The Entitlement Generation

One of the more disturbing criticisms of the housing affordability discussion is coming from some pretty obnoxious baby boomers. They are telling younger Canadians to “stop whining” and accusing them of “entitlement”. Talk about irony!

The typical boomer was raised in a home where mom stayed home and dad worked an 8-hour day. Back then, the average Canadian family could afford a comfortable middle-class life in a single-family home with only one income and little household debt (less than 30% of GDP). Today families are weighed down by record-high household debt which is approaching 100% of GDP.

When it came time for university, boomers graduated without the need for large student loans. Their parent’s generation picked-up the tab thanks to a top tax rate of 80%. Now, university students are being asked to finance their own education, so boomers can enjoy the lowest tax rates since the Great Depression. The situation is especially bad in BC, where the 2013 BMO Student Survey found students here graduating with almost $35,000 in student debt.

When the boomers started working, they enjoyed good starting wages and generous retirement benefits — thanks to strong labour unions. As they moved up the income ladder and as some of them took over positions in government, they gave themselves huge tax cuts, greatly weakened the strength of labour unions, and put in place plenty of other perks that they disproportionately benefited from — like income splitting and TFSAs . In a report from earlier this year, the parliamentary budget officer concluded that TFSAs overwhelmingly benefit older, wealthier Canadians. Did I mention the TFSA was first proposed by one of Canada’s most prolific millennial-mocking boomers, Garth Turner?

As the baby boomers stock holdings grew, corporate income tax rates fell. Since the 1980s, the Canadian corporate income tax rate has been cut in half. This has done wonders for after-tax profits, and been yet another windfall for the boomers.

CanadaCorpProfits

Ask any millennial if they expect to get the same generous government retirement benefits that older boomers now enjoy. The age for OAS is already going up. Sorry, you young entitled whiners, but there’s a good chance you’ll be working many years more than the boomers had to.

When it comes to housing, boomers were able to buy a single-family home on one income. Then they got to enjoy decades of falling mortgage rates, giving them a nice bonus every time they renewed their mortgage. The outlook for millennials is much less rosy. As hard as it is now to buy a place, it’s likely to get much worse when they renew as interest rates have nowhere to go but up.

One of the regional perks enjoyed by boomers has been the Agricultural Land Reserve. In the mid-1970s, after many of them bought cheap land for their homes, restrictions were put in place on future development. As a result, the ALR helped ensure that the homes of baby boomers would appreciate handsomely. We got ours, tough luck future generations! Now stop whining!

And one of the most outrageous examples of boomer entitlement comes courtesy of the BC Liberals. For homeowners over the age of 55 — most of whom are equity rich — the BC government will now give you a super-low 1 per cent loan. The only requirement is that you don’t pay your property taxes. Meanwhile, the whiners get to pay over 5 per cent on their student loans.

I don’t think there’s been a generation in history that’s had it as easy economically as the baby boomers. They’ve enjoyed economic tailwinds their entire life.

Now that millennials are rightfully complaining that their prospects are much worse than baby boomers enjoyed, some of those boomers now have the audacity to call millennials entitled?

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Emergency Town Hall Meeting

RSVP for tickets to David Eby’s Emergency Town Hall on Housing Issues here: https://ebyemergencyhousingtownhall.eventbrite.ca

What: Emergency housing affordability meeting
Who: Everyone who believes there is a problem in Metro Vancouver’s real estate market
When: Wednesday March 16, 2016 at 7 p.m.
Where: St. James Community Square, 3214 W. 10th Ave, Vancouver

Join MLA David Eby and local experts for an Emergency Housing Town Hall

This meeting is to discuss the causes of, and solutions to, an out-of-control real estate market in the Lower Mainland that has little or no connection to average household income. Issues of international speculation in our housing market, shadow flipping, real estate agent accountability, and other concerns will be addressed. Bring your stories, questions and concerns. The media, along with MLAs from both sides of the legislature, both BC Liberal and BC NDP, will be invited.

This is a meeting to hear stories, demand answers, and send a message to the Premier and the government to start to value the people of Metro Vancouver who make the communities we call home possible.

Wednesday March 16 from 7-9pm at St James Community Square. Doors at 6:30pm.

Vancouver – 34th Most Livable For Millennials

Here we go again…

Mercer recently came out with their 2016 Quality of Life Survey. As usual, the media misused the survey to brag about how Vancouver is the bestest of the best. What they failed to point out is what the survey is actually trying to determine.

When executives are temporarily relocated to another city, they frequently will receive a hardship allowance. For example, when an executive in a city like Vancouver is assigned to Jakarta, Indonesia, Mercer recommends a 25% hardship allowance.

In calculating their index, Mercer considers these ten categories:

  1. Political and social environment (political stability, crime, law enforcement, etc.).
  2. Economic environment (currency exchange regulations, banking services).
  3. Socio-cultural environment (media availability and censorship, limitations on personal freedom).
  4. Medical and health considerations (medical supplies and services, infectious diseases, sewage, waste disposal, air pollution, etc.).
  5. Schools and education (standards and availability of international schools).
  6. Public services and transportation (electricity, water, public transportation, traffic congestion, etc.).
  7. Recreation (restaurants, theatres, cinemas, sports and leisure, etc.).
  8. Consumer goods (availability of food/daily consumption items, cars, etc.).
  9. Housing (rental housing, household appliances, furniture, maintenance services).
  10. Natural environment (climate, record of natural disasters).

Because these executives will continue to earn their base salary plus any hardship allowance, and will be housed by their company, local incomes and housing prices are not even considered. The idea that incomes and house prices have no bearing on quality of life is absurd. Any true measure of livability would need to consider both of these factors. This would be especially true for young families who are just starting out.

So, in light of the deficiencies of livability surveys that only consider temporarily relocating corporate executives, I’ve adjusted Mercer’s numbers to take into account incomes and house prices. For example, if Mercer thinks City A is 5% better than City B, but pay is 5% higher in City B, they would tie in my adjusted index. The same would be true if housing in City A is 5% higher than City B.

I’ve taken the latest available data from Mercer (for English-speaking cities), and adjusted the index to account for incomes and house prices. Here are the results.

Millennial Livability Ranking

Vancouver is without question a great place to live for visiting executives, home-owning retirees and the super-wealthy. But for young families just starting out — not so much.

Wanted: Mayor, City of Vancouver

The City of Vancouver is in urgent need of interested, engaged, effective leadership.

Duties include:

  • Working to solve housing affordability crisis.
  • Reducing street homelessness.
  • Working with Province and local municipalities to improve transit.
  • Fulfilling FOI requests.

Duties do not include:

  • Meeting Pope.
  • Solving Global Warming.
  • Frequent trade missions to China.

If interested, please contact City Hall.

New Price-to-Income Estimates

By now, everyone is probably familiar with the annual Demographia Housing Affordability Survey. In last year’s report, Vancouver — with a house price to income ratio of 10.6 — had the second worst affordability behind only Hong Kong.

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But the numbers they used to arrive at that multiple are now a year old. How has the picture changed since then, and what is the current ratio? The median house price then was $704,800 and the median household income was $66,400.

According to the latest REBGV numbers, house prices in Greater Vancouver have increase 20.1% in the last year. And BC Stats reports that average earnings are up 3.8%.

Applying those increases to last year’s Demographia data, we can estimate that the new median house price is about $846,500, and median household income is now around $68,900.

If these numbers are accurate, then the median multiple for Vancouver is now 12.3 — higher than any US market at the peak of their bubble.

Demographia2007Chart

This is the new North American record for poor affordability. Congratulations Vancouver.

How Much More Proof Do We Need?

Last May I discovered that real estate prices in Metro Vancouver were now being driven by high-end home sales. The only logical conclusion seemed to be that foreign buying was now the primary driver of the Vancouver real estate bubble.

We now have hard data that proves the high-end is being bought by Mainland Chinese money.

In a recent six-month period about 70 per cent of all detached homes sold on Vancouver’s west side were purchased by Mainland China buyers, an academic case study shows.

Even more stunning, the study shows that of all self-declared occupations among owners — on homes worth an average $3.05 million — 36 per cent were housewives or students with little income.

How much more proof do we need before our politicians address the biggest issue in the decline of Vancouver?

Coincidence or Causation?

The latest RBC Housing Trends and Affordability report was released a few days ago. In it, they added a new graphic showing bungalow affordability for Vancouver, Toronto and Canada excluding Toronto and Vancouver.

As most of us know, foreign buyers have been most active in Vancouver and Toronto. As far as I can tell, there is very little foreign buying going on in other Canadian cities. Here is that graphic with a few notations added.

Canada Affordability

For the last few decades, Canadian housing markets have mostly moved in tandem. But over the last several years, there has been a clear break between the two markets where foreign buyers have been active and the rest of the country. Is it just a coincidence, or is foreign buying now driving the Vancouver and Toronto markets?