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Derek Wilson left Vancouver a couple of years ago and moved to London because he says he saw the city becoming a resort town. He says he’d look out at the condo towers from his Coal Harbour apartment and see about 80 per cent of the windows in darkness.

The 28-year-old property developer says the city was being hollowed out, largely owing to foreign investment. So in the spring of 2015, he moved to London for a job with the region’s transit system and began his graduate thesis at the University of Oxford on Vancouver’s foreign-buyers tax to determine the impact it had on improving affordability. According to his research findings, the tax that was introduced in August, 2016, resulted in an immediate improvement in housing affordability in Metro Vancouver. He says he thinks he is the first academic to use empirical evidence to prove the tax achieved better affordability for local income earners, albeit only temporarily. And as someone who’d like to return to Vancouver one day, he’s arguing for policy makers to do more to deter foreign investment.

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Derek Wilson, a senior sustainable development manager for Transport for London who has studied the effect of B.C.'s foreign buyer tax.Markus Berensson

“It was so frustrating to see the city I had come to love so much get gutted in the name of providing a market for foreign investors,” Mr. Wilson said in an interview from London. “Given the opportunity, and given the fact that people like myself are getting pushed out, there was a need to pin down the roll of foreign investment in the housing crisis, especially given that the dialogue and discourse around the issue has been so fraught with conjecture.

“Given that this tax exclusively targeted foreign investment, this fluctuation definitely proves that foreign investment is a primary factor driving the unaffordability of housing in Vancouver.”

Earlier in his career, Mr. Wilson says he thought Vancouver could achieve greater affordability with greater supply. He worked for Rize Alliance, the developer that fought long and hard to build the controversial 21-storey tower at Kingsway and Broadway. He remembers being heckled at public hearings for the project.

He worked for other developers, including a company that specialized in master planning projects around the world. In Vancouver, he saw foreign investment money flow into the market, with individual buyers snapping up several units in one building.

Since the province introduced a foreign-buyers tax, the market has softened considerably. A recent report on luxury property prices by global real estate agency Knight Frank puts Vancouver at the bottom of an index of 43 cities, with an 11.2-per-cent drop in the past 12 months. The report states: “Vancouver sits at the bottom of our rankings as upmarket areas such as West Vancouver have seen a marked slowdown in sales and prices as a result of the raft of measures introduced in February’s budget.” Those measures, introduced by the provincial NDP government, included an increase to the foreign-buyers tax, from 15 per cent to 20 per cent.

The effect has been swift, as can be seen in the example of a house in West Vancouver, B.C., at 1480 14th St. in Ambleside, that recently sold after dropping its original asking price by $950,000 as it sat on the market for a year. The modest house on a 55-by-122-foot lot was priced at $3.18-million in the summer of 2017 and sold for $2.23-million.

Some attribute the market slowdown to a retreat of global dollars that had been sloshing into markets around the world, combined with the tightening of lending rules.

Mr. Wilson says a softening market does not mean foreign investment has gone away. He says that, without the foreign-buyers tax – officially known as the Additional Property Transfer Tax (APTT) – affordability would have likely worsened. As is, British Columbia managed to delay its effects.

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A neighbourhood of single-family homes is seen in Arbutus Ridge as downtown towers rise in the distance in Vancouver.DARRYL DYCK

Mr. Wilson says we are seeing long-term effects of the tax, but he says the tax itself is too low, even at 20 per cent, to have enough of an impact.

“The tax did have a significant impact, but it was short-lived and temporary, meaning the rate of taxation may not be high enough to dissuade foreign investment on a long-term basis to a sufficient degree.

“The affordability crisis is a boulder tumbling down the side of a mountain and the APTT is a tree it crashes into. It slows it down, but keeps on rolling and picks up speed again. It’s delaying and slowing down the overall speed and rate of that decent. But it doesn’t stop it.”

He believes that increased restrictions on foreign investment – not supply alone – will have the most impact on the B.C. Lower Mainland’s affordability crisis.

“You do need sufficient supply – there is no question,” he said. “But this idea that has been advanced by policy makers and the development community, that you are going to satiate the market with supply and thereby bring down prices, is a little bit ludicrous.

“You’ve got a global pool of demand that is potentially coming into this market. We are never going to build enough houses in Vancouver so that every foreign investor across the face of the globe will fill their boots to the point where they say, ‘I have no desire to invest in housing in Vancouver any more.’”

Mr. Wilson works as senior sustainable development manager for Transport for London, the local government body responsible for the British capital’s Underground, Overground and light-rail systems as well as its road networks, where he helps London develop its significant property portfolio to fund transit projects. He also recently completed his master of science in sustainable urban development at Oxford, for which he wrote his dissertation on B.C.’s foreign-buyers tax. Because the B.C. government for many years kept so little data on the inflow of foreign money, analysts had little to go on until the levy on foreign home buyers was introduced, he says. Some experts say there is still a lack of data to truly determine the long-term effect of foreign property buying.

Using hedonic regression analysis, Mr. Wilson says he was able to measure the direct impact of the tax on housing affordability. He didn’t use the standard affordability ratio of median income versus median home price, but instead considered how well a median household could service a typical mortgage payment while maintaining a basic standard of living. He found that the ability for the median income household to cover the cost of a mortgage had been reduced by nearly 50 per cent between 2012 and 2016. When the foreign-buyers tax was introduced for Metro Vancouver in August, 2016, this trend reversed and affordability improved by 38 per cent. However, the impact was short-lived, and after six months, affordability once again began to worsen.Mr. Wilson says this proved that demand-side measures must be paired with supply-side measures if the crisis is to be fully addressed.

“This suggests that significantly higher taxation rates, or more likely, outright restrictions on foreign ownership, must be applied to deal effectively with the influence of foreign capital in Vancouver’s housing market,” he wrote in an e-mail.

John Rose, human geography instructor at Kwantlen Polytechnic University, has also been critical of the supply argument in his research. He is concerned that government leaders continue to set policy based on supply, rather than the impact of outside investment. If the idea behind the foreign-buyers tax was to significantly curtail inflows of wealth into the market, then restricting such buying would be the logical next step, he says. Instead, policy remains focused pretty much solely on supply, albeit with a bigger focus on affordable supply.

“I am all for expanded social housing and co-ops et cetera to meet the needs of the most vulnerable, especially, but I cannot see how this would be of a sufficient scope to impact the overall housing market, which is still, overwhelmingly, a private one. Furthermore, there is the time factor – while this may help in the long run, I can’t see us building enough public housing in the short term to address the current affordability problem.

“An expanded foreign-buyers ban, on the other hand, would be relatively quick to implement, alongside the continuing tightening up, as we’re seeing, of the lending environment.”

Mr. Wilson is planning to start a development firm in Europe and possibly in Vancouver one day – if he decides to return. And while he doesn’t fault his own development industry, he says he’d rather target local income earners instead of just seeking the bottom line.

“The development industry sees real estate as a zero-sum game and they make money when others lose out. They don’t see the value in creating value for others. That is what my career is built around: helping developers come to [a] realization that by creating better communities and helping locals and the city, they can do better for themselves as well.”

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