Andy Yan, the analyst who exposed Vancouver's real estate disaster - Macleans.ca
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Andy Yan, the analyst who exposed Vancouver’s real estate disaster

Hated by politicians, speculators and money-launderers, Andy Yan’s data on Vancouver housing has earned him the right to say, ‘I told you so’


 

Andy Yan is a 42-year-old East Vancouverite who came up out of the proud working class ranks of Van Tech high school, toiling on weekends in the kill tank at the old Hallmark Poultry Factory on Clark Drive. He set out on a career in urban regeneration and applied demographics that took him to projects in New Orleans, New York City and San Francisco.

Nowadays he’s the director of the City Program at Simon Fraser University, and while he’s too modest to boast about it, along the way he’s picked up a couple of exceedingly rare civic distinctions.

The first is the enduring enmity of all the politicians, real estate speculators, white-collar currency pirates and money launderers who have turned Vancouver into a global swindler’s paradise for real estate racketeering, a city that is now also one of the world’s most hopelessly pathetic urban landscapes of housing affordability. The second thing Yan has earned is an unfettered and unimpeachable right to say “I told you so.”

Three years ago, Yan was anxious to get a handle on the role foreign capital was playing in Vancouver’s weirdly convulsing real estate market. At the time, Yan’s main gig was his work as an urban planner with Bing Thom Architects, on contract as an urban planner. When Yan published the results of his research in November, 2015, it came as a shock, for two main reasons. It seemed to conclusively prove what everybody knew but nobody was supposed to say out loud. And it broke a taboo that was enforced so absurdly that Vancouver mayor Gregor Robertson resorted to dismissing Yan’s research as racist.

Yan found that buyers with “non-Anglicised Chinese names” had picked up two-thirds of 172 houses sold over a six-month period beginning in September 2014 in Vancouver’s posh west side neighbourhoods. Contrary to public perception, however, the buyers weren’t just showing up with “bags of cash” to make their buys. Some of Canada’s biggest banks were in on it. Roughly 80 per cent of the deals involved a mortgage, and half of the mortgages were held by two banks – CIBC and HSBC.

WATCH: 5 signs Canada is in the grips of real estate mania

Canada’s banks have mastered the manipulation of clandestine back channels around China’s currency control regulations—the same routes that well-connected Chinese multi-millionaires have been using to shift up to a trillion dollars’ worth of yuan out of China every year. What wasn’t clear about what was happening on Vancouver’ s west side, however, was who the real buyers were, exactly. The new homeowners’ most commonly stated occupation: housewife or homemaker.

Fast forward three years. The weirdness that Yan documented in Point Grey, Dunbar, Kerrisdale and Shaughnessy has rapidly spread southward and eastward, decoupling the bonds linking incomes with housing values across Burnaby, Richmond, Coquitlam, all the way out to Surrey and White Rock on the Canada-U.S. border. Metro Vancouver’s real estate market is now a dystopian tableau of panic buying, tax fraud, property flipping, overseas pre-construction condominium sales, stone cold speculation and elaborate, multiple-account money transfer rigmaroles that are the conduit of choice for drug cartel tycoons. Not even the heaviest regulatory hands at the controls of the Chinese Communist Party’s surveillance state seem capable of shutting the networks down.

It’s not just about shady Chinese money—not by a long shot. Vancouver’s old establishment property developers and real-estate companies fed the frenzies and made a killing. Along the way, they greased the skids by pouring buckets of money into Gregor Robertson’s now-dying Vision Vancouver civic party and Christy Clark’s Liberal Party. Robertson is now a sad figure, his legacy a shambles, his term up in October, and even his celebrated relationship with his glamorous girlfriend, the Chinese pop star Wanting Qu, fell apart last year. Qu’s mother, a Communist Party official in Harbin, remains on trial on charges of embezzling $70 million in a land swindle. Christy Clark is history, too. Her government was toppled last year by John Horgan’s New Democrats. With at least 60,000 Chinese immigrant investors sloshing their money around Metro Vancouver real estate over the past few years, federal politicians, too—Liberals, mainly—have been more than happy to rake it in at cash-for-access soirees and in generous donations to election campaign war chests.

READ: Why Canadians need to start worrying about China

In these ways, in Vancouver’s political circles, and in polite company, one simply didn’t mention the way the city’s housing market was being restructured to serve as an offshore investment bolthole for billions of dollars’ worth of shadow currency being spirited out of China, Iran, Russia and other such kleptocracies. But back in 2015, when the profoundly caucasian Mayor Robertson attempted to dismiss Yan’s findings—“I’m very concerned with the racist tones that are implied here,” Robertson said—it was a smear too far.

Yan’s great-grandfather was allowed into Canada only after being obliged to pay the infamously racist head tax Ottawa put in effect to keep out working-class Chinese immigrants. Students, merchants and diplomats were exempt. The head tax was in place until 1923. Yan wasn’t going to put up with Robertson’s backchat, and by that time, Vancouver’s ethnic Chinese community leaders had similarly lost their patience. White real estate moguls and politicians like Robertson persisted in proclaiming their anti-racist bona fides and purporting to be the champions of Vancouver’s Chinese community by shutting down public debates about the region’s housing catastrophe. Brandon Yan, a civic activist and volunteer on Vancouver’s planning commission, put it best: “Let’s leave it to the rich white dudes to decide what’s racist, right?”

Vancouver’s “condo king” Bob Rennie—a primary financial backer of Robertson’s NDP-tilting Vision Vancouver team and also the chief fundraiser for the NDP’s adversaries in Christy Clark’s Liberals—had cultivated a particularly brazen habit of it. “So you had these whispers about racism being used to shut down a dialogue about affordability and the kind of city we want to build here,” Andy Yan explained. “It’s a kind of moral signalling to camouflage immoral actions. It’s opportunism, and it’s a cover for the tremendous injustices that are emerging in the City of Vancouver and across the region. It’s a weird Vancouver thing. It’s very annoying. It’s kale in the smoothies or something.”

READ: The battle to clean up B.C.

While the politicians and their friends in the property industry were making speeches about diversity and the importance of having sensitive feelings, foreign ownership grew to account for more than $45 billion dollars’ worth of Metro Vancouver residential property. Within Vancouver city limits, 7.6 per cent of all residential properties are now owned directly by individuals “whose principal residence is outside of Canada,” by the definition of the Canada Mortgage and Housing Corporation. Roughly one in ten Vancouver condos are owned by non-residents. And that’s just the owners we know about.

Transparency International reckons that perhaps half of Vancouver’s most expensive properties are owned by shell companies or trusts, with the nominal owners commonly listed as student, housewife, or homemaker. Roughly 99 per cent of the single detached houses within Vancouver’s city limits are now valued in excess of $1 million. More than 20,000 Vancouver homes are vacant, year round. Vancouver’s rental vacancy rate is hovering just below one per cent.

“I’m always careful about using biomedical analogies,” Yan told me the other day, “but what was like a little skin ailment, if you will, over the last 10 or 15 years, has become a full fledged cancer.” Over just the past four years, throughout Metro Vancouver, homes worth $1 million or more have risen from 23 per cent of the housing market in 2014 to 73 per cent of the market now. Yan has been putting together a series of maps that show how the $1 million “red line” has been moving inexorably across the region, deep into the suburbs. “But what those maps don’t do is they don’t factor in transportation costs,” Yan said. “The top two expenditures of any Canadian household is shelter and transportation. God help you if you factor in child care. The whole map might as well be red. A number of factors have all come together to produce this catastrophic situation, but what was a small concentrated pattern in the west side of Vancouver has now metastasized to hit every single part of the region, and it’s similarly metastasized into the rest of the economy.”

As for where things are headed, Horgan’s NDP government has raised expectations, mainly because of Attorney-General David Eby’s avowed determination to chase dirty money out of Vancouver’s housing market and bust up the gangland playground B.C.’s provincially-licenced casinos have become—money laundered through casinos has also been pouring into residential property acquisitions. In Tuesday’s throne speech,  delivered by Lt.-Gov. Judith Guichon, Horgan’s government directly addressed tax fraud, tax evasion and money laundering in the real estate market, hinting that a speculation tax is in the works. Next week, the New Democrats release their first full budget. The housing file, however, falls mainly to the more timid Carole James, former NDP leader and now deputy premier and finance minister. Preliminary indications aren’t particularly promising.

With short-term AirBnB rentals swallowing up long-term rental inventory, Yan was less than impressed with James’ solution, announced last week: short-term rental outfits will now pay the eight per cent provincial sales tax, and two or three per cent in municipal taxes. “That’s like taxing cigarettes to pay for lung cancer treatments,” Yan said.

READ: Ian Young on Vancouver’s ‘freak show’ housing market

Developing appropriately punitive taxes to discourage property-flipping and offshore pre-construction sales – those are obvious fixes. But knowing how to fix things requires a clear understanding of what’s wrong, Yan says, and closing the “bare trust loophole” that allows property owners to hide their holdings is a must-do. Ontario closed the loophole back in the 1980s. Clark’s Liberals promised to close it, but they never did.

In the meantime, Yan is focusing on converting hidden-away data into publicly comprehensible information. Some key information Yan has drawn from a trove recently released by Statistics Canada’s Canadian Housing Statistics Program, for instance, shows that simply building more condominiums won’t do. A condo building boom in Metro Vancouver has kept the property developers happy, but there’s no evidence that the boost in supply has lessened demand or beaten back prices. Nearly one in five condos built in Vancouver since 2016 were snapped up by non-residents.

To a certain extent, there’s nothing new here,” Yan said, pointing to the Guinness family’s financing of the Lion’s Gate Bridge in the 1920s, and the opening up of the British Properties on Burrard Inlet’s north shore. “But what is new is the hyper-commodification of residential real estate, mixed in with an intensification of global flows of people and capital. It’s just a statement in fact. We’re talking about the globalization of the Chinese economy and its impacts.”

Yan says there may be some solution—a mix of remedies, new laws, purpose-built rental housing, tax adjustments and so on—that does not mean a collapse in Metro Vancouver’s real estate prices. Channelling foreign investment in such a way as to serve the public interest might be possible. “But whether this comes out as a bubble-popping isn’t the point. That’s a secondary concern to the kind of society we want to build. “We need to go back to civic virtues.

“We need to talk about the sacrifices we are willing and we need to make for the greater good of the community. We need to have a discussion about what the public good is, and what we are willing to sacrifice to make it happen.”

 


 

Andy Yan, the analyst who exposed Vancouver’s real estate disaster

  1. Overall the world’s middle class has been growing rapidly, therefore many of the immigrants
    to Canada are becoming increasingly wealthy. Many more of the recent new Canadians, especially
    from Asia who have become successful business owners in their rapidly growing economies,
    are bringing to Canada their wealth as well. As long as Canada welcomes these richer immigrants
    the demand for residential real estate will continue to support the high land values. There will
    be short-term price corrections when interest rates rise and in economic recessions, but the uptrend
    will still be intact for land values in Toronto and Vancouver.

    • The Immigrant Investor Program was responsible for a (large?) share of those rich immigrants. Canada shut down the federal version of it in 2014. However, Quebec maintains its version, despite (because of?) the fact that something like 2 out of 3 Quebec immigrant investors end up in Toronto and Vancouver, not Quebec. So, Quebec gets the monetary benefit of an interest free loan, and Toronto and Vancouver deal with the aftermath. Note that there’s not been so much as a peep out of the current, or the previous, federal government about Quebec’s program – c’est la vie.

      Interestingly, studies have shown that immigrant investors were paying less income tax than refugees, strongly suggesting that immigrant investors were evading income tax by not declaring offshore income.
      The type of immigrants Canada should be targeting are middle class folks who are educated or have marketable trade skills, not rich immigrants who distort the local economy.

      Finally, I personally hope the BC NDP government comes down hard on offshore residential real estate investors/speculators. BC owes such people absolutely nothing.

    • If it were simply ‘rich immigrants’ this would be less of an issue.

      It’s rich foreigners who are not really immigrants, or immigrants in name only, buying up property for speculation and asset allocation.

      We don’t have a problem with ‘people buying homes to live in’.

      This is not what’s happening.

  2. Housewives pay little income tax, so in reality Vancouverites are not only being priced out of a home, but subsidizing those that are the cause. It is not racist to restrict land purchases by foreigners–many countries protect their citizens by enacting such laws. This should be done not only in Vancouver, but Victoria as well.

    • These aren’t foreigners purchasing residential real estate, they are new landed immigrants and new Canadians. Our new immigrants (not just those in Quebec’s investor program) are just wealthier as the developing countries they are coming from have done much better economically over the past 10-20 years.

      • The housewives and students as homeowners suggests tax evasion and/or money laundering. Clearly housewives and students would not normally be able to afford a Vancouver home sized mortgage or outright purchase. So, they are fronting someone else. One possibility is that these are “astronaut” families where the husband works overseas and does not declare his worldwide income to the CRA, thus evading taxes.
        That was the point of the article in mentioning housewives and students.

      • False.

        As stated in the article, 8% of homes are owned by those who’s primary residence is not in Canada. Ergo, not immigrants in any meaningful sense of the word.

  3. Quote:
    Yan says there may be some solution—a mix of remedies, new laws, purpose-built rental housing, tax adjustments and so on—that does not mean a collapse in Metro Vancouver’s real estate prices.
    /quote

    Except that a collapse is needed. Right now the prices are unaffordable. Ideally you want to let the air hiss slowly out of the balloon, rather than go ‘Pop!’

    But a lot of people are going to lose a lot of money. Some degree of more lenient bankrupty laws may be in order.

    (In Idaho they didn’t want farmers who went bust to be a burden on their communities. So 40 acres, 4 draft horses, 4 non draft horses, 6 pigs, 20 chickens, 8 sheep, the house you lived in, and the out buildings on the same 40 acres were exempt from bankruptcy proceedings. This gave the farmer the tools to rebuild his life. We are no longer an agrarian society, but perhaps we need a modern equivalent.)

    Suppose that you had an non-occupancy tax that was, say, 10% of the assessed value per year. So a million dollar house was taxed 100,000/year for being empty.

  4. This article is mostly crap to justify NDPs new capital gains tax on primary residents. They are building up the foreign investment fears to tax local homeowners. GVRD land has always risen 7 to 10% for the last 100 years with a few buying frenzies followed by a correction. Developiable land is scarce in this valley, bordered by mountains and the USA, and single family detached homes are going the way of the doodoo. The Lowermainland needs to expand, but we won’t be moving mountains or the USA border. So just as the Guinness North Shore properties paid for the Lions Gate bridge (also tolled), Sunshine Coast Crown land could pay for a hard access.

    • Timey, you’d better dash over to the author’s basement where you will likely find an empty pod. Judging by previous material, I would say Mr. Glavin supports the NDP the way a rope supports a hanging man.

      The crux of the problem has been Vision’s propensity to rubber stamp developers’ re-zoning applications to build swaths of condos and, when public pressure began mounting, some market rate rental properties, all the while giving little back to the communities where they are built.

      • So your solution to high demand would be to stop building or giving free waterfront condos to drug addicts? Greens are trying to kill every good paying resource jod in rural BC and replace them with granola cafes DT.

  5. Many prosperous and desirable cities have the same issue as Vancouver so to say that prices have been driven up mostly by foreign investment is only acknowledging part of what’s going on. We’re hitting that point where the entry price for a 2bed 2 bath in the surrounding downtown suburbs is around 850k, which compared to a lot of other cities is actually quite common, if not cheap. I would bet that as long as there’s a growing population, more educated and skilled workers are allowed in through the immigration program, and industries like the tech sector continue to drive wages higher, Vancouver is always going to be a desirable place to live and a popping of a bubble would be unlikely. End of the day, Vancouver is a boutique city with a huge amount going for it.

    • Except, except….your facts are wrong. Vancouver’s wages are actually lower than most Canadian cities, both the average and median wage being below the national average. And far from tech industries pushing up housing prices, Vancouver’s tech companies, and universities, have been stating for several years that the region’s high housing prices are making it difficult for them to recruit and retain skilled professionals. And skilled immigrants are in the same boat as local skilled workers; they do not earn enough to be able to purchase a home in Vancouver: in 2016, it was estimated that $283,000 per year per household was needed to pay an AVERAGE mortgage in Vancouver. And finally, you confuse skilled immigrants with investor immigrants. Of the latter, some at least have earned money abroad that they do not report in Canada, and, some, at least, are also connected to very shady sources of financing. This is not, in short, a story about locals versus outsiders, it is a story of corrupt governments who allowed Vancouver’s real estate market to become speculators’ and money launderers’ paradise.

      • It’s a story of simple investment strategies. A falling Cdn$, low interest rates and under supply homes in lower mainland. Made the ideal investment play for anyone. But as it is turn to an investment play what goes up will come down. Higher interest rate, unsustainable prices and then a crash. Although investment and tax law are mostly federal, they DO need to change laws to protect from foreign and domestic speculators from holding vacant land and homes.

    • “Many prosperous and desirable cities have the same issue as Vancouver”

      Rubbish. Which cities have this degree of lack of affordability?

      Almost by definition, when affordability is whack, something is awry.

  6. Thank you, Mr. Yan, for your courage and hard work. I wish you’d take on Montreal before we find ourselves in the same situation as Toronto and Vancouver. There is still time — just!

  7. Thank you, Andy Yan and Macleans!

    We Vancouverites now have the facts. Before we just had that awful feeling that something was terribly wrong. We can blame our governments for allowing us to become second-class citizens in our hometown. They stood by and did nothing.

    I, for one, figured something was fishy after Expo 86 and the dissolution of Hong Kong and condos in our city being offered for sale in China, but not here. Filthy lack of ethics. What a disgusting lack of city planning, provincial planning, and federal planning for our future.

    We are Canadians. This is our country. Unfortunately, now it seems to belong to the world and foreigners.

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