Developer proposes a 'more-nuanced approach' to foreign investment in B.C. housing

Yahoo

2 days ago

After the federal and provincial governments rebuffed a call from several B.C. developers to allow foreign investment back in housing, another real estate leader is proposing a middle-ground: enable offshore investment, but 'with a handcuff' and an aim to produce rental homes.
'If we're inviting foreign money back into the market, I would recommend that it comes with a bit of a handcuff, and that would be a requirement to enter the rental pool for five years,' Townline Homes CEO Rick Ilich said Friday.
Townline, he said, proposes allowing foreign buyers into the market, but 'under regulated conditions that require their units be rented out through a professionally managed rental program for the first five years of ownership or the first five years after project completion.'
Ilich had declined to add his name to a recent letter that was signed by dozens of leading figures in B.C.'s real estate sector, lobbying Ottawa and Victoria for policy changes to encourage more foreign purchases of local homes to boost a struggling construction industry and ensure a steady future pipeline of housing.
'I don't want to say it was a mistake,' Ilich said of the request from his fellow developers. 'But it does misread public opinion.'
The coalition's letter, which was sent Tuesday, asked the governments of B.C. and Canada to reconsider the federal temporary ban on foreign purchases of residential real estate and the provincial tax on foreign buyers.
The coalition urged the federal government to look at Australia, which prohibits foreigners from buying existing homes, but allows them to buy new builds and presales.
The federal Housing Department responded with a statement suggesting such changes were not in the cards. Provincial leaders were even more blunt, with Premier David Eby saying he's glad the old model of foreign-funded speculative development is dead.
'In fairness to the existing government, they took a position which is popular,' Ilich said Friday. 'But we are not going to hit the prescribed housing targets … if we don't get creative with finding other means of having capital enter the market, because there's simply not enough capital interested in real estate in Canada right now — so invite it back, but use it as a catalyst to expedite rental.'
Ilich is working on a proposal he plans to present to provincial and federal government leaders. He provided with Postmedia a version of the letter, which says that while he and his colleagues at Townline understand the concerns and motivations behind the other developers' request earlier this week, they would advocate a 'more-nuanced' approach.
'Many factors drove housing prices beyond reach for both renters and owners — unrestricted access to our market by foreign investors was one of those contributing factors,' Townline's draft letter says.
'Today, the foreign buyer ban has swung the pendulum too far, at a time when the housing industry needs to attract diverse and broad forms of investment — both local and non-domestic — to meet our long-term housing needs.'
Ilich argues that his proposed program could free up capital for developers to build more housing, increase rental supply for local residents, prevent empty homes, and 'discourage quick resale for profit.'
Ilich chairs the Urban Developer Institute, but emphasized he is floating this idea on behalf of he and his company, not for the industry association.
He proposes allowing foreigners to buy both presale condos and unsold condos currently under construction or recently completed.
'This is not about bailing out developers. It's about freeing up capital for a purpose, to produce housing,' he said.
The coalition's Tuesday letter cited an estimate that only one per cent of Canadian homes were owned by non-residents.
But the proportion of foreign ownership appears to be dramatically higher in certain segments of the market, according to a new analysis by Andy Yan, an associate professor of professional practice in urban studies at Simon Fraser University.
A Statistics Canada report released this week showed that 4.8 per cent of all residential properties in British Columbia were owned by at least one non-resident of Canada, Yan said, but when looking only at newly built condos that rises to 14.8 per cent in Vancouver, 12.6 per cent in Burnaby, and 15.1 per cent in Richmond.
It seems likely that those levels of foreign ownership could put upward pressure on prices, Yan said. 'The question for the federal government is whether it would like to continue on with a game that has created some winners and many losers, or actually create a housing system that houses all Canadians. … Do we want to extend and pretend? Or change and adapt?'
It remains to be seen whether governments — and the voters who elect them — might be open to encouraging some type of foreign investment in real estate, with certain restrictions.
While Eby's response to the coalition's letter earlier this week made clear he is not interested in 'going back' to the days of wild speculation and empty condos, he seemed to leave the door open to some kind of role for international investment.
Citing the cautionary tale of a downtown Vancouver condo project that was fuelled by foreign money and is now facing receivership, Eby said 'that model is dead.' However, Eby also said: 'If foreign capital can help build housing for Canadians and British Columbians, great.'
Asked Friday about Townline's proposal, a B.C. Housing Ministry spokesperson sent an emailed statement that said that the province recognizes the 'the urgent need to increase housing supply throughout B.C. so we can continue to see rents fall and vacancy rates rise.'
'While we will not return to previous policies and approaches that don't help people find the housing they need, we are open to exploring new opportunities that support the development of more rental homes — particularly those that meet long-term needs of the community,' the ministry said.
'We are also mindful of the federal government's ban on foreign home ownership, but we remain open to engaging with industry experts to find a balanced approach where we can leverage investments and deliver more homes for people.'
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