42% Drop in Vancouver Housing Starts Prompts Worry from Development Advocate

The recent decline in Vancouver housing starts, a 42% drop compared to last July, has sent shockwaves through the development community. According to Mike Drummond, CEO of the Urban Development Institute, this downturn signals “the worst housing market and housing downturn in the last 30 years.”

Behind these numbers lies a complex web of costs and consequences that demand a more nuanced understanding. One key factor contributing to this decline is the rising cost of construction. Drummond argues that this increase is a major obstacle for developers, who are struggling to balance their books with decreasing profit margins. The price of building what was once a standard home has nearly doubled since 2015, making it increasingly difficult for builders to break even.

Andy Yan, director of Simon Fraser University’s City Program, notes that the issue is not simply about construction costs. Rather, it speaks to a broader problem of affordability in Vancouver’s housing market. Approximately 70% of condo units built but not sold in the city cost over $1 million. This raises important questions about what kind of housing we are building and whether it meets the needs of local residents.

Infrastructure costs associated with new developments also warrant attention. Yan estimates that each unit requires around $107,000 worth of infrastructure to come online – a figure that includes roads, sewage, and water services. The question of who should bear these costs is particularly pertinent in a city where developers are often incentivized to prioritize profit over social responsibility.

Drummond’s suggestion that Canada follow Australia’s lead in dealing with foreign homebuyers has been met with skepticism by some experts. While Australia does allow foreign buyers to purchase new product, it restricts their ability to bid up the cost of existing inventory. However, Yan cautions that simply copying a single practice from another country is not enough to guarantee success.

Canada’s experience with foreign homebuyers has been more complex and nuanced than often acknowledged. The 2018 ban on foreign homebuyers was introduced in an effort to cool the market and make housing more affordable for locals. However, its effectiveness remains a subject of debate. Some argue that the ban has merely driven foreign investment underground, while others contend that it has helped to stem the tide of speculation.

As Vancouver’s housing market continues to evolve, no single solution will be enough to address the complex web of costs and consequences at play. A multifaceted approach is needed, taking into account the various factors driving this downturn – from rising construction costs to affordability issues and infrastructure expenses.

In the coming months, debates about how to address these challenges are likely to intensify. The upcoming expiration of Canada’s foreign homebuyer ban in 2027 will undoubtedly be a major flashpoint, as policymakers grapple with the implications for local markets. Meanwhile, developers and policymakers must work together to find creative solutions that balance the need for affordable housing with the imperative of sustainable development.

Ultimately, Vancouver’s housing dilemma serves as a stark reminder of the complex interplay between economic, social, and environmental factors in shaping our cities. As we navigate this difficult landscape, one thing is clear: the status quo will no longer suffice.