National Crisis – Local Challenge

“The crisis is not as acute in the Valley.” A less-than-full-throated endorsement perhaps, but then, Surrey’s former General Manager of Planning and Development Don Luymes had already declared himself a pessimist on the question of providing affordable housing—anywhere in Metro Vancouver. Nonetheless, even when everyone in the planning, real estate, development and investment communities seem to be holding their breath, there is still a sense that—for families, especially—housing solutions may appear more readily and apply more easily in the Fraser Valley.

The extent of the current housing crisis is undeniable: in its June Housing Market Information report, the Canadian Mortgage and Housing Corporation (CMHC) declared that it has been forced to abandon its own definition of affordability. Traditionally, CMHC worked off the banking definition that, to be judged affordable, a home mortgage payment must be “no higher than 30% of average gross household income.” But home prices have risen so much that, by mid 2024, the only place in Canada where you could still meet that test was Saskatchewan, at 29%. In Toronto, servicing the mortgage on an average home would require 74% of an average income. In Vancouver: 99%. “As a result,” CMHC says, “that metric has become obsolete.” And there is no new definition. CMHC says it’s current plan is to “target” lower prices over the next 10 years, hoping by 2035 to return to the pre-pandemic levels of 2019 – a time when Vancouver’s ratio was already 71% and the “Rest of British Columbia” (including the Valley) was 47%. Not, by any definition, affordable.

Seeking Supply Solutions

Of course, housing prices are falling, and they’re dropping farther and faster south of the Fraser. Ryan Berlin, head economist at the real estate marketing company, Rennie, reports that prices are down in the valley by 18% since their peak in 2022 – compared to a 6% decline in Vancouver. Then again, the pandemic run-up in the Valley was also more extreme: benchmark prices rose by 76% between 2020 and 2022, nearly double the still-vertiginous 40% increase in Vancouver. So, even allowing for the recent decline, prices remain far beyond the capacity of all but the wealthiest first-time buyers.

In any case, Canada’s new Federal Housing Minister, the former Vancouver mayor Gregor Robertson, says he doesn’t want housing prices to drop, anyway. When asked the question in May, Roberston answered: “No, I think that we need to deliver more supply, make sure the market is stable.”

Luymes points out that Robertson is likely reacting to another potential problem. Many aging Canadians are counting on the equity in their homes to cover their expenses in retirement. If prices drop sufficiently to make homes affordable for young buyers, it could trigger an economic crisis in the Baby Boomer demographic.

So, Roberston says the answer is increased supply, and CMHC agrees. In the same June report, it said Canada has fallen dramatically behind in building homes and must nearly double new housing starts nationally, from a business-as-usual 245,000 to almost 480,000 per year, for the next 10 years to catch up. But it doesn’t say how.

No Longer Business as Usual

In big-city housing development, especially, business is not “usual.” On the contrary, the largest housing sector – concrete high-rise condo development – is grinding to a halt. With the recent spike in interest rates, the flight of investors (foreign and domestic) and the government reduction of immigration among students and Temporary Foreign Workers (two big renter populations), the business case for new condos has evaporated. As Luymes says, the cost of new concrete construction is such that developers can’t deliver the product at a price people can afford to pay. Accordingly, CMHC says that between 2022 and the first quarter of 2025 condo sales fell by 75% in Toronto and 37% in Vancouver. Despite the housing shortage, there is a glut of condos that the market can’t absorb. Macleans, reported earlier this summer that Toronto has unsold inventory in the pipeline of more than 23,000 units – more than five years’ supply. Nearly 2,000 of those are already built and sitting empty. Metro Vancouver also has 2,000 unsold units, built and empty, a figure Macleans reports is expected to swell to 3,500 by year’s end.

A While in the Making

So, we need to be building twice as many housing units – and we’ve just shut off the biggest tap. How did we get here? And how might we get out?

Ryan Berlin says that many factors contributed to the current crisis. First, policymakers and developers were lulled by 40 years of declining interest rates, perhaps getting a sense that rates would stay low forever and that housing prices would just keep going up. That also encouraged investors to park their money in real estate. People inside and outside the country would buy condos, assuming that renters would cover the carrying costs while price inflation would increase their investment. And it worked – for years.

At the same time, Berlin says, governments began piling policy upon policy to harvest tax revenue or manipulate the market, confident they could do so without causing a crash. Municipal governments started increasing Development Cost Charges (DCCs) and Amenity Cost Charges (ACCs), using the revenue to cover the cost of development and to shield homeowners from big property tax increases. And, as the condo market started to overheat, the provincial and federal governments also stepped in, especially to discourage inflationary foreign investment.

In 2016, BC instituted a Foreign Buyer Property Transfer Tax with legislation that also enabled the City of Vancouver to add an Empty Homes Tax. In 2022, the Federal Government added the Underused Housing Tax, and in 2024, BC followed with the Residential Property (Short-Term Holding) Profit Tax Act, to stop investors from driving prices up by flipping properties.

Without critiquing any of these measures individually, Berlin questions their cumulative effect, saying, “If we were starting with current housing conditions, we wouldn’t stack those policies as we have.”

That cumulative effect? Investor purchases of condo units in Metro Vancouver, which were on the high side of 50% in 2022, settled to a regional average of 50% in 2023, 26% in 2024; and, so far this year, 14%. As Berlin says, people with money might just be thinking, “Hey, maybe I don’t know how this works anymore. Why don’t I just sit back and not participate for a while?”

Pressure on Munis

This is a potential problem for everyone but a specific challenge for Mission Director of Development Services Don Sommer, who is the guy who has to account when the provincial government asks whether the municipality is hitting newly mandated housing targets. The province instituted the targets to ensure that municipalities were moving quickly to get new housing approved. And Mission exceeded its first-year target of 211 new homes; builders actually completed 314. But, Sommer says, if builders, developers and investors stay on the sideline, there is little the city can do.

Sommer also pushes back on the complaints about DCCs and ACCs. Acknowledging that the charges inflate costs for developers, he says, “But that’s what development costs.” When new units or whole subdivisions get built, the city still has to provide infrastructure, schools, parks. Luymes agreed, adding that the social licence to develop high-density buildings is predicated on those buildings being a net positive. It would be easy to waive such fees if senior levels of government were showering municipalities with cash, but that’s not happening and not likely.
One of Sommer’s biggest obsessions is facilitating the kind of commercial and industrial development that will add new living-wage jobs in the community. If Mission has residents who can afford to buy homes, Sommer is confident that developers will be there to meet the demand.

Destination: Fraser Valley

Everyone is also conscious of the role the Valley plays as a place for young families. Andy Yan, Director of the City Program at Simon Fraser University, says Statistics Canada’s latest data shows that, between 2001 and 2024, the percentage of people between the ages five and 18 has risen by 36% in Langley and by 47% in Surrey, even as it fell by 3% in Vancouver. That is, as the total Vancouver population grew by 50%, the number of school-age children went down by 1,870 – while it spiked in Surrey by 34,244. This is an obvious reflection of the affordability level that prevailed over the last two decades, but even in an inflated market, the Valley retains a relative advantage for first-time buyers and for people who want larger, ground-oriented homes.

Given the demand, Luymes also raises the prospect of solutions that we haven’t yet identified. For example, he pointed out that in the Post-2008 Recession, there was a long period in which no new rentals were built. But in 2012, Surrey passed a bylaw, legalizing 40,000 units at a stroke and opening up a whole new category of housing. The provincial government has been leaning toward something similar with legislative changes that force municipalities to accept Small-Scale, Multi-Unit Housing (SSMUH) – up to six-plexes on single-family lots. Given the scale of the problem, Luymes says it’s unlikely the so-called SSMUHs will fill in the gap.

But, given the circumstances, it seems like a time when every solution will be needed.