MAE101 Trimester 2: Vancouver Housing Cost Analysis Report

This report provides an in-depth analysis of the escalating housing costs in Vancouver, attributing the problem to the city's attractiveness, climate, and Canadian immigration policies. It examines both supply-side factors, such as immigration policies and tenant protection, and demand-side factors, including economic growth. The report utilizes supply-demand diagrams to illustrate market dynamics and the impact of policy measures like increased property taxes on second homes. It further explores the implications of taxing empty homes and compares the situation to housing affordability challenges in Australia, offering recommendations for policy interventions to address the crisis. The report concludes by emphasizing the importance of prioritizing housing affordability through government policies and initiatives.

HOUSING COST IN VANCOUVER 1
HOUSING POLICY IN VANCOUVER
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HOUSING COST IN VANCOUVER 2
1. Vancouver is grappling with the increased costs of housing and this has pushed
out a large number of residents. The increase in the housing costs has caused distress to
the youth who are not capable of getting rent easily and hence they live under the
assumption that they will never have a home of their own.
The politicians, on the other hand, have discovered that Vancouver is so
expensive in terms of housing and therefore they are yearning to tax the real estates of the
region into submission and the homeowners think that this will be the best idea that has
ever been employed.
The problem of the increased cost of housing is brought about by the attraction of
Vancouver itself, the climate of the place and the immigration policies in Canada
(Dougherty, 2018).
2. The supply-side factors that have contributed to the worsening of the situation in
Vancouver include a) the Canadian liberal immigration policies that have led to many
buyers accessing land in Vancouver.
b) Provision of subsidies and the steps taken to ensure that the tenants are not
overcharged.
c) Protection of the tenants to make sure that they are not mishandled and
overcharged by the homeowners (Dougherty, 2018).
d) Taking measures to enable developers to build houses fasters and hence solve the
issue of the shortage of houses and increased housing costs.
The demand side factors include:
a) The demand for housing

HOUSING COST IN VANCOUVER 3
b) Growth in the economy that has seen increased income for the residents of
Vancouver who get their income mostly from abroad (Dougherty, 2018).
3.
a) As it can be noted in the diagram, the steeper demand curve is for the owner-
occupiers whose demand appears steeper and more inelastic. Due to the inelasticity, the
prices go up and the quantity demand is low. For demand two, the demand curve is less
steep and more elastic, for our case, this curve represents the demand for land owned by
the investors. Here, the higher the prices the lower the demand (Dougherty, 2018).

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c) Policy measures that are being proposed by the recently elected government
which are aimed at regulating the housing demand include the imposition of higher
property taxes on the second homes and on the families whose core breadwinners
earnings come from outside the country and also on homes which are valued at least $2.3
million. These policies will make the market demand for houses to go down and many
people will be able to pay the housing cost in Vancouver and its suburbs. The demand
curve for houses in Vancouver will be highly elastic (Dougherty, 2018).
d) The supply-demand diagram below shows the impacts of demand management
policies on the property market equilibrium.

HOUSING COST IN VANCOUVER 5
The abbreviation DD1 is used to show the initial market demand for houses in
Vancouver while SS1 shows the initial supply and E is the equilibrium (Dougherty,
2018).
Upon the introduction of policies like the increase in the property taxes (which is
shown by the change from p* to p1) the number of houses being occupied will go down
and the demand too. This will shift the supply and demand curve equilibrium from E to
E*. However, these policies will be good in Vancouver since they will make sure that the
problem of shortage of housing is sort (Dougherty, 2018).
4. The law of supply is used to show the direction of change. It is used to show the
degree of responsiveness in the quantity that is supplied to a change in the price of the
same commodity. In this case, the change in prices will lead to inelasticity in supply. The
percentage change in the level of prices will be relatively higher than the quantity that is
being supplied. The latter is because the demand will be low. It is whereby the quantity
demanded changes by a smaller percentage than the quantity supplied (Dougherty, 2018).

HOUSING COST IN VANCOUVER 6
5. The introduction of taxes on empty homes will increase the supply of homes and
rental houses. This will be made possible since the owners of these empty homes will
find it not possible to pay taxes for these homes and yet pay taxes. Since they need to
look for this money to pay taxes, they will have to rent the homes. Renting the home will
increase the supply of houses in Vancouver. Consequently, the cost of housing will go
down and the demand will also decrease (Dougherty, 2018).
The diagram below shows the impact of introducing a tax on empty homes; the
demand curve is marked D while S shows the supply curve.

HOUSING COST IN VANCOUVER 7
Due to the introduction of taxes on empty homes, there will be an increasing
supply of homes as shown by the shift of supply curve from S1 to S2. The shift in supply
will make the cost of housing to go down as shown by the change in price from P to P1.
There will also be a movement along the demand curve caused by the shift in the supply

HOUSING COST IN VANCOUVER 8
curve. The number of homes demanded will increase as shown by the change from Q to
Q1. The equilibrium in market cost of housing will move from E to E1.
6. The economic growth in Australia and the welfare of the citizens have a close
correlation with the housing sector. Just like in Vancouver, the affordability of housing
has emerged and an issue that is widely talked of by the politicians and also the
policymakers. The two issues described in the housing in Australia include the cost of
housing and the homeowners and renters. Research shows that Australians prefer a
freestanding house on its block since 88% of the population has been noted to live in
separate houses in Melbourne and 57% of the houses that were rented were separate
(Phillips & Joseph, 2017).
Most of the Australians see the cost of housing being substantial. The latter causes
an ongoing expenditure in their lifetime irrespective of whether they rent their domiciles
or not.
Recommendations: the housing affordability should be given a priority through the
formulation of proper policies. The government should also put up houses and
particularly the low-cost housing. There should also be a formulation of policy to shorten
the time taken when bringing land and housing to the market (Phillips & Joseph, 2017).

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References
Dougherty, C. (2018, June 3rd). In Vancouver, a housing frenzy that even homeowners want to
reign in”,. Retrieved June 3rd, 2018, from The Age: <https://www.theage.com.au/world/north-
america/invancouver-a-housing-frenzy-that-even-homeowners-want-to-rein-in-20180603-
p4zj62.html>.
Phillips , B., & Joseph, C. (2017, January 20th). Regional housing supply and demand in Australia.
Retrieved January 20th, 2017, from ANU Centre for Social Research & Methods: http://csrm.
cass. anu. edu. au/sites/default/files/docs/CSRM _1% 3A2017_Housing_Supply. pdf.