We built this city on real estate

From a Vancouver Sun article about shifting tax burdens for the province posted by New Junky:

The convention comes on the heels of a business taxation report that suggests provincial and federal government decisions have had negative financial implications for local government.

The report by an expert panel also suggests the province doesn’t have any more money to dole out, Moore said. But he takes heart in a recommendation that the province work with municipalities to find alternate forms of funding to provide services.

“We really feel there hasn’t been a lot of cooperation,” he said.

Delegates’ resolutions include using development cost charges to fund projects such as recreation centres, fire halls and flood mitigation. Moore said other suggestions will focus on grants and shifting existing taxes — such as income, corporate and sales taxes — from the province to the municipalities, where they originate.

Moore noted changes in everything from improved workplace standards in fire halls to cameras in jail cells and rifles for RCMP vehicles have a financial effect on local government.

“We have to pay the price with no revenue coming with it,” he said.

It seems that local governments are becoming increasingly dependent on Development Cost Charges.

It seems like a bad way to pay for essential services like fire halls. How are we going to pay for these things after all the real estate development stops/slows because of a real estate crash???

Are city councils going to approve real estate development projects that are bad for the community simply because city finances are addicted to Development Cost Charges just to keep the fire halls functioning???

Read the full article here.

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painted turtle
Guest
painted turtle
jesse
Member

” because city finances are addicted to Development Cost Charges just to keep the fire halls functioning?”

I think so, though it may not necessarily be “bad for the community”, but certainly there will be great interest in ensuring the money keeps flowing.

Look at measures the City of Vancouver was preparing in 2009 when permit revenue dropped significantly. Now we hear nary a peep of potential layoffs.

Further, recent permit activity is somewhat out of phase with current resale market weakness.

gokou3
Guest
gokou3

@jesse: This is how governments get into bankruptcy. Take the “one-time” revenues (land sales, development charges, etc) and use it to fund recurring expenses (firefighting). Once the one-time revenue is gone or just slow down, there’s not enough money to make everyday payments. By this time, municipals would usually resort to borrowing to “ride out the slow times”. But when the good times return, they don’t pay off the old loans. So, loans stack up after each bad cycles and eventually, the municipal is overcome by the weight of its debt.

painted turtle
Guest
painted turtle

http://vancouver.en.craigslist.ca/van/apa/3280724559.html

This one has been on the market for a long time. 1.3 million.
I talked to the REA, sellers do not want to decrease the price…

Well… they are now trying to rent it out for $2600!!!

They should try a Rent vs Own simulator! It takes more than 35 years to break even…

joe_blown_away_by_high_housing_costs
Guest
joe_blown_away_by_high_housing_costs
Municipal governments that are financially reliant on Development Cost Charges is yet another example of a phenomenom I have observed during this real estate bubble: Governments and government entities are using real estate development as a means to print money. The prime example of that is the Little Mountain redevelopment, which involves reinvesting the proceeds of privatization into new supportive housing projects. We are paying for supportive housing by building market condos at Little Mountain. There are many other examples. SFU and UBC have both been involved in real estate development on their lands in order to raise money for these public institutions. Translink has talked about condo development adjacent to skytrain stations to raise money for transit. If the Riverview lands are redeveloped into condos that would also raise money for government. Even the federal govt is getting in… Read more »
M-
Member

CBC article, somewhat critical of CMHC: “should we stop encouraging home ownership?”
http://www.cbc.ca/news/business/story/2012/09/21/home-ownership.html

dire straits
Guest
dire straits

I was reading somewhere that Real Estate economy is zero sum game.
What does that mean zero sum game?
Thanx

Many Franks
Guest
Active Member
Many Franks

Had a look at this Strathcona townhouse on the weekend for a larf. Asking 539K. The realtor never even bothered to get up off the couch. All the Ikea-by-the-hour staging stuff is long gone (and the place no longer looks anything like the photos). Apparently the 23(?)-unit complex has a princely $15k in their coffers, having only just increased strata fees to $200 monthly.

Awful layout unless you like prison-yard chic with a bonus cinder-block bondage dungeon. The only perk I could spot is that it has a grandfathered-in wood burning stove, so you can use the Georgia Straight to cook your KD for the next 25 years.

If you want to inherit a quarter-century of deferred maintenance, this is your chance.

Many Franks
Guest
Active Member
Many Franks

@dire straits: The power of the Internet is at your fingertips.

patriotz
Member

@gokou3:
” By this time, municipals would usually resort to borrowing to “ride out the slow times”. ”

BC municipalities cannot borrow to meet operating expenses. If revenue from a source such as development charges drops, they either must cut services, raise property taxes, or some combination of the two.

The statutory requirements for municipal finance in BC ensure that it is almost impossible for a municipality to go bankrupt. It would require something like a single industry town losing its employer, and even that is not always enough – for example, Kimberley is still functioning.

Patiently Waiting
Member
Patiently Waiting

“Forty-five per cent of those surveyed say they couldn’t save $2,000 in a month, even if they were able to borrow some of the money.

About a quarter of the 45 per cent says even if there were no time limits, they could never save that much.”

http://www.news1130.com/news/local/article/404842–do-you-care-if-you-re-in-debt

Another story about this was linked by Patriotz in the previous thread. Its really confusing. How is borrowing saving? Maybe they mean to access $2000 in actual cash for an emergency (car broke down, medical problem etc.).

dire straits
Guest
dire straits

@Many Franks
Thanx
so no added value is created during transaction. cool.

patriotz
Member

@painted turtle:
“They should try a Rent vs Own simulator! It takes more than 35 years to break even…”

You never break even at that price/rent. You keep getting further behind every year, even if interest rates never go up.

jesse
Member
@M-: A few comments that have the highest rating: “Another example of the on-going destruction of the middle class.” “Well, there is no way I’m ever going to take or listen to the advice of someone who equates home ownership with fridge ownership (Moshe Milevsky). My fridge is like a car: it wears out and I replace it. I make enhancements to my home, I better it, and its value rises. We are in a very sad state if the “experts” are advising that home ownership is not a good investment. The issue isn’t owning a home, it’s making sure you purchase a home that is affordable to you. Why these ongoing attempts to destroy the middle class?” “If you’re paying rent instead of a mortgage, you’re just paying someone else’s mortgage. I don’t see the economic benefit to anyone… Read more »
joe_blown_away_by_high_housing_costs
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joe_blown_away_by_high_housing_costs

@gokou3:

“This is how governments get into bankruptcy. Take the “one-time” revenues (land sales, development charges, etc) and use it to fund recurring expenses (firefighting). Once the one-time revenue is gone or just slow down, there’s not enough money to make everyday payments. By this time, municipals would usually resort to borrowing to “ride out the slow times”.”

I think gokou3 just agreed with me! The privatization of the Little Mountain Housing Project is a “one-time” revenue generator. The provincial government is reinvesting this money to build supportive housing for addicts. This new supportive housing will need money indefinitely in order to fund its operating expenses.

jesse
Member

@gokou3: “This is how governments get into bankruptcy.”

Just curious, you think Vancouver is going towards bankruptcy? I’m not seeing anywhere near the amount of distress that typically preludes a BK.

Patiently Waiting
Member
Patiently Waiting

@jesse: “If housing is to go down, it’s not going down without a fight.”

The real estate fight is inter-generational. The younger generation eventually wins.

I was talking to a 19 year-old recently. She was saying how her parents house quadrupled in value and how she can’t imagine ever being able to buy a place. At 19? Really? But my heart warmed when she mentioned the words “housing bubble” and “pop”. She knows…

I really wanted to tell her to just focus on school and not worry about buying for another ten years. But there were others around who might have taken offense. 😛

Her generation will lose interest in home ownership once they see how ugly things get. They are the lucky ones, in some ways.

dire straits
Guest
dire straits

@jesse
LOL, some of the comments are hilarious. look this one

“Renting an apartment or leasing a car have a common thread. You have nothing of value for the money you spent.

Some of these moonbats would rather all of us live in government housing. History shows how well that worked for the common good. Can anyone say getto?

A landlord is your master. He may raise your rent, he can evict you, he dictates your living conditions, he pays his bills with your money.

Tell me again why renting is so cool.”

Compounding Rates. Really?
Guest
Compounding Rates. Really?

@M-: http://www.cbc.ca/news/business/story/2012/09/21/home-ownership.html

Good one. Sweet. The hammer didn’t slip off the head of that nail!

Here’s the real zinger from that story:

“Without that government support that’s allowing people with very little down to jump into the ownership pool, you just would not see the ownership rate expanding the way that it is,” he argues. He also believes the CMHC mandate is inherently self-defeating.

“They don’t provide affordable housing, they provide affordable financing. And when all you do is provide affordable financing, you inflate house prices.”

N
Guest
N

@dire straits:

“A landlord is your master. He may raise your rent, he can evict you, he dictates your living conditions, he pays his bills with your money.”

A landlord is your servant. He gives up his house to you, fixes things when you say so, and is legally responsible for your living conditions. No matter what his costs, he cannot charge a penny more than you are willing to pay. And when his house no longer suits you, you are free to find a new one.

Can't wait
Guest
Can't wait

Can’t wait to see the hammers and yuppie baby boomers crying on GlobalTV. I hope you don’t mind retiring to Chase BC or Nanaimo instead of Maui.

The people making sales now are the smart speculators. The amateur investors will be selling at the bottom. They’re the ones who’ll listen to the pumpers who tell them to hold on and help keep property values high. while the pumpers are acting like dumpers, deeply cutting their price.

Anonymous
Guest
Anonymous

What if Turd Sommervile is right- he gets to head Sauder and gets a bonus.

What if he is wrong and hundreds of first time buyers get into s debt trap? he still gets his $240K and can’t be kicked out because of tenure, heck he will probably return to Israel for a year and call it a ‘sabbatical’ and hide there to avoid the fall-out.

gokou3
Guest
gokou3

@Patiently Waiting: Thanks for pointing this out. On the other hand…

@joe_blown_away_by_high_housing_costs: You gave a good example of how governments can shuffle numbers around and use “debt” for “capital investments” and general revenue for operating expenses. So, by the letter they don’t use debt for OpEx but the debt still stacks up.

@jesse: Well, I think it was too harsh to say that Vancouver will go bankrupt. OTOH, it still seems to have chronic difficulty meeting budgets even with the “good” times we have over the past couple years. Maybe after a few more bike lanes, their budget problems will go away?

(Sorry, just had to insert my favourite pet peeve – bike lane – whenever i talk about city of vancouver governance)

Anonymous
Guest
Anonymous

@painted turtle: What a clueless owner! First asking a little too much when trying to sell, and then asking way too little when offering the place for rent!

groundhog
Guest
groundhog

Troll index very low today, maybe we should expect sales to top 100?

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