When it comes to housing in Metro Vancouver, Richard Wozny says the laws of supply and demand don’t apply.
In his report, Low Incomes and High House Prices in Metro Vancouver, Wozny says that under reporting of family income in cities such as Vancouver, West Vancouver or Richmond is pushing house prices upward.
He says that’s because people who pay less personal income tax have more money to spend on a house.
His report, which uses Canada Revenue Agency data, shows that Richmond had the lowest median family income in Metro Vancouver – at just more than $60,000 a year per household in 2016. That’s a median family income that is even lower than some poor and rural parts of B.C.
“Does that not strike anyone as inexplicably strange?” he asks.
He adds that Richmond had the third-highest median home prices (after West Vancouver and Vancouver). That produces an income-to-house-price ratio of 28, while Vancouver and West Vancouver have income-to-house-price ratios of 37 each.
An income-to-home-price ratio of five is considered over priced. Hong Kong has a ratio of 19 and San Francisco, nine.
Maple Ridge’s ratio is eight and Pitt Meadows is nine.
The result is that house prices climb because those not paying their full taxes can plow that money into buying homes.
“High, middle and low-income taxpayers are subsidizing house prices for those who inappropriately report low incomes, enabling them to re-allocate resources from taxation to paying higher house prices,” says Wozny.
That’s a result of a failing tax system that’s costing everyone one millions of dollars.
He’s going to be making a presentation on his paper on Monday in Vancouver at the annual Union of B.C. Municipalities convention.
In addition to revising the tax rules so that people have to accurately report income, Wozny says that real estate transaction fees and property taxes should increase, while incentives should disappear.
He also says there’s a disparity between skyrocketing real estate values and the relatively low property taxes collected to fund the services on which the homes rely.
Instead, homeowners should pay through taxation for all of the services that a home needs. If those costs aren’t covered, the entire rest of the city’s taxpayers are subsizing suburbs.
And if higher taxes were imposed, house prices would drop, he maintains.
He says that informal buyer surveys show that more than half the units in Vancouver condos near urban centres and transit are being bought by investors.
Maple Ridge Mayor Nicole Read, though, questions parts of the data.
Vancouver and Richmond may have a lower median family income because there are more low-income people with access to better transit.
“So there may be other drivers to that number. I need to see more data to understand that better.”
And with relatively little low-income housing in Maple Ridge, this city shows a high median income.
She plans on hearing Wozny on Monday when he explains his case.
She wants to look at the issue more closely.
Housing is getting so expensive that today’s youth won’t be able to buy a home.
“I think it’s a really important conversation that we need to have. We’re not going in the right direction.”