Escaping housing trap

By Josef Filipowicz and Steve Lafleur

The B.C. government's recent budget included a 30-point plan aimed at the province's housing woes. The aim was off the mark.

Most of the plan's points fit into two broad categories: reducing demand by raising property transfer taxes, for non-residents and on homes over $3 million, for example; and increased spending on social housing - sometimes called affordable housing - for disadvantaged groups.

In both of these categories, the government targets specific niches of the housing spectrum - non-residents and the most vulnerable - but ignores the fundamental drivers of housing markets (and prices) for the vast majority of British Columbians.

British Columbia gained almost 250,000 new residents between 2011 and 2016 - more than the entire population of Burnaby. A growing population and growing average incomes and historically low mortgage interest rates mean that homes in B.C. - particularly in Vancouver - remain in high demand.

Typically, when faced with strong demand, homebuilders respond by building new homes. However, if the supply of new homes doesn't meet that demand, prices increase. That's precisely what has happened in B.C.

The provincial government's new housing plan partially recognizes this ongoing supply conundrum by repeating the need to accelerate new home construction. However, its solution to this conundrum is to spend at least $6.6 billion over 10 years to construct thousands of new social housing units.

While some British Columbians will benefit from this new raft of social housing, the province's plan almost completely ignores the many more market-rate homes (houses, townhomes, apartments) required to satisfy demand and eventually help temper prices. Without addressing this chronic shortage, renters and buyers alike will see their ability to climb the housing ladder reduced, and the billions of taxpayer dollars spent on "homes and housing supports that people need" will have been in vain.

For all the talk of affordable housing, the vast majority of British Columbians need affordable market-rate housing. Why? Because most people don't qualify for subsidized housing and expanding eligibility would mean needing to build even more social housing. The majority of British Columbians just need the market to accommodate their housing needs.

So what's holding back the supply of new homes in B.C.'s most desirable metropolitan areas?

Of course, there's geography - the ocean, mountains and U.S. border all make it more difficult to build new neighbourhoods at the urban fringe of Metro Vancouver. But there's also red tape at city halls across the region that slows or halts homebuilders from getting much-needed housing on the market.

It takes 21 months (on average) for homebuilders to obtain building permits in Vancouver and more than a year across the Lower Mainland. There's also an ad-hoc process of fees levied on builders, making it difficult for them to know how long a project will take and/or how much it will cost. This uncertainty reduces the likelihood of new homebuilding, aggravating existing supply constraints.

These regulatory barriers impact affordability. The previous provincial government commissioned a report on the homebuilding process. It found that hundreds of thousands of units were tied up in the approvals process across several Metro Vancouver municipalities.

And yet, rather than addressing the causes of a severely constrained housing market, the government of Premier John Horgan has opted to tinker by targeting two relatively small groups at either extreme of the housing market. This is a lost opportunity and indicates a fundamental mischaracterization of B.C.'s housing woes.

Rather than focusing on affordable housing for some and freeing up homes at the margins, the government should ensure that the housing market can accommodate the needs of all British Columbians.

Josef Filipowicz and Steve Lafleur are analysts at the Fraser Institute.

– Troy Media


Kill the sacred cows

By Dermod Travis

When times are tough, governments like to spin bad news budgets as a call for every segment of society to share in the pain. 

Rarely, when times are good, do they set out a blueprint to share the gain, something the last government paid dearly for.

Finance minister Carole James rightly recognized that B.C.'s social fabric is a little frayed and some mending might be the order of the day. While her budgetary themes were dead on, the devil is still in the detail. 

Governments can hike revenue by sneaking it in through the back door – as the former government preferred to do – or through the front, as James chose to do, but without sufficient context.

Looking at the principal cities of each province – and relying on 2017 numbers from Saskatchewan – a family earning $75,000 in Vancouver had the fourth lowest provincial tax bill ($6,642) of the 10 cities. Calgary was lowest at $2,766 and Charlottetown highest at $9,502.

Add in utilities (heating, electricity, telephone and car insurance) plus the average rent for a two-bedroom apartment in Vancouver (CMHC data) and suddenly that family has the second highest costs of the 10, just behind Toronto. Vancouver was in sixth spot in 2015 for median family income, though. 

The government may see room to raise taxes and be right, but British Columbians don't have much in the way of room when it comes to disposable income. All the more reason for the finance minister to proceed with caution.

The budget's big blooper goes to the ill-thought-out employer health tax, which simply shifts a regressive tax from one group to another.

One can't call it ill-advised, because it runs counter to the advice the ministry was receiving from the task force it appointed last November. 

It is customary to wait for the advice before charting a contradictory course.

University of Victoria economist Lindsay Tedds – the panel's chair – tweeted following the budget: “This is not the direction we were going.” 

They were leaning to a combination of a personal income tax surcharge and a small payroll tax. 

James has MSP down for $1 billion in 2019/20, with the payroll tax bringing in an additional $1.85 billion. In some quarters that's called double-dipping. 

It's also a difference of $1.1 billion over what former finance minister Mike de Jong estimated in his final budget. 

The great unknown? How much of it is a tax grab? 

For some employers – who paid their employees' premiums – it may be six of one, half a dozen of another, for others it's a new cost of doing business.

The switch from regressive to progressive should be as revenue neutral as possible. The government still has nine months to work it out.

On paper, B.C. may be one of the wealthiest provinces in Canada, but paper wealth tied up in home equity doesn't mean gobs of cash in the bank.

Back in 1993, economics instructor David Tha was the poster boy for opposition to then-finance minister Glen Clark's surtax on homes valued at more than $500,000.

Tha is back, but his circumstances have changed.

The Point Grey home he purchased 31 years ago for $370,000 is now valued at $6.5 million, an increase of 1,658 per cent. 

In the same period the cost of living rose 96.6 per cent. It's a safe bet his salary – before he retired – rose at pretty well the same rate.

Tha may only have three options to pay an extra $12,000 in taxes per year: cash in, borrow against equity or borrow from the province at 0.7 per cent.

While the public's mood has changed – lessening the risk of pitchforks at the legislature – James is already signalling tweaks to the government's real estate speculation taxes. Smart move. 

Budgets are as much about balance, as they are about being balanced.

Hoping to escape the 20 per cent luxury car surtax by dashing off to Alberta to buy your next Ferrari? Wait 'til you try and register it in B.C. 

– Dermod Travis is the executive director of IntegrityBC

Mysterious Mr. Beattie

By Dermod Travis

Sometimes the real identity behind a fake identity story can be just as good a story. This may be one of those times. Meet Michael Beattie, a resident of Brantford, Ont.

Last month, Beattie had a BA in engineering from McGill University, an MBA from Western University and “a personal net worth of $228 million,” all according to his fictitious website bio.

Turns out he's a convicted perjurer and fraudster and is facing charges for fraud over $5,000, laundering proceeds of crime, and possession of proceeds of property obtained by crime over $5,000 in Ontario. 

He had been Caledon, Ontario's fleet manager in the town's public works department, when he was charged in 2016. 

Beattie's lawyer for his latest endeavour – Grant McGlaughlin at Goodmans LLP, a Bay Street, Toronto law firm – initially “denied that his client was the man who was charged,” The Globe and Mail reported. 

This week, Beattie was dumped by the firm.

Why is any of this relevant to British Columbia? 

Claiming to be a construction magnate, Beattie had been beating the drums against a proposed $1.5 billion bid by China Communications Construction Co. for Canadian construction firm Aecon.

Aecon is part of the AFDE Partnership, a joint venture that includes Flatiron, Dragados and EBC Inc., which has been selected by BC Hydro “as the preferred proponent to move to the next phase for the Site C generating station and spillways contract.”

Flatiron and Dragados are divisions of Madrid-based ACS Grupo. Along with Quebec-based EBC Inc. they're part of the consortium building Montreal's new Champlain bridge. 

In December, Montreal media reported that more than 2,000 repairs have already been undertaken on defects with the still under construction bridge.

In meetings with MPs earlier this month, Beattie was accompanied by McGlaughlin and up to three lobbyists, including former CBC broadcaster – now with Ottawa-based Ensight Canada – Don Newman and Joseph Belan, a Swiss-based businessman.

The subject matter of Beattie's lobbying was “to provide an introduction to (his fictitious) MBM Investment Corp. and to discuss the China-Canada Free Trade agreement and issues related to the Investment Canada Act.”

The former fleet manager told The Globe and Mail – before his ruse had been uncovered – that he felt many in Canada's construction industry: “oppose the sale on national-security grounds, pointing to Aecon's widespread involvement in critical infrastructure projects from nuclear energy to pipelines, transit and hydro-hydroelectric projects such as the massive Site C project in B.C.”

Adding for effect, "(CCCC) has no accountability because they are tools of the Communist Party.” 

How could a Bay Street law firm that has counted at least five state-controlled enterprises of the Chinese government among its clients – “tools of the Communist Party of China” no less – take on Beattie as a client?

One of its partners, Hong Kong-based Felix Fong, is a member of the 400-member Selection Committee for the purposes of electing the Chief Executive for Hong Kong Special Administrative Region and the Hong Kong members to the People’s Congress of China. 

Then there's this other nagging matter. How does Goodmans take on Beattie as a client, when it happily promotes the fact that one its other clients was Aecon?

Was Goodmans going to risk flushing its China business down the drain for Beattie, a client who has insulted the country at every opportunity over the past four months? China is not well known for taking insults in stride.

Before Ottawa approves the CCCC takeover, there's some new questions that need to be asked in light of Beattie's shenanigans. How exactly did Beattie – a former fleet manager facing criminal charges – end up as a player in this $1.5 billion acquisition, and why? Who paid the legal and lobbying bills, Beattie or a third-party? And if Beattie did, was he later reimbursed by a third-party? 

BC Hydro officials may want to hold off signing any contracts with the AFDE Partnership until this has all played out. Never hurts to know who you're actually signing an agreement with.

– Dermod Travis is the executive director of IntegrityBC.


Safe water must be priority

By David Suzuki

All nine community water systems on Lytton First Nation land in B.C. have been under boil water advisories at one time or another. Now the First Nation is taking an innovative approach to resolving its drinking water problems. It’s working with public and private organizations and universities in a “circle of trust” to identify challenges and test solutions in real-world conditions. The approach came about as the result of a partnership with RES’EAU-WaterNET, a strategic research network under the Natural Sciences and Engineering Research Council of Canada.

Because problems with drinking water systems vary, RES’EAU-WaterNET works with communities like Lytton First Nation to gain insights early on in the process. With Lytton First Nation’s water treatment operators at the centre of an “innovation circle,” they and experts from government, universities, consulting firms, water companies and contractors identified and piloted several options for providing affordable, sustainable water treatment solutions. Community members, including elders and youth, were also included in discussions.

A lab at the University of British Columbia built a mobile, state-of-the-art water treatment plant that can fit on the back of a truck. With help from UBC students, it was up and running at the Lytton First Nation in 2016, providing filtration and disinfection for water from Nickeyeah Creek.

It’s one of several innovative, much-needed approaches to meeting the federal government’s promise to end all long-term drinking water advisories in First Nations communities by 2021. As commendable as the government’s commitment is, new research shows it’s falling short on progress.

A David Suzuki Foundation report, Reconciling Promises and Reality: Clean Drinking Water for First Nations, finds the government failing on eight of 14 indicators developed to assess its progress.

Lack of clean water in Indigenous communities is astonishing in a country where many of us take that for granted. “Right now, we have elders going down to the lake, chopping holes in the ice to bring water to their households. Right now,” Assembly of First Nations Manitoba regional chief Kevin Hart said at a Vancouver symposium, Reconciliation through Sustainable Water Management, in early February.

As of January 23, there were 91 long-term drinking water advisories affecting First Nations communities on public systems. (Adding short-term advisories brings the number to 147, as of October 31, 2017.) Over the past two years, the government has lifted 32 advisories, but 22 new ones were added over the same time, illustrating the complexity of the problem.

Part of the problem is inadequate funding. The 2016 federal budget included $1.8 billion in new funding to help resolve the crisis, but a December 2017 Parliamentary Budget Officer report found these new investments into waste and water infrastructure represent just 70 per cent of what is needed to end all First Nations drinking water advisories by 2021.

Meeting the government’s commitment will require a number of measures. Ensuring that First Nations lead the processes and have the tools, money and training needed to operate and maintain systems, and recognizing that a one-size-fits-all approach won’t address the varying needs of different communities are among the first steps.

The report recommends a number of ways to improve processes, including the 12 recommendations from the Foundation’s report released a year ago, Glass Half Empty? Year 1 Progress Toward Resolving Drinking Water Advisories in Nine First Nations in Ontario, that still apply.

It also recommends that government invest in and share successful models of First Nations-led approaches to resolving drinking water advisories, including developing and implementing source water protection plans. It should ensure systems are upgraded quickly and effectively, with adequate and transparent funding provided for operations and maintenance. Legislation and regulations should also be developed, with First Nations as equal partners, to hold the federal government accountable to First Nations for safe drinking water.

Support from provincial governments is also necessary, as is being done in Ontario.

“A long history of colonialism has had disastrous effects on social, psychological and economic resilience in communities. Only a holistic approach that builds capacity and infrastructure throughout communities and across sectors will be successful,” the report notes.

Water is life. We all have the right to safe water for drinking, cooking and bathing. Reconciliation means many things, but access to clean water is an absolute requisite.

– David Suzuki is a scientist, broadcaster, author and co-founder of the David Suzuki Foundation.

Best way to choose a leader?

By Dermod Travis

When a political party sets rules for a leadership race and tries to be all things to all members, the result can end up looking like the proverbial camel designed by a committee.

As they did in 2011, the B.C. Liberal party opted to continue with its practice of favouring ridings over members.

Under the rules, each of B.C.'s 87 ridings was worth the same 100 points. The winner needed to amass 4,351 points out of a possible 8,700. 

In giving equal weight to the ridings over its members, the Liberals created a false equivalency.

A riding's relative strength within the party mattered naught. A riding with 218 Liberal members had the same 100 points as a riding that had 1,457 members. The turnout in each riding also had no impact on the points.

The 91 members who voted in Peace River South were worth the same 100 points as the 1,241 who voted in Surrey-Panorama. In the 23 ridings with a turnout of fewer than 200 members, 3,416 members voted. With 2,300 points at stake, the ridings represented more than half of the points needed to win.

Whereas the five ridings where more than 900 cast a ballot – a total of 5,159 members – counted for just 500 points.

While highly improbable, theoretically, 8,603 members in the 44 ridings with the lowest turnout last week could have chosen the new leader had they all voted for the same candidate.

Going into its three-day vote, the Liberals claimed 60,000 members. They didn't all vote and the ones that did didn't stick around for long. On the first ballot, the six competitors shared 30,775 votes between them.

Despite the “stay in the comfort of your own home and vote” nature of the ballot, only 23,270 members voted in the fifth and final round.

Andrew Wilkinson won 53.8 per cent of the votes on that ballot, but not a majority of the vote when the total number of members who voted are considered. His 12,509 votes on the final ballot represented the support of just 40.6 per cent of those who voted.

Sam Sullivan placed fourth in his own riding of Vancouver-False Creek on the first ballot, but even more surprising Andrew Wilkinson came second in his riding of Vancouver-Quilchena behind Michael Lee. 

Rich Coleman's endorsement of Mike de Jong didn't help much in Coleman's riding of Langley East where de Jong placed a distant second to Dianne Watts.

Michael Lee bested Watts in six of the nine Surrey ridings on the first ballot, while Wilkinson took five of the nine on the final ballot.

Todd Stone illustrated another problem with the process: buyer's remorse.

When news broke in the midst of the vote that the party had found irregularities with 1,349 members the Stone campaign had signed up, one member took to social media, posting “I have asked three sitting MLAs and the returning officer via email how to rescind my vote and redo. I have yet to hear back.”

And that's one of the big drawbacks to the vote from the comfort of your own home all at one time for each and every ballot, there's no opportunity to consider a different mix of candidates than conventional wisdom might have settled on. 

Six went into the vote, three were left for the final two rounds. Perhaps, for some, the three candidates left standing were a different three than they had envisioned when they voted.

Would some members have marked their ballots differently had they seen who the final three were? Unfortunately, we'll never know.

Since most political parties now have some form of a ranked ballot and vote from home process, perhaps a two ballot vote should be considered over two days. 

Members eliminate some candidates on day one – but not all – and then have a final vote on the candidates left standing the next day. Something for the Liberals and other parties to chew on.

– Dermod Travis is the executive director of IntegrityBC.

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