Vancouver Real Estate has changed dramatically in the past year. But what exactly is different? The answers may surprise you. Data Scientist Jens von Bergmann sits down with Adam & Matt to crunch the numbers and offer valuable insight into the fiery debates that surround Vancouver housing. Should we still be talking about foreign buyers? Is light density the way forward? And are we facing a new frontier when it comes to supply issues? Get your scuba gear out and join us for a deep dive into the data. And don’t get the bends!
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Jens is a data analyst and consultant and the creator of http://mountainmath.ca. He moved to Vancouver from Calgary about nine years ago and has a PhD in math. Jens used to teach and do research. He and his wife have mostly been at different universities, but when they had a child it made much less sense and so they moved to Vancouver.
At this point, Jens was looking at doing something else. He started out working for the government on a data management product for daycares. He got bored and became interested in census data. Jens built Census Mapper as a response to how inaccessible a lot of Canadian census data is (though it is open and freely available, it’s painful to do anything with it).
Jens then did more and more data work on various projects, and in Vancouver housing is just something you can’t avoid. He was interested in teardowns from the beginning and has been working in this area for awhile. He’s interested in urban, cycling, and housing issues in Vancouver—these are big topics.
On the housing market, generally, right now:
Medium to long-term, he sees Vancouver still has supply issues. We have an astronomical job vacancy rate, and really low unemployment and high participation rates. The labour market, something that typically drives housing demand, is very strong and doesn’t look like it will soften much. We’ve seen a slight dip in the job vacancy rate well within the margin of error of just above to just below 5%–this means 5% of jobs in the region are vacant and need to be filled (to compare, Toronto is at 3% which is fairly strong). So, there’s a huge gap of people that we need. Many people across Canada would love to come here for a job and can’t – maybe because it’s unaffordable but also, and related, because there are simply not enough places for these people to live.
In terms of immigration, federal targets have increased. Housing supply is in the pipeline and a lot under construction will complete in the next year or so, which might lead to softening of supply constraints and prices. But in the longer outlook, unless this pace is kept up, Jens doesn’t know how we’ll deal with the supply issues we face.
It doesn’t seem like we’ll keep pace—developers have pulled back.
Yes, supply is still an issue. There are other indicators to look at, such as overcrowding of households: over 100,000 young adults aged 25-40 in Metro Vancouver live with their parents. Some of this is by choice; there are cultural drivers for this. This is an issue in Toronto, too. However, a good portion, maybe 40% of them, would probably love to move out if they could find something affordable. Regardless of affordability, there just aren’t enough places to go around. This also ties to the fact that one-bedroom units have been in such high demand. Rents for these units have risen faster than rents for two or three-bedroom units.
On rents in Vancouver and the future of rentals over the next five years:
One of Jens’ pet peeves is that rents don’t care about municipal boundaries, but the policy affecting rental markets does and it creates problems. The City of Vancouver has been aggressive in trying to get more rental built. But this doesn’t do much if, say, Burnaby tears down rentals. In the end, it’s a regional market. If the City is building a lot of rental, it probably brings up the vacancy rate in places like Surrey, as Vancouver is the most attractive location. This is a problem for the City.
The rental market is not completely disconnected from the ownership market—a unit is a unit. In this region, we know if we build ten condo units, three will be rented, six owner-occupied, and one vacant or in transition at any point in time. There is a place for purpose-built rental. It would be a huge benefit to get more rentals throughout the region.
So, unless there is a regional Metro Vancouver plan, the vacancy rate in Vancouver will likely always be low and will help affordable housing further out?
There are two points of view. Affordability is an important factor that drives how people feel about housing. The other side is giving people more opportunity to enjoy the region, be closer to jobs and have shorter commutes. There is a reason why rents are higher in the city than they are in Burnaby or Surrey—people are willing to pay for better amenities and proximity to jobs.
Another pet peeve of Jens’ is we tend to think of housing and transportation as separate, but they’re intimately tied: wherever you live makes a huge impact on transportation. People in Surrey often spend equal amounts of money on transportation as they do on housing, if you also include their time. does the 30% affordability metric really work? If you live in Mt. Pleasant, which is a transit and amenity-rich neighbourhood, you can get downtown to work very easily, and you therefore need a much smaller transportation budget than you would in Surrey, or even Burnaby. When people make decisions about housing, they account for this. They know how much time and money they spend. Yet, when we talk about affordability, we don’t account for transportation. Not everyone can exchange time for money that freely, so it depends on how you value these things. Some people might structure their commutes in a productive way; for instance, maybe they answer emails on the SkyTrain, or maybe they get their workout on a bike as they cycle to work. So, we can’t over-generalize, but these are important questions when considering how we deliver housing. We shouldn’t separate location from the 30% metric of affordability.
On the Federal Government’s perspective of how interdependent housing and transportation costs are:
Jens has not seen metrics from CMHC or other federal agencies that do this. Metro Vancouver has a transportation and housing study with panel data, where they survey the same people over time. They use this to compute and relate transportation and housing costs, at an individual level. Time is not taken into consideration. This is one approach, but it would be nice to have national metrics.
On foreign buyers:
This is a hot topic that isn’t dying. In the public discussion, there are a range of related but different things. Foreign buyers are a simple metric with a clear definition that we all understand. They’re people who are not foreign residents or citizens and buy property in Metro Vancouver. They could be here on a ten-year visa or a work permit, though some people are excluded if they’re provincial nominees. They may also live elsewhere and plan on moving here, or they may have investment property and not plan on moving here.
Every time there’s a property transaction, you need to provide your social insurance number or citizenship information. The Province started looking at this in 2016, at first for only a couple of weeks, and they found a lot of foreign buyers so then put out a tax. Essentially, the number of people in that category collapsed. It’s hard to know how many foreign buyers there were before the tax because of the short time period before data was collected (which influences behaviour) to the announcement of the tax. Most people include the whole pre-tax period, which overestimates that number quite a bit as it includes the many people who tried to pull forward sales and beat the deadline. After this, numbers dropped off quite a bit and we’re now at roughly 3% or less of sales in this category. The Province publishes the numbers on a monthly basis.
Many people believe Vancouver needs to densify—it’s the only rational response to rising land values. Another point is that we’re a growing region and we need to think about how we want to grow—do we want to sprawl out and commute or be more compact in the centre with people closer to jobs and amenities?
Jens and Dennis looked at the frequent transit network, which is a proxy for a neighbourhood in which we can take transit, but coinciding with car shares, biking facilities, and walkability. As a baseline, ideally, we put people where they don’t have to drive. Metrotown in Burnaby is a good example of this. However, it meant that a lot of old apartment buildings got torn down and replaced by condos (arguably, this cost the mayor the election). There was a huge gap since the 1970s in new rental buildings. These older ones are considered lower use and less dense than new buildings, but they are more affordable.
Affordable housing is a function of location and quality (people aren’t willing to pay as much for these older suites, and there is rent control with long-term residents). So, when those buildings are removed the people who inhabited them will no longer have a chance to live in that neighbourhood – which Jens thinks is an issue. As we grow, how much we take care of people who already live here vs. how much we enable more people to live in the region needs to be balanced. To avoid a problematic imbalance, we can think of metrics that inform how we should densify. Rather than looking if each project helps one by one, we can introduce planning from the get-go. This is where the idea of planned displacement comes from.
They took the frequent transit network and intersected it with land use and census data to see where in the network we have high and low densities of vulnerable people and high density of people overall – all kinds of metrics can be added to this. As a demonstration, they took vulnerable renters. Homeowners are not really vulnerable to displacement because, for one, you don’t have to sell. The neighbourhood around you might change, but you’re not being forced out. Plus, to compel homeowners to sell in these types of situations (land assemblies), they would get more money than they would in a regular transaction. They tried to see where within the frequent transit network they could add density and not displace vulnerable people. There are many renters in Metrotown, but on the fringes of it there aren’t. If you look at the Metrotown catchment for the SkyTrain stations (within the frequent transit network, this is an 800-metre radius from a station, 600 metres from a B-Line bus stop, and 400 metres from a regular bus stop). On the fringes, it gets into single-family, but these aren’t areas where Burnaby chose to densify—rather, they chose already dense areas.
This seems to make sense but is politically more difficult. A portion of the neighbourhoods have the “not in my backyard” environment, compared to renters with less political sway.
The former mayor of Burnaby might have ideas about this. It goes both ways—change is always hard.
At least single-family homeowners would be handsomely compensated under your approach.
Yes. And if we look at the Cambie corridor, it’s been a very long process from the Canada Line being proposed to land use changing. We’ve seen cases where people wondered why their block wasn’t included in the townhouse region when it was situated so close. Over time, people can adjust their expectations and those who moved to the region within the ten years already knew change was possibly coming. Of course, ten years is a long time for something like this.
In the Metrotown example, they excluded land uses that weren’t already residential (for instance, the mall and density that was added without displacing anyone – which is good, but these opportunities are minimal in the frequent transit network).
Based on the census for Vancouver, we know that single-family just doesn’t work for families anymore. The share of children in townhouses is higher than in duplexes, and the share of children per duplex unit is higher than in single-family homes. People may want that single-family home in Burnaby or Surrey, or a townhouse in Vancouver—this is the trade-off.
On if the West End of Vancouver would work for planned displacement (as it’s going through a lot of displacement and renovictions, and is home to many vulnerable people):
If you look at their maps and metrics, you probably shouldn’t touch the West End if you’re going to densify. The West End, along with Marpole, faces issues such as an aging rental stock which is economically hard to make work. The way property taxes are assessed on these buildings add to the pressures. This means we have huge redevelopment pressure, combined with a West End plan that came into force – which maybe people didn’t anticipate. On top of that, you have one of the most desirable locations in the region being used by fairly old, four or five-story rental buildings, so there is huge incentive to do big renovations and charge much higher rents, or to replace the building with something taller. This has caused huge issues for the City and it means many people can no longer continue to live in that neighbourhood.
There are many factors and pressures that we put in the system to get to this point of making renovictions and demovictions attractive. Rent control is one. Jens calls the “moving penalty” what you would have to pay in order to move from a rent-controlled unit. Many people can’t even afford to downsize. They may have a two-bedroom rental apartment that they’ve raised their kids in for 15 years. When their kids move out they would like to rent something cheaper, like a one-bedroom, but they can’t as it costs much more than the two-bedroom unit they’re in. This means the two-bedroom isn’t freed up for a family who actually needs it.
Sometimes deals occur within buildings, such as a lower rent promised to a tenant who switches to a smaller unit. The landlord then rents out the two-bedroom at market rent. This is a win for all three parties: the current tenant pays less rent on the smaller unit, the landlord makes more rent on the larger unit, and a family gets the space that they need. Rent control isn’t a problem—it is important for some people to have this stability. But, the moving penalty is a problem as it reduces mobility and property doesn’t get used well (not downsizing because you can’t afford to do so is a problem). This all adds up to pressures on people to get out of old units.
The demand-side policy on the resale (buy) side and rent controls all hinder mobility in a problematic way for the larger economy. People are scared to move in Vancouver. It’s hard to sell any property right now and mobility has declined in the past year.
For ownership, that’s probably temporary, but in the rental market these things will last for years. With ownership, people might move because they have to and might choose to rent at first in a new city, while they rent out their current place. This probably adds to the secondary rental market. Part of not being able to sell eats into mobility and part of it eats into the share of homes that are owned vs. rented.
- Favourite neighbourhood in Vancouver: UBC area is great, especially for kids. Jens also loves the places in between and along the seawall.
- Favourite bar or restaurant: Jens loves cooking at home. For special occasions, he likes Raisu on 4th.
- Downtown penthouse or west-side mansion: Penthouse. Jens loves his condo.
- First place he brings someone from out-of-town: The in between places on the seawall.
- Recent purchase under $500 that’s had a big impact on his life: AirPods