA wants to help nd A Better Way Home for all British Columbians.

MANDATING A PRE-OFFER PERIOD

BCREA believes the BC government should introduce measures that help homebuyers make informed decisions, not backtrack because they regret bad ones.

That’s why BCREA has recommended that government introduce a pre-offer period of at least five business days from listing instead of a cooling-off period.

HERE’S HOW THEY’RE DIFFERENT:

A pre-offer period protects buyers and sellers equally. It gives buyers time for due diligence and sellers confidence in the offer they receive. A cooling-off period brings more uncertainty into real estate transactions. Buyers may make unserious offers on multiple properties just to have options.

A pre-offer period recognizes sellers are often buyers in another transaction and need to know they’re getting a serious offer.

A cooling-off period could raise prices, with buyers making offers on more than one property, knowing they can walk away. A 10% increase in offers could increase list prices by 2-3%

A pre-offer period supports consumer choice, informed decision making and more transparency in real estate transactions.

bcrea.bc.ca/betterwayhome

REAL ESTATE BMO: War catches Canadian housing in “crossfire”

by Carlito Pablo

You may be wondering how the war between Russia and NATObacked Ukraine is going to affect the housing market in Canada.

BMO Economics has this covered.

Sal Guatieri, a senior economist and director at BMO Capital Markets, looked at the issue and released an analysis titled “Canadian Housing: Caught in the Crossfire”.

The short take is that the war is not good for Canadian real estate—that is, if you’re the sort who’s hoping that the market will get even hotter than it is.

Guatieri wrote in his March 4 paper that the “war is unlikely to echo previous crises that only ended up juicing the market”.

He cited the 2014 oil-price crash and the 2020 COVID-19 pandemic. In both situations, the BMO economist recalled that the crises “led to rate cuts that stoked the 2016 and current mania”.

“As things stand, the conflict is expected to raise more concern about inflation than growth, heightening risks to the rate outlook,” Guatieri noted.

In simple terms, if there had been any chance that the Bank of Canada would slow down its anticipated 2022-to-2023 series of increases in its interest-setting rates that will make mortgages more expensive, that possibility has likely evaporated.

“The Bank of Canada doesn’t see the war as an obstacle to tightening, as it pulled the trigger this week, and it plans to hold tight to the normalization path for the year,” Guatieri stated.

The BMO economist was referring to the March 2 announcement by the central bank of a 0.25 percent increase, hiking its rate to 0.5 percent.

To explain, raising the interest rate is a way of reining in inflation or the growth in prices of goods and services.

Inflation in Canada stood at 5.1 percent in January, which is way higher than the Bank of Canada’s target of two percent.

In its March 2 rate announcement, the central bank stated that the conflict in Ukraine is “putting further upward pressure on prices for both energy and foodrelated commodities”.

“All told, inflation is now expected to be higher in the near term than projected in January,” the Bank of Canada stated.

For Guatieri, the market is hot enough to begin with. “In fact, it’s hard to see the housing market becoming more feverish than it is now,” the economist wrote.

He noted that “benchmark prices posted record gains (going back to 2005) on both a yearly and monthly basis in January, and prices look to have accelerated again in February based on the latest city reports”.

In the Greater Vancouver market, the benchmark composite price, or the typical price of all types of homes combined, increased to $1,313,400 in February 2022. This represents a 20.7 percent increase over February 2021 and 4.6 percent more than January 2022.

In January 2022, the benchmark composite price in Greater Vancouver was $1,255,200. This price marks an 18.5 percent increase over January 2021 and a two percent addition to December 2021.

Moreover, Guatieri noted that the February 2022 increase in Greater Vancouver is “pedestrian compared with Toronto”. In Toronto, the price soared 35.9 percent year-over-year in February.

“To put the latter figure in perspective, in a balanced market, house prices would normally rise more or less alongside family income—which rarely grows 4.5% in an entire year let alone a single month,” Guatieri wrote.

It was on February 24 that Russian President Vladimir Putin announced a “special military operation” in Ukraine.

While rising interest rates may slow down transactions in big markets like Greater Vancouver and Toronto, the BMO economist suggested that some regional markets may “come out ahead even in a rising interest rate climate”.

These are the “energy and commodity producing provinces of Alberta, Saskatchewan, and Newfoundland and Labrador”.

“Not only have they largely avoided the pandemic explosion in house prices, and thus remain highly affordable and likely to withstand higher rates, they stand to benefit from the soaring price of oil, natural gas, wheat, and potash,” Guatieri stated.

He cited Calgary as an example, where home resales “hit a record high for the month of February, and benchmark prices blasted nearly 6% higher in the month and 16.1% in the past year”.

With interest rates starting to rise amid the backdrop of the Russia-Ukraine war, Guatieri suggested that Canada’s housing market “now faces its biggest test” in recent years.

“Investors, now the fastest growing share of buyers, will be the first to back off,” the economist wrote.

Meanwhile, elevated housing prices will continue to pose affordability problems. “Many potential buyers will have little choice but to rent as ownership becomes an ever-distant dream,” Guatieri stated.

The Bank of Canada is scheduled to make its next announcement about its interest-setting rate on April 13, 2022.

Guatieri wrote that while central bank governor Tiff Macklem has said that the “uncertainty caused by the war warrants a ‘careful’ approach, any caution will be sorely tested if inflation pushes further beyond three-decade highs”.

“By further snarling global supply chains and sending many commodity prices to multi-year highs (oil and wheat at 13-year peaks and aluminum at all-time highs), the war is an unwelcome guest at the inflation table,” the BMO economist stated.

“The Governor isn’t ruling out the possibility of launching a 50-bp missile if needed,” Guatieri added, referring to the likelihood of a 0.5 percent rate increase on the immediate horizon.

But like any good economist, Guatieri provided a second scenario for such a complex situation as the war in Europe.

“If the conflict escalates and ultimately depresses confidence and financial conditions further, the hit to the economy could dominate concerns about inflation, spurring a slower tightening cadence,” Guatieri qualified. g

Russian president Vladimir Putin and Canadian prime minister Justin Trudeau, chatting with one another in happier times (at a 2018 peace forum in Paris). Photo by www.kremlin.ru.

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enants’ RIGHTS EXPLAINED

d A VANCOUVER lawyer says that a human-rights complaint can proceed against a landlord at the B.C. Human Rights Tribunal even if there was no intention to discriminate. Laura Track (above), director of the Community Legal Assistance Society’s human rights clinic, pointed out in a March 3 webinar that housing and community spaces must be available equally to everyone, except in rare circumstances, such as when a building is reserved for people with disabilities or for those 55 years of age and older. “Remembering that discrimination can be unintentional is a really important part of upholding human rights,” Track said in the webinar, which was hosted by the South Vancouver Seniors Network.

The B.C. Human Rights Clinic provides free information by phone on weekdays and free 30-minute appointments with lawyers on Mondays and Wednesdays. Track explained that the B.C. Human Rights Code applies in three main areas: jobs, tenancies, and access to services delivered to the public in B.C., apart from those under federal jurisdiction. She noted, however, that the condition and maintenance of buildings are the purview of the Residential Tenancy Branch and not the B.C. Human Rights Tribunal. The South Vancouver Seniors Network is seeking stories and testimonies from older tenants who have experienced abuse, neglect, or conflict in connection with their rental accommodation. Emails can be sent to SouthVancouverSeniorsNetwork@svsn. ca until March 25 at noon. g by Charlie Smith