Talk about the hot seat! Former Finance Minister Mike de Jong oversaw BC’s economy through an historic time: the incredible run-up on real estate prices, duffel bags of money passing through casinos, a booming economy that was the envy of every province, and the implementation of the Foreign Buyer’s Tax. He now sits down with Adam & Matt to talk about his big wins, his big regrets, and his views on the problems facing the province today. Join us behind the curtain with one of BC’s most influential politicians.
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Tell us about yourself:
I grew up in Abbotsford, B.C., formerly Matsqui before the amalgamation, in a one-room prairie farmhouse. I went on to do my undergrad in Ottawa and law school in Alberta. I always intended to come back home and did. I started a law practice and got involved politically in the early ’90s at the provincial level, and I have served as an MLA for just about 25 years.
Did you foresee the run-up in real estate prices over the last five years that seems to have created so much tension in metro Vancouver?
We tend to focus on the most recent events and the dramatic rise in prices, but they’re very much a symptom of other stuff that has taken place in metro Vancouver over the past three decades. Our economy has been leading the country, which is no accident. We sought out people to come here to invest, to create jobs, to establish their homes and families here. And now Vancouver is a world-class city that registers internationally. But what we forget is that when I became finance minister in 2012, we were still fighting our way out of a recession. So the government and B.C. worked to grow the economy. Vancouver real estate prices and the massive growth that we have seen is largely a symptom and a result of the success we enjoyed as a region and province in developing the strongest economy in the country.
Is there anything you wish you’d done differently as finance minister during the overwhelming response to Vancouver as the real estate market clipped 3 to 5 percent every month?
In retrospect, there were two things that I wish I and the government had done differently. The first relates to the collection of data, because in the absence of sound data, people came up with all kinds of crazy explanations for what was happening. I had people coming to me telling me that half of every sale of a home in metro Vancouver was going to foreign national, offshore investors. Well, we know that wasn’t the case. But in the absence of data, it became very difficult to address that. So, I did ultimately in 2016 begin that process. I wish we’d done that sooner because it would have given us – as a government and society – a better base of information upon which to make decisions.
The other thing I wish I’d been more insistent upon has to do with supply. The conversation tended to focus almost exclusively on what the government should’ve done to dampen down demand. As we now know, the majority of that demand was domestic, and that’s a good thing. Unfortunately, we didn’t keep pace in terms of the supply of homes and condos. People don’t always like to hear it, but there’s a finite supply of detached homes in Vancouver. In fact, next year there will be fewer detached homes because we have to densify on land that presently holds those detached homes. That means there will be fewer detached homes, and the value of those left is going to go up, not down. This part of it is not rocket science.
In 2016, I began exploring in detail the pent up demand for building permits. I called City Hall, and they couldn’t tell me how many pending permits there were. Every day, the mayor’s talking about the crisis, surely they should’ve known. Government has a role in low-income housing and supportive housing; but the middle class and builders have to be given the opportunity to build those homes. And if they’re being forced to wait two to six years to get basic permitting approval, that’s our fault as a society and as a government. People are reluctant to look in the mirror. It’s easy to point and blame someone else. The ultimate solution to that challenge is for us to do a better job expediting approvals for builders to start making homes.
Walk us through the process of coming up with and implementing the foreign buyers’ tax when you did.
The objective was not to diminish people’s equity in their home. But in 2016, with the market as heated as it was, we looked at our available options. Everything you can imagine came through the door and was examined, and things were rejected like speculation taxes that have proven so ineffective in other jurisdictions and are being ineffective here. We settled on a limited application of a foreign buyers’ tax. The rationale was to buy some breathing space while supply caught up. I was hesitant about it because our success as a country and as a province is built around generating commerce and welcoming people in. A special tax like this sends a different signal. It had the desired short-term effect of reducing that demand, but of course, we know now that foreign demand accounted for less than 10 percent of the market.
What are your thoughts on the possible ripple effects to the larger economy from the recent government policy shifts aimed at reducing housing demand in the province?
The new government is focused on democracy, and they’re making different choices. There will be a very negative impact that will flow from all of these new taxes that are being heaped on British-Columbians and Canadians. The signal from B.C. today is very different from before; It’s ‘do not come here, you are not welcome, do not consider investing here.’ And there will be a price to be paid for that. More housing is the only thing that will alleviate the exceptionally high housing prices and create affordability, and yet housing stats are going down. It doesn’t make sense to me.
I differ significantly from the NDP government in the case of housing. They believe government will be the one to solve the issue. They think if they impose enough new taxes, they will reduce demand and they’ll spend taxpayers money and build housing. I think there is a role for government in terms of supportive housing and low-income housing. I don’t dispute that. But the challenge that the broad middle-class is experiencing in terms of finding affordable housing in metro Vancouver will not be solved by them; it will be solved when the private sector is freed up to construct more housing. But we’re seeing the exact opposite with the NDP’s policies. At this rate, things aren’t going to get better for the middle class. In other parts of B.C., there is a positive spin-off effect. Armed with the wealth that has been created, some people are finding other places to live in the province. We forget that other parts of B.C. over the last couple of decades have faced depopulation problems. That’s now changing.
Would you buy metro Vancouver real estate today?
In the short term, I see some real problems deriving from the government policies that want to drive people away. Ultimately, however, I think it will continue to be a solid investment and always will be. But I can’t afford it. So I’ll be content sitting on my porch on my farm in Abbotsford. But if I could, I would.
What is the NDP getting right in regard to housing policy?
They’ve followed through on the significant billion-dollar investments that we had put in our budget in 2017 for supportive housing. I think they’re serious about that. We are hearing about potential investments in transit, and I’m a little bit concerned about that. It’s fine to talk about expanding the SkyTrain–I love it, I’ve got my Compass card. But if we’re going to invest billions of taxpayers dollars, I want to see a determined approach for densification along those very expensive transit corridors. I should’ve been more insistent upon that with my government. We would be foolish in the extreme not to insist upon that as a prerequisite to investing that amount of money. I know some neighbourhoods are going to be upset about that, but that is the price. You cannot build the SkyTrain past white picket fences.
Do you think the NDP did enough modelling debate analysis in regard to the current real estate policy that they introduced in February?
I don’t think they did any. If you look at one of the fundamental pillars of that speculation tax, describing it as half-baked is generous. The answers from the government about who it’s going to apply to and what it’s intended to accomplish change every week. I think this has far more to do with political optics than any well-developed strategy to actually address housing issues. And I can’t say I’m surprised. I’ve been involved in this long enough to know that the approach taken by the NDP when in doubt is taxes. Although heaping new taxes on to people strikes me as an odd way to try to make something more affordable. So, I don’t think they put a lot of thought into this. I think they felt compelled to demonstrate some sort of a dramatic approach. The speculation tax, which is really just a wealth tax, captures British-Columbians, not foreigners or speculators. They’re people that want to buy a retirement home or a cabin or something like that. The fact that we see housing stats significantly dropping tells me that the approach is going to make the situation far worse.
What broader impact do you see these recent policy shifts having on the provincial budget and the economy more generally?
General economic growth in B.C. is slowing down significantly. When that happens, there is an impact across the fold on economic activity and revenue to government. I’ve talked to people in the construction sector, and they say things like “’I’m pretty busy right now, but I don’t have a lot of work in the spring, so right now I’m on track to lay off 10 guys.” In the close past, if someone was laid off, they got absorbed the next day. Now the company that those 10 guys might’ve gone to is also laying off 10 guys. You can just feel the attitude is different and the numbers are pointed in the wrong direction. I think it’s only a matter of time before we find ourselves back in deficit financing at the governmental level. I hope I’m wrong, but that’s what the evidence suggests.
Five Wire Questions:
Favourite Neighborhood: Kitsilano
Favourite Restaurant: Tableau
West side mansion or downtown penthouse: “I like to have a garden”
First place you take someone from out of town: Seawall
Purchase for under $500 you made that you would recommend: “I recently replaced the 8-track in my car with a cassette deck”