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“Land prices are high, it is said, higher than anything would warrant. ’Why, the workingmen cannot afford to pay at the rate demanded for these tiny outside lots,’ asserted one man recently. The same thing was said here twenty years ago, answer the pioneers; others of us know that it was repeated ten years ago and five years ago, and our children and our children’s children will hear the same tale of woe decades hence.”
- RJ McDougal, BC Real Estate, 1911
Last year, the average price of a detached home in Vancouver passed $887,000, triggering groans from locals, and renewed worries about overseas property speculation pricing the average homebuyer out of the market. With mean house prices rising by 10-15% per year, average prices that, when compared with income, now exceed those in New York and London, and Vancouver bearing the distinction of being one of the three least-affordable cities on the planet, real estate, speculation, and affordability are topics on the lips of activists, politicians and locals all over town.
So how did it get this way? What changed? When did overseas ownership take over the market? How did Vancouver go from being a city where one could reasonably expect to purchase a single-family home, to the most expensive city in the country?
The reality is, nothing’s changed. Contrary to the cozy little myths about inflated land values and foreign ownership started in the 80s by mainland China, the factors that fuel the city’s vibrant real estate market are actually little different than they were 100 years ago. In fact, if it weren’t for the global property market, there may never have been a Vancouver in the first place. The only difference is, back then, the speculation that transformed the tiny logging village of Granville into a bustling metropolis was coming from entirely different places: the United States and Europe.
The Early Years
In 1887, only a year after incorporation, Vancouver had 12 grocery stores and 16 real estate firms. The city’s first mayor, Malcolm McLean, was a real estate agent. But, in the late 1870s, before the arrival of the CPR, land in what is now downtown Vancouver sold for approximately $1.00 an acre. Previous to that, the West End itself was granted to Englishmen Samuel Brighouse, John Morton and William Hailstone for a total of 116 pounds (a sum thought to be so exorbitant that it earned them the nickname “The Three Greenhorns”). However, by 1886, with the announcement that Vancouver would be the home of the CPR’s coveted Western Terminus, property values skyrocketed, and suddenly a lot near Granville and Dunsmuir was selling for $400. By 1893, a lot in the same area sold for $1,100, and, by 1900, an adjoining lot went for roughly $4,250. Incredibly, by 1912, – at a time when wages were roughly 50 cents an hour, and a tailored suit cost less than $40 – a lot in the very same area was worth $725,000. Property speculation was so rampant that, when the first CPR land auction took place in 1886, (the railway was granted large tracts of land in exchange for extending their Western Terminus) Vancouver CEO Harry Abbott realized with dismay that speculators “had seized upon all the best sites without any intention of putting up buildings.” By 1889, proceeds from the sale of granted land in Vancouver had made the CPR more money than in all other company towns across the country, combined.
“Better chances for investment were never offered,” reads an 1870s advertisement in The West Shore, out of Portland, Oregon. “Lots that can now be bought for a few hundred dollars will beyond a doubt be worth as many thousands within a year or two. Investment of only a few hundred dollars will yet return fortunes to those that have the foresight to realize the future in store for this place.”
Growth and Crisis
By 1912, the market was an orgy of borrowing, spending, and inflation, a place where real estate fever had even hit those who could least afford it; according to a 1912 survey conducted by the Ministerial Union of British Columbia (entitled “The Crisis in BC”), during a single week in October, more than 40% of the land-purchase applications received were from working-class people. Vancouver had become a place where, according to novelist Bertrand Sinclair, the common man would “go without lunch to make payments on plots of land in distant suburbs.”
In fact, so great was the influence of the real estate industry on the development of Vancouver that it influenced the names of many well-known streets.
“During that land boom at the turn of the century, American speculators bought large tracts of land in the area of Ninth Avenue and Westminster Road,” Anne Broadfoot explains, in her history of the Greater Vancouver Real Estate Board. “To promote sales, they decided to upgrade street names, so in 1909, Westminster Road became Main Street, and ninth [sic] Avenue became Broadway – familiar names found in many major centres around the world, so bound to appeal to the cosmopolite. News reports of the day show that it worked, because all the land sold quickly.”
However, the prewar boom was not to last. Between 1913 and 1915, following the U.S. stock market collapse, and resultant worldwide depression, Vancouver’s real estate bubble burst for the first (and possibly only) time; suddenly, commercial rents declined by 50%, and ordinary working people, no longer able to meet their obligations, defaulted on their loans. The city of South Vancouver went into receivership. The market was decimated. In fact, there is one recorded instance of a corner lot on Cambie and Broadway being listed for $90,000, and eventually selling for less than $8,000.
Even though the Depression took longer to affect Vancouver’s real estate market than it did the rest of the province, construction slowed to a virtual standstill. This, combined with the sudden influx of unemployed men and women seeking refuge in its neighbourhoods ensured that, by the time servicemen were returning from overseas after the Second World War, the city was being affected by a severe housing shortage. Even the creation of the Vancouver Housing Registry (started during the Depression with the intention of encouraging homeowners to rent empty rooms to prospective tenants) couldn’t completely solve the problem, and, faced with little other choice, people began to crowd into existing buildings. The crisis eased only slightly throughout the 1950s (fuelled by the continued demand for single-family homes) and, through it all, prices continued to rise.
“It may be, also, that to achieve a truly low-cost home in this high-priced time we will have to spread the repayments over a far longer period than the terms accepted today,” complains a Vancouver Sun editorial from 1958. “Housing costs are high, but we can’t afford to throw up our hands and say we can’t afford to build many more houses until costs come down again. In a city growing as fast as ours this would be the counsel of stupidity and despair. We must have more homes and we must have them at prices people can afford to pay.”
The Condo Boom
Though housing price increases in Vancouver continued to outpace the national market by a substantial margin (in 1967 alone, according to property assessments, the value of lots for single-family dwellings increased by 25-35%), there was one crucial factor that would change the face of city real estate forever: apartment living. Before 1966, it literally wasn’t possible to own your own apartment; you either owned the entire building, or you rented from someone who did. Apartment buildings, viewed as a terribly downmarket option, were exclusively rented, usually only a few stories high, and were generally built outside of the downtown core. It was only with the enactment of the Strata Titles Act in 1966 that it became possible for British Columbia’s apartment owners to subdivide their properties into individual units for sale, thus allowing for multiple owners. Today, 99% of the downtown population lives in apartment buildings. However, even in the 60s, downtown highrise living was still considered a revolutionary idea, one which would take time to catch on, and would require massive changes to existing zoning bylaws.
“Downtown zoning should be changed and great apartment towers should rise above stores,” a 1966 article in the Province suggests. “If thousands of people had their homes downtown, they would both extend the daily ‘life’ of the city and reduce its traffic problems.”
In 1958, 75% of all housing starts were declared as single-family dwellings. By the mid-1960s, apartment construction outnumbered house construction by 2 to 1. Suddenly condominium living was so popular that apartment owners began rushing to convert their rental stock into 99-year leases and selling them to buyers. However, it wasn’t long before speculators got involved in this lucrative new market. In fact, the problem became so pronounced that, following a report made to council, the city of North Vancouver requested a provincial ban on any such sales, and both Vancouver and Burnaby put a moratorium on all rental-lease conversions. The report, prepared by a North Vancouver land agent, estimated that close to 25% of all condo sales in the city were being made to speculators. The report details one incident of a suite purchased in May of 1973 for $38,500 and sold for $42,000 later the same day.
Though Vancouver enacted a lease conversion freeze in 1973, and provincial programs such as MURB (the Multiple Unit Residential Building program) were enacted in hopes of encouraging developers to construct purpose-built rentals, cries about the city’s lack of affordable housing remained on people’s lips. Accusations of developers abusing MURB are evident in many of the papers of the day, as in the case of the False Creek developments in the 1980s – with word of developers building condos for tax breaks, and then selling the units to wealthy speculators.
“Many of the suites are expected to be rented out by investors,” reports a Vancouver Sun article from 1982, regarding the development. “A $100 million False Creek apartment project will soon become a refuge for many of the city’s wealthy – and a renter’s rights spokesman calls it ‘typical’ of lower mainland development.”
“There’s no shortage of expensive apartments,” comments Tom Lalonde, of the Greater Vancouver Renters’ Association, in an interview with the paper. “Developers have used the MURB program as an example of affordable housing, (but) MURB has never given anybody affordable housing.”
Even Pennyfarthing Development spokesman Ian McBean admits, when interviewed, that “the project falls well short of the False Creek apartment goal of one-third high income, one-third medium income, and one-third lower income, but added: ‘Construction costs and land costs are extremely costly. It would be economically impossible to do that.’”
Land of Destiny
“Like the European Union, Vancouver is crumbling, not along ethnic lines, but among the owns and owns-not,” an article in this week’s edition of the Vancouver Courier reads. “Globalization, in the form of foreign investment, may help chase an entire generation of native-born residents from the city and deny other immigrants a chance at home ownership. Remedies are scarce. But returning property to people who live, work and raise families here seems like a good start.”
There’s no debating that Vancouver is the most expensive city in the country. And, it’s possible to argue that that part of its value is the result of speculative investment. However, contrary to the views expressed by newspapers such as the Courier (Mark Hasiuk’s article asserts that “it began in the 1980s, when waves of Hong Kong residents including members of the business elite, wary of communist China’s pending takeover, poured across the Pacific, gobbling up property with converted HKDs”), this isn’t a recent phenomenon. People from all over the world have been investing in Vancouver for more than 130 years. In fact, Vancouver was a real estate investment before it was even incorporated as a city. The factors that draw investors today are no different than those that brought the European settlers of the 1870s; simply, that Vancouver is a desirable place to live. As the first few generations of Vancouverites bought, sold, swapped, and developed, and realized the desirability of their new city’s climate, location, and resource wealth, the land took on incredible value unbelievably quickly.
And we’ve been bitching about it ever since.
“We live in the land of destiny,” RJ McDougal wrote, in 1911. “In the land of wealth where, though gold is not idly picked off the rocks or from the pavements in the streets, it is just as surely gained from the platted acres and twenty-footers around us. One day an artisan may put the scanty savings of a lifetime into a tiny holding out among the evergreens, and on the morrow almost, he is building city blocks from the proceeds thereof.”