Have you ever wondered why Vancouver developers prefer to build condos while Seattle developers build apartments?
Margaret Morales from the Sightline Institute in Seattle joins us to chat about her recent article, “Why Vancouver Builds Condos, while Seattle Builds Apartments,” providing some insight into this cross-border phenomenon.
Margaret is a researcher on the housing and urbanism research team at Sightline Institute, which is a non-profit think tank that focuses on sustainability issues for Cascadia (a bio-region covering BC, Washington and Oregon). Sightline sees cities as the future of our world because populations are urbanizing at a fast pace. There is an opportunity to reduce our carbon footprint in an affordable and accessible manner.
On her recent article, Why Vancouver Builds Condos, While Seattle Builds Apartments, and interest in comparing the two cities:
Vancouver and Seattle are two of Cascadia’s biggest, booming cities, yet their housing mix of the past 5-10 years is absolute opposite. Seattle is building almost all new buildings as apartments, and 50% of Vancouver’s new builds have been condos. Margaret wanted to know why.
The similarity is the strong apartment and condo market in Seattle and Vancouver, respectively. What drives this is that obstacles have been put in front of the housing types that each city lacks. In Seattle, condo builders face a lot of liability fears, for instance, a history of high-ticket lawsuits against condo builders have pushed developers away. In Canada, a series of federal tax code changes (mostly in the ‘70s, some in the ‘90s) de-incentivized apartment building (this is Canada-wide but most pronounced in Vancouver, due to its booming housing market).
On when Vancouver’s condo market boom started:
We saw it start back in the 1970s with the change in government policy, but it’s taken time to see the growth catch up—there is always a small lag. Now, Vancouverites are short on affordable rental options.
On the factors mentioned in What’s Fueling Condo Development in Vancouver and why developers are so keen on condos:
You need a lot of up-front capital to build big developments. When developers have this, they decide whether to build an apartment building (rental property) or a condo (where people own individual units, but collectively own the land). Before the federal government’s tax code change in the 1970s, you would not be taxed on capital gains if you immediately re-invested profit from the sale of a property into another building project—there was a grace period. This still exists in the US, but in Canada, you are now taxed on capital gains. As well, there are big up-front costs with apartment buildings and you only make the investment back gradually over time. Investors usually need an incentive to go for the slow return on apartment buildings. There were tax shelters you could access if you invested in apartments, but they were diminished in the 1970s and 1990s—you can make your investment back much quicker with condo developments.
On if the tax code changes were geared towards incentivizing and building the condo market intentionally, or if this was unintentional:
The government wanted to encourage and provide options for home ownership. Having fewer apartments would allow for this, so condos were still a good way to provide the opportunity. The issue is when you set something in motion and wait 40-50 years, the housing mix will look so different.
On if the better policy is in Seattle or Vancouver:
The housing market in Seattle is also out of balance. A healthy housing market has a mix of options for people from all walks and stages of life. Seattle is not something to strive for, it’s just that the incentives have been pushed in the opposite direction.
- Favorite area in Vancouver: Spanish Banks
- Favorite restaurant or bar: in general, East Indian food
- Downtown penthouse or west-side mansion: downtown penthouse
- Where you would first bring a visitor from out of town: Pacific Spirit Park
- Vancouver Whitecaps or Seattle Sounders: Seattle Sounders
To reach Margaret and learn about Sightline:
Go to www.sightline.org and check out the housing research page.