All posts by patriotz

The Elephant on the Campaign Platform

fig. 1As we all know, BC has one of the biggest housing bubbles in the world. The collapse of the global housing bubble is directly responsible for the economic crisis we now find ouselves in. So we would expect BC’s political parties to spotlight this to demonstrate their grasp of economic issues, right? Wrong. None of the parties uses the phrase “housing bubble”, or even ventures the thought that maybe housing in BC is too expensive and prices have to come down.

At least the Liberals are giving us what we would expect. They have been cheerleading this bubble all along, so why should they stop now? But why the silence from the other parties?

The housing bubble is the greatest scam ever perpetrated on workers by the rich, yet the party of the workers, the NDP, won’t mention it. It’s also the biggest misallocation of resources ever seen in a market economy, yet the party of sustainable development, the Green Party, has nothing to say either.

What do the party platforms (available on their websites) have to say?

NDP platform:

“Pushing the federal government to change federal tax laws to encourage the development of market rental housing …  Encouraging new market rental and co-op housing through the Market Housing Partnership Program in concert with the private, non-profit and cooperative housing sectors.”

Developers build condos rather then purpose-built rentals because condo owners are willing to pay prices out of line with rental value. They cannot be incented to build rental housing unless the government takes the role of the condo specuvestors by supplying cheap capital. This is a subsidy to land owners and developers. It will not affect market rents.

Green Party platform:

“BC Greens will establish a provincial housing program that works with municipalities to build affordable housing or to purchase existing housing that can be moved into permanent rental housing.”

This is a subsidy to existing property owners and developers. If housing is not affordable prices must fall. The housing has to be rented out at market anyway. Purchasing existing stock does not affect rental supply.

“Commit 1% of the total provincial annual budget to solving the housing crisis.”

The “housing crisis” is simply one of inflated prices due to speculation. The government does not have to spend a dime to end speculation.

“Mandate BC Housing Corp to purchase units of market housing within current or stalled projects to provide an expanding pool of permanent below market and market rental housing”

Can you believe this? An outright handout to the developers. These projects will have to be sold anyway, either to owner-occupiers or landlords at prices they are willing to pay.

I am not trying to pick on the Green Party BTW. They have more policy planks on housing than the NDP so there’s more to criticise.

Both the parties are trying to fix a problem that does not exist. There is not a problem with general rental affordability. The problem is with people with special needs who cannot afford the market rent.

To be fair, both parties do advocate programs to assist those with special needs or to allocate public lands for non-market housing. This is a legitimate role for government. Subsidies for market housing are not. They only make it more expensive.

There is one simple, universal measure the government could take to remedy the discrimination against renters built into the property tax system – a refundable renter’s tax credit equivalent to the homeowner’s grant. This would also be largely self-financing, because by requiring renters to document their rent payments on their income tax returns it would put an end to evasion of rental income by landlords.

How can the provincial government put a stop to speculation so that housing prices reflect rental value and no more? Easy. A speculation tax. For any property sold within, say, 5 years of purchase, all capital gains are taxed 100% by the province. Exempt principal residences and purpose-built rentals. Problem solved.

The provincial government could also increase housing supply at no cost, by assessing for taxation unimproved land that has been approved for development by municipalities as though it already had improvements. This would provide an incentive for municipalities to approve land for development and make it economically unfeasible for owners to sit on raw land, and so increase housing supply.

Revenue from these policies could be earmarked for providing housing for those with special needs.

The Liberals simply want to pretend that the current housing bubble, which is already collapsing, is sustainable. The NDP and Green Party both advocate spending money on schemes that would not make housing more affordable. But effective measures to make housing more affordable could actually bring in money to the government.

What’s the better choice?

As to who to vote for May 12, that’s up to you. I must say that distasteful as it may sound, I would prefer to see the Liberals re-elected. I don’t want to see anyone else blamed for the collapse of Gordo’s house of cards. Perhaps after the “golden decade” has been revealed to be fool’s gold all the parties can start getting serious about what kind of sustainable economic future is possible for BC.

Your comments are welcome as always.