Budget Estimates 2021: Minister of Finance on Housing

Jun 22, 2021 | 42-1, Blog, Estimates, Governance, Legislature, Video | 0 comments

Housing prices are skyrocketing in British Columbia and across the country and it continues to be a challenging policy issue for all orders of government.
 
In budget estimates for the Ministry of Finance I asked Hon. Selina Robinson about her approach to balancing the supply and demand policy measures that are needed to increase housing affordability.
 
Is the provincial government too reliant on revenue from real estate transactions?
 
Why would the province move to cool the housing market if they are making so much money from increasing prices?
 
Where is the breaking point for the Minister of Finance to cool the housing market?
 
These are a few of the many questions I asked the Minister.

[Transcript]

The Chair:

Saanich North and the Islands.

A. Olsen:

Thank you, Mr. Chair, and thank you for this opportunity to engage in budget estimates with the minister.

I’m going to switch gears a little bit here, or a lot, actually. I’m going to talk about the housing market. Over the pandemic, housing prices have skyrocketed in British Columbia. But Budget 2021 talks about the cost of housing like it’s a good thing. It’s a communications pitch as a positive thing — the fact that “the average home sale price in B.C. has increased by 11.6 percent in 2020 compared to 2019.” And it adds: “Housing market activity has been resilient despite the pandemic, and monthly home sales reached record levels in late 2020 and have continued to grow in 2021.”

Does the minister agree that housing, both the housing market and rentals, is unaffordable for many British Columbians and that this is a serious problem, despite the language in the most recent budget?

[Interruption.]

The Chair:

The House will recess for two minutes while we figure out what this noise is.

The committee recessed from 5:15 p.m. to 5:17 p.m.

[N. Letnick in the chair.]

Hon. S. Robinson:

Housing affordability was an issue for British Columbians when we formed government in 2017. We brought forward a 30-point plan. I know the member knows it well. I was the minister at the time. He was the critic and understood full well about the whole-of-government approach that we were taking, making sure we were dealing with money laundering, making sure we were getting illegal activity out of the real estate market.

The Minister of Finance at the time was responsible for doing a number of legislative pieces to do just that. The Leader of the Third Party, in fact, was just asking me about the land owner registry that came out of our 30-point plan. As well, billions of dollars to build the kind of housing that British Columbians have desperately been needing for well over a decade and a half.

We were making some progress. Certainly, the speculation and vacancy tax was playing a role. Bringing in the rental-only zoning was playing a role. There were significant steps that we’ve taken in our first few years as government, and we certainly saw some levelling off. It wasn’t a lot, but it was some levelling off before COVID hit.

COVID really, again, changed the landscape in terms of what was going on. We certainly saw, in the early days of COVID, rental vacancies. We didn’t know what was going to happen to the rental market, but there were some vacancies that we saw coming up.

Then there was pressure put on the real estate market. People who had been living in 500 to 600 square foot condos, which were initially built for an investment market and which were being rented out to folks…. That wasn’t meeting people’s needs because they were now working from home. We certainly saw that that was putting significant pressure, in terms of people looking for larger spaces, where they were living and working in.

My son and his fiancé certainly felt that pressure. It’s not healthy for relationships and not a great way to live your life, especially over this last year and a half.

We also saw that with low interest rates…. That, too, was putting…. Again, it’s an incentive to get into the market. Money is cheap. That was putting significant pressures on real estate.

[5:20 p.m.]
I don’t want the member to suggest somehow that this budget was thrilled about how that was playing out. It used the word “resilient.” The market was resilient. Again, I want to go back to where we were. People thought everything was going to stop. That everything was going to shut down. That no activity was going to happen. It was resilient in the face of COVID, not resilient in that: “Isn’t it a great thing that housing is unaffordable.” I don’t imagine anybody in this House thinks that that’s a good thing.

Having said that, and this budget responds to some of that, again, there is $2 billion to the housing hub so that they could help developers do construction financing for that middle income group that is finding itself challenged. They have jobs and they have capacity to pay a mortgage, they just can’t get in on the down payment. That’s not part of the 30-point plan per se, it’s an element that was in it.

As a government, we’re continually looking for things that we need to do in order to get the right supply in the right communities so that people can live and work and age with dignity here in British Columbia. All of these things taken together are about addressing housing affordability.

I know that the member is well aware — and I’ve said this before, and I keep coming back to it, because it’s a nerdy piece of legislation…. The housing needs assessment. When we formed government, there was absolutely, really, no data on: what’s the housing stock look like? Wholesale, right across this province. So how do we know what kind of housing we need? We don’t.

This housing needs assessment is going to be incredibly helpful for government, and for local government — we’re not the only ones making decisions that look to making housing affordable and available — as well as the federal government, because they have been, historically, missing players for the last couple of decades. They are sort of back in. I think there is more that I would like them to do, again, to address housing affordability.

It’s very much top of mind for our government. There is absolutely more for us to do around addressing housing affordability. If the member somehow thinks that government is happy about housing becoming unaffordable, it’s absolutely not the case. It’s very concerning.

But also, there is so much that this pandemic has changed — has sort of thrown everything up in the air and changed so much. I will say that we know where we were — what was going on in February of 2020. We saw the trajectory, and certainly the housing hub was a piece that we saw has potential to deliver the right kind of housing. That work continued with the current Minister of Housing.

There are still so many unknowns around how things are going to play out over the next year — two years, three years. I know that the member knows that it takes some time to build housing, so it’s not an immediate response to what is happening on the ground. It will take some time.

I know that the Minister for Municipal Affairs is also working on the DAPR report. I know that the current Minister of Housing is continuing to look at how B.C. Housing can adapt and deliver for people needing housing, people who have no home whatsoever, right through to middle-income British Columbians, because everyone is affected by a challenged housing market. Certainly, as the Minister of Finance, I continually monitor what is happening in the market and work with my colleagues to ensure that we have the kind of housing that people can afford and that meets their needs.

A. Olsen:

Thank you for that answer. I think we benefit in this province having a finance minister who also had carried the housing portfolio previously, not that the current minister doesn’t necessarily have the understanding of it. It also, I think, is really important that there is that breadth of understanding across multiple ministers.

I think that…. I’m very thankful, actually, that the housing hub program was…. More capital was put into it, as the minister knows. I’ve reached out on numerous occasions, because there are projects that have benefitted from it in my riding. I think all 87 MLAs, probably, can point to a project or two that have benefitted from that program. It was a good program. So good, in fact, there were projects that were waiting to see if there was going to be something from Treasury Board to increase it.

[5:25 p.m.]
So that program, I think, is a very valuable program.

I think what I am getting to here, just in terms of the context of housing to the budget and the B.C. economy, is in and around the impact that the housing market and sales have on our books. And so the question to the minister is: is the government too dependent on revenues from an overheated housing market to take any meaningful action on the policy mechanisms on the other side, rather than building supply? This is on the policy mechanisms that could be used by a government to cool a housing market in order to ensure that there is some affordability. The question being the minister’s response to whether or not we are too dependent on the revenue that’s being generated right now and recognizing that this has been happening over a number of years that we’ve become dependent on that revenue.

Hon. S. Robinson:

Again, I appreciate the member’s question, and I want to acknowledge –– if I could just take a moment to talk about the housing hub. It was certainly oversubscribed because it brought together…. The intent was to bring together opportunities in community with the private sector as well as local governments and housing providers, whether they were Indigenous or not-for-profit, to use their various component parts and their expertise, really, to create something that neither one partner can deliver alone. So by coming together, they could actually deliver housing for people who need it.

I think about…. Earlier, the leader of the Third Party had asked a question about a new program and what measures we were taking, and this is a perfect example of government starting something new, trying something new, learning from it, taking in information and then adapting it and reshaping it in a way so that it can continue to deliver. This is a perfect example. We certainly saw many, many, many good projects, and this kind of financing opportunity means that as soon as the project is built, the money comes back into government to then be loaned out for development financing to the next project. So it’s really exciting, and it helps to deliver housing for people. And I appreciate the member’s exuberance about this project.

Pertaining to the member’s question, we forecasted revenue declining from this. The question was: are we too dependent? Well, because we forecast, we see it declining, so that we have other revenue sources to help us deliver our programs and our services, because that’s what governments do. The fact that the market is so desirable is one of those blessings and curses at the same time. This is a challenge that we’ve been facing for a long time, but we are careful to not become too reliant on it because it could also change as well if the interest rates…. There are other levers that other orders of government have. Then that will change the dynamic and the revenue. So we’re very, very cautious in our forecasting so that we aren’t too reliant on it, because that is also risky. We try to be really conservative with our forecasting revenues from the property transfer tax.

[5:30 p.m.]
But having said that, this is certainly a challenge, and it really does require all orders of government to work together in order to address housing affordability, because it does affect the economy when you can’t find people who are able to work in our businesses.

I’ll use the North Shore as an example, because there is a significant challenge there, because businesses that need employees on the North Shore, even for construction, their employees come from Surrey or Mission, and they’re taking jobs that don’t require crossing a bridge.

[S. Chandra Herbert in the chair.]

Hon. S. Robinson:

So it’s really hard to find employees who will come to the North Shore to work, and they can’t afford the North Shore, because housing affordability is so challenged there. So it’s a perfect example of how we need to work together in order to deliver the kind of housing that people can afford in all of our communities and not just relegate certain income levels to certain communities. Because that just doesn’t work. They’re not complete communities, and it has economic impact.

So I appreciate the member’s question, and I know that he joins with me and with our government to find ways to help deliver housing affordability for British Columbians.

A. Olsen:

I think — yeah — I’ve got five of those communities in my riding, and the southern Gulf Islands are very similar, maybe not to the population level of the North Shore, but a similar situation in that the real estate that is available is not necessarily the real estate that the people who need it, the workforce…. I think that we’re working with the Minister Responsible for Housing on a variety of fronts for supported housing all the way through to middle-income housing solutions. There are a variety of different programs that are available for that.

So, to the Finance Minister’s point around how the forecast was lower than what it was, does that mean, then, that there is some space for the provincial government to perhaps take some action, put some policies in place that would then cool the housing market? Because there is also economic impact of having housing be unaffordable. There are so many layers to this.

I think, maybe a fairer question — maybe it’s not an unfair question, but maybe I could reframe the question to say: where is the tipping point where the minister might consider taking actions that approve housing affordability, to cool the market?

[5:35 p.m.]
Hon. S. Robinson:

Again, I just want to remind the member. We put together a 10-year plan, right? That’s still continuing to evolve. There’s still work to be done, and that work continues. In fact, I would say, and this is where…. I’m honored to be Finance Minister, but I will say that there’s a part of me that really misses the Housing file because we’d done so much work putting that plan together — the billions of dollars that were dedicated to building housing for all income types.

Now there are ribbon cuttings that are going to be coming. It’s like…. I remember that project, I remember that project, and I remember that project, but I won’t get to go and actually see people’s faces as they move into their new homes. I’m glad that the new Housing Minister will get to do that, and perhaps MLAs from around the province will get to do that and see the relief on people’s faces as they move into homes, because it’s been a few years since we’ve been announcing them. We’re going to start to see thousands and thousands and thousands of homes, people moving into them, which is a good thing. I think it’s what we’ve all wanted.

That’s continuing to unfold. We also are in the pandemic still. It feels like we’re coming through, but there is still lots of volatility around it because things really change dramatically in terms of not being able to predict how the pandemic would impact the fact that people want bigger spaces and adding more pressure into the single-family market, for example. The pressure had been in condos for the longest time — or rental. So the pressure changed, things changed, that we couldn’t have predicted. We’re still in it and certainly watching closely, funnelling resources where we know we need to build more opportunity, like in the HousingHub.

Just around real estate purchasing and where the market’s going, the volatility in it, there’s still some lack of predictability, because COVID continually changes. Just for example, when the federal government was changing the stress test requirements, we expected to see a rise in housing sales just before the June 1 deadline, and it didn’t materialize. There’s a real level of challenges of predictability in the market because it’s so volatile. So it’s really, I think, premature, to take any action. For sure, watching it closely, engaging with the federal government about where they’re going, what their plans are, because we all feed together. Continuing to work with local governments to build the right kind of housing in the right communities — I think that’s work that we still need to continue to do.

The last thing I want to say before I take my seat is that we need to remember just how desirable it is to be here in British Columbia. We have a diversified economy. We have really good…. It’s a great place to live, and the opportunities here abound. And we have the best winter weather of all of Canada, frankly, particularly here in the south Island. So it makes us highly desirable, and people are investing here, which is also good. That, of course, continues to put pressure on our housing market, and it has for many decades.

Having said that, I do think we need to continue to push the envelope to get more housing built, the right kind of housing built, so that those who want to live and raise their families here, participate in the economy here, can have a place that they can afford. That’s work that we’re committed to continue to do, and I expect that all 87 of us, I believe, are committed to addressing that problem.

[5:40 p.m.]
A. Olsen:

The 30-point plan was brought in, in 2018, and it’s a 10-year plan — so out to 2028. However, there wasn’t any particular action taken, and I take the minister’s point that it might be premature to act in a pandemic, to take cooling measures on policy. However, we’ve also put $2 billion into it, and building materials have gone up. So actually…. Right. Exactly.

Like we were saying, there are so many layers to this. The actual value of that $2 billion is diminished because we’re able to build less now. Labour is a challenge too. A lot of the builders that I’m talking to are having a hard time getting access to the workforce that they need.

There are multiple layers of challenges that the government faces. I recognize that there has to be a coordinated approach, as the minister said. Local, First Nations, provincial, federal.

Is there any multi-jurisdictional, multi-authority working group that is looking at how those interchanges happen here in British Columbia with the federal government or done at a federal level with all of the other partners, whether it be UBCM or FCM and such? Is the work being done to recognize the role that each plays and to deal with the housing? Housing affordability is a problem right across the country. Is that working collaboratively happening?

The Chair:

Members participating virtually are reminded to please focus on the work here. If you’re needing to have a conversation or a meeting somewhere else, do that somewhere else. Thank you, Members.

Hon. S. Robinson:

I appreciate where the member is going. It is a complex file, which is why we’re investing in the skilled trades, for example. We know that there’s a labour shortage. In fact, when I was the Housing Minister, the two biggest issues were land costs and…. It wasn’t building material costs at that time. It was access to labour.

That’s why we’re investing and making sure that we have the skilled trades that we need. As a government, we are coordinating all the various pieces and bringing everything we have to bear to make sure that we can continue to deliver and that we have the skilled trades needed to build for us here in British Columbia for the long term.

I don’t think we’re going to see immigration slow down any time soon here to British Columbia. Again, it’s a blessing and a curse. We need to be ready and to make sure that we can meet the challenges for the months and the years ahead.

More specific to the member’s question, we are continually working across jurisdictions to coordinate. It’s not easy. One would think it would be the easiest thing to do. It’s not when you have orders of government responsible for different jurisdictions, each having their own angle on it and each having their own levers but knowing that if they pull that lever, then it’s going to affect our lever over here in the provincial realm. At the local or Indigenous level, it’s a different lever.

Coordinating is challenging, but we are bringing people together across jurisdictions and working to identify various challenges. CMHC and B.C. Housing, for example, work very closely to identify how to…. At least, when I was the Housing Minister, they were. I suspect they still are.

I speak regularly with the Housing Minister around what tools I have. We speak regularly with the Minister of Advanced Education to make sure that she’s doing the skills training piece that we’re hearing from the private sector, those that actually build our homes. Certainly, the Minister of Municipal Affairs is working with the local governments and looking at development approval processes, which can take a long time in some communities, and how to speed that process up.

[5:45 p.m.]
All of these things have to mesh together. So that work is continually being undertaken. Having said that, I think there’s always more we can do. For right now, there’s always more we can do, but for right now there is just…. How things settle out, we don’t know. Are people going to continue to work from home for the long run? We don’t know. I certainly like the fact that I could work in my slippers. But I suspect that I will go back to working mostly in my community office here in Victoria, because that’s where people are and we need to meet with people. Maybe if there’s one day a week that I get to wear my slippers, I’d be very happy, but I don’t know that that’s going to be the case.

So we don’t know what people’s housing needs are going to be. Is the demand for single family going to continue? And are people going to continue to work using the technology, so that they can be at home and earn a living? Maybe, maybe not. So there’s still so much uncertainty in terms of where we’re going as a society, about the role that technology is going to play in our work life, that I think the best we can do right now is watch very closely, see how people’s behaviours change, see how business conducts itself going forward. Taking a look at how….

Keep our conversations going with the federal government around what’s happening with interest rates. What’s happening with stress tests. Making sure that local governments continue to do the important work of land-use planning that works for people so that they’re doing the density, because that’s also good for climate change as well. So there are a whole bunch of reasons why they need to do that work. Making sure they are speeding up their development approval processes.

Making sure that we continue to be a nimble government in monitoring what is happening, and making sure that we’re directing our resources and our policies so that we can address housing affordability for the long run.

A. Olsen:

Thank you to the minister for that response.

I think part of this is getting to the point. The minister used the word “nimble,” which is a very responsive term. It’s that we are responding to the conditions. There is an aspect of this where the people that are represented in here and in the House of Commons in Ottawa and around the council tables are also responsible for shaping policy that shapes society and shapes the options that people have to be able to buy into as well.

So part of, I think, what we’re getting at here in this part of the discussion — around the tools that could be used to cool the housing market, the revenue that government generates and comes to rely on in terms of being able to then provide $2 billion for a housing hub program — is whether or not the government has taken a proactive role of shaping policy that then gets outcomes?

I think that the Premier responded to a question in question period earlier today about this federation that we’re a part of. I have heard it a lot. I deal with it when I’m dealing with issues around the Salish Sea, for example, where everybody has got jurisdiction over something, and then nothing happens — or, I should say, very little happens. I shouldn’t say nothing happens. Little happens.

I just think that what I’m trying to get at is what role does the minister see we play in being proactive. We’re being very proactive on the housing hub side — on the supply side — whereas the demand side, it’s more of a reactive role.

Does the minister agree with that statement that I’ve just made? That we’re more proactive on the supply side and more reactive on the demand side?

[5:50 p.m.]
Hon. S. Robinson:

Government has taken, certainly, significant steps to address demand-side measures, with taxing speculators who were driving up housing costs — that legislation was passed November 2018. Acted quickly. So that’s complete. We have increased the foreign buyers tax rate to 20 percent. That was done budget 2018. Expanded the foreign buyers tax to areas outside of Metro Vancouver as well. That was completed in budget 2018. We increased the property transfer tax value of homes over $3 million, and that was done in 2018. The other one is allowing online accommodation providers to apply provincial sales taxes and municipal and regional district tax on short-term rentals. That was completed in October 2018.

These are a number of steps that we’ve taken from the demand side that we’ve acted on. They became effective in 2018. We’re three years out. So we are seeing some of the impact that we were seeing before COVID, where we were seeing the impact that it had: 18,000 homes being available rentals as a result of the spec tax, which I think is a good thing.

So seeing that was good. I mean, seeing the impact of those measures as well as supply measures — I think that we were starting to make some headway. COVID really did throw us all for a loop on this, and understanding how things settle out, I think, is going to be really important. We’ll continue to keep track of how things are playing out, how the market is moving and in which direction and which parts of the market.

I think that when people talk about the housing market, they talk about it as a unified market, and it’s not always the case. Sometimes it’s on single-family. Sometimes it’s on condos. Trying to understand, sort of, where the pressure points are and what it would take to relieve is also really important.

The member has noted how complex this is, with all of the various component parts. So I think that it is really important that we understand how the interactive parts are working or not working and that we tweak them as need be. As a government, that has been how we have been taking action on this file. COVID is really another one of those things where we’re monitoring very closely to see what kinds of steps we may need to take, but at this point it is premature.

A. Olsen:

Basically, to summarize, the minister sees a role for there both being supply-side and demand-side action taken, and we’ll be watching through as we prepare for budget 2022, as an example, and the government may need to consider further demand-side action if the market remains high. Is that something that we can see this government remaining committed to doing now that we’re in the situation that we’re in now?

I should just clarify that. When I say, “Now we’re in the situation that we’re in now,” politically, it’s a very different makeup of this Legislature than when a lot of that work, demand-side and the 30-point housing plan and all that, was being done. There was a minority government. So what I was referencing when I said, “In the situation that we’re in now,” is not COVID. It’s now that there’s a majority government in place. That’s what I wanted to just be clear on.

[5:55 p.m.]
Hon. S. Robinson:

I understand where the member is going with his question, and I want to assure him that the 30-point plan was about good public policy. It was not about who was in charge necessarily. It was about good public policy. It’s still what we’re about as a government. I want my kids to at least want to live in my province, at least be able to afford to live in my province. I don’t them to say: “Mom, we can’t live here because we can’t afford it.” To me, that’s a terrible outcome, not just for me as a parent but for all of us, if our children can’t afford to live here. It’s bad for communities, and it’s bad for the economy.

This is about just good public policy. I would certainly welcome the member’s ideas or suggestions around what would help. I have a whole bunch of people in my ear who also are continually looking and trying to identify what would help.

I look forward…. I’m not going to anticipate what the future brings. I don’t want to debate Budget 2022 until we finish Budget 2021, but I know that this is very much top of mind for government. It’s top of mind for the Minister of Municipal Affairs, top of mind for the Minister of Housing, top of mind for the Minister of Finance, top of mind for the Premier and top of mind for our government because we see what the risks are in front of us, and we know that we were making headway before COVID. So we’re waiting to see sort of how things play out, and continuing to be responsive to housing affordability is very much top of mind for our government.

A. Olsen:

Excellent. Thank you. I think I’m just going to be able to squeeze one more question in here. I really do appreciate this exchange with the minister. Thank you for this.

I think just a brief bit of commentary and then a question. The commentary being that, of course, it’s wonderful to have multiple ministries involved in this. On the other hand, it’s also a challenge when there are multiple ministries that are involved in this because, then, not only does it require multi-jurisdictional alignment between federal, provincial; it also requires alignment within a single government. Actually, we’ve seen examples of success, and we’ve also seen examples of where that multi-ministerial responsibility actually fragments the situation and creates some unintended consequences.

I’m not questioning the approach that the government has taken, although I just think that there’s probably benefits and drawbacks to both. I think that’s probably the best way to frame this conversation that we’ve been having, which is both the drawbacks and the benefits.

My final question…. And it just comes from an article that I read earlier this week — that there are developers in southern Ontario that are buying up single family homes and just, I think, creating collections of single family homes and turning them into rentals or just renting them out. The secondary housing market has generally been…. Like, me and my family bought a house. This is part of a mortgage helper, and we engage in a relationship with the tenant. The landlord and tenant would be basically two families, essentially. Now we’re starting to see, in other parts of the country, where they’re consolidating huge amounts of real estate and renting them out and creating real estate firms.

Has our provincial government taken a look at this? I think there’s a huge amount of profit to be made in this business, and where there’s a huge amount of profit to be made in this business, it could have further impact on the affordability of the rental markets. We’ve talked about the real estate market in general, but now the rental market could also have challenges for people who are looking at single-family homes. This is still a new thing in Canada. Has our provincial government turned its mind to that challenge — potential challenge?

The Chair:

Thank you, Member. I’ll know next time that a short question isn’t really a short question. The minister can answer, but we will need to get to the vote.

Minister, if you wanted to note the hour, that’s okay.

Hon. S. Robinson:

Thank you. Well, I can do a very short answer. I want to let the member know that we are very much aware. I read the same article — and doing an analysis in order to understand what the potential impacts could be.

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