Race and real estate: how hot Chinese money is making Vancouver unlivable

After Canadas ugly episode of racism in the early 20th century, Vancouverites feel uneasy talking
about how this beautiful but unassuming city became one of the worlds least affordable: an
unprecedented flood of capital from China

A group of young men look at a Lamborghini sports car stopped in a waterfront park in
Vancouver.

A group of young men look at a Lamborghini sports car stopped in a waterfront park in
Vancouver. Photograph: Andy Clark/Reuters

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Tyler Stiem in Vancouver

Thursday 7 July 2016 11.49 BST Last modified on Wednesday 13 July 2016 17.30 BST

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Heres one, says Melissa Fong. Shes browsing online real estate listings in a cafe near
Vancouvers City Hall. Behind her, the mountains of the North Shore the view that launched a
thousand bidding wars rise through mist. Three-bedroom townhouse, 1,400 sq ft, C$1.5m
(800,000). You could start a family in a place like this. Way, way out of my price range, though.

Fong moves on, scrolling through half a dozen homes, each smaller than the last, until she
arrives at a tiny, 500 sq ft condominium on the east side of the city. Unassuming would be a
generous way to describe how it looks from the photos, which, tellingly, are all exterior shots.
You could live there if you only had one kid, right? she says with a grim smile.

An urban planning researcher, Fong divides her time between Vancouver, where her elderly
parents live, and Toronto, where shes finishing a doctorate. She grew up in Vancouver, has deep
roots in the city, and plans to settle here with her husband, a home renovator. But she has
looked on with a mixture of frustration and horror as the cost of housing in Canadas famously
liveable city rise beyond the means of young professionals like her.

When you think it cant get any worse, it does. So you keep adjusting your expectations, you
know?

Over the past year, the price of a single family house in Vancouver increased by an incredible
30%, to an average of $1.4m. Its just the latest, most dramatic jump in an already dramatic long-
term trend that has turned the beautiful but unassuming Canadian city into one of the worlds
least affordable, with a housing price-to-income ratio of 10.8. Thats third after Hong Kong and
Sydney, and well ahead of London, which ranks eighth at 8.5.

protest house prices Vancouver

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The average single family home in Vancouver costs C$1.4m. Photograph: Jimmy Jeong/Reuters

Driving the rise is an unprecedented flood of foreign capital, mainly from China. What you have
is a huge pool of very wealthy people who want to hedge against uncertainty back home, says
Thomas Davidoff, a real estate economist at the University of British Columbia (UBC). Combine
anxious money a lot of it with a beautiful gateway city that has limited space to build, low
property taxes, lax regulation on capital flows, and wealth-friendly immigration programmes,
and you get a market like this one, a market where an ordinary house with a waterfront view
can sell for $15m while people earning local wages struggle to buy or rent a home.

In spite of spiking inequality, policymakers have been slow to acknowledge the problem of
foreign capital. Public debate about Vancouvers affordability crisis has, until recently, been
surprisingly circumspect due in no small part to a very Canadian discomfort with talking about
race.

Were a polite and tolerant society that has been thoroughly schooled in the virtues of
multiculturalism

David Ley

From leftwing mecca to resort town for the super-rich

Chinese immigration has always been a defining social, cultural and economic force in Vancouver
and Vancouverites know what the wrong side of history looks like. Railway workers from
southern China began arriving as early as the 19th century, and at the beginning of the 20th
century Vancouver was the stage for some of Canadas ugliest episodes of racism: anti-Chinese
riots, a head tax on ethnic Chinese, and later an outright ban on Chinese immigration.

As the city grew into a mecca of leftwing politics and hippie self-expression in the 1960s and 70s,
the ideals of tolerance and inclusion became central to the civic self-image. Today, more than
30% of residents claim Chinese ancestry and the city is, by the standards of most western
countries, remarkably easygoing though this ideal of harmony never quite squared with
immigrants own experiences. Fong notes the pressure her parents generation felt and still
feels to assimilate. When we were growing up, they encouraged us to speak English at home
instead of Chinese, she says.

The lessons of the past go some way to explaining Vancouvers almost religious embrace of
multiculturalism, says David Ley, a UBC geography professor and wealth migration expert. I
think its very much part of the Canadian psyche to want to avoid these discussions, he says.
Were a polite and tolerant society that has been thoroughly schooled in the virtues of
multiculturalism.

Unfortunately, this also amplifies the uneasiness around the affordability discussion.

Its frustrating, says Justin Fung, an activist with Housing Action for Local Taxpayers, a local
advocacy group. [The crisis] is a policy issue, its a social justice issue, and up until now,
everyone is saying, Were nice, we cant talk about this. Well, if you cant even talk about where
the money is coming from, you cant do anything about it.

A mansion under construction in a Vancouver neighbourhood popular with Chinese buyers.

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A mansion under construction in a Vancouver neighbourhood popular with Chinese buyers.

Photograph: Reuters

Canada has long targeted anxious money from Asia. Right now, if you invest a five-year,
interest-free amount of $800,000, you can effectively buy citizenship. (By contrast, a similar
scheme in Britain, the Immigrant Investor Programme, offers citizenship for between 2m and
10m.) Such programmes have driven the globalisation of Vancouvers real estate market. They
were created in the 1980s with Hong Kongs elite in mind: millionaires arrived by the thousands
from Hong Kong ahead of the 1997 handover to China, and there was tension in Vancouver then,
too.

Whats different about the current wave of wealth migration is the scale and speed of it. Hong
Kong is a small territory, Ley says. With China you have an amazing depth of capital capital
which is more and more eager to leave the country.

That capital is turning Vancouver into a resort town for the wealthy. Heritage homes are being
knocked down and replaced with mega-mansions. Teenagers drive quarter-million-dollar
Lamborghinis. Nowhere is the fascination, scorn and exaggeration to which these gaudy lifestyles
of the Asian nouveau riches are subject better exemplified than in Ultra Rich Asian Girls of
Vancouver. The reality TV show follows the daughters of elite Chinese families as they float
through a Vancouver that would be unrecognisable to most Vancouverites including, probably,
some of the ultra-rich the show purports to represent.

From a western perspective, maybe theres a certain crassness, says Sonny Wong, a marketer
who advises wealthy newcomers. I had a chicken farmer from southern China come to my
office. His income the previous year was US$100m. He doesnt have a university education.
Ultimately, though, he just wants to do well for himself and his family. So what do you do when
you move to a new country? You buy a car and a house. And a $5m house and a Maserati are
within his means. If you can afford it, thats what you buy.

What matters isnt that wealthy people are immigrating to Vancouver from China, or anywhere
else, really. Its that they continue to earn the vast bulk of their wealth outside of Canada and
they use that wealth to invest in Vancouver real estate. As a result, housing prices have
decoupled from the labour market, putting people who earn local wages at a major
disadvantage. Research by Ley and other academics shows a clear link between global wealth
migration and local affordability.

Vancouver, luxury retailer

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Customers in Vancouver queue for a release of vintage Bordeaux. Photograph: Reuters

While some economic migrants do start businesses here, the problem with Canadas cash-for-
citizenship programme is that it doesnt encourage long-term investment or entrepreneurship
beyond the initial outlay of money. Millionaire migrants might as well establish their families in
Vancouver and continue to build their fortunes in China and they do. A study by the Canadian
government shows that, 10 years after arriving in the country, immigrants who used the investor
programme declared marginal incomes, and paid only a fifth as much income tax as other
Canadians.

Understandably, this outrages people. If someone wants to live here, they shouldnt just be
parking a family here and earning all their money elsewhere, says Raymond Wong, an engineer
who grew up in east Vancouver, a traditionally working class part of the city that has seen prices
skyrocket. They should be contributing to the economy, putting down roots, fitting into the
culture.

The issue here is [the buyers] millionaire-ness, not their Chinese-ness. And I think most people
get that

Ian Young

Compounding the frustration is the fact that, according to experts, a major portion of the money
flooding into the market is hot. Officially, the Chinese government limits the amount of money
individuals can take out of the country per year to US$50,000. Wong recently launched an online
petition to strengthen Canadas notoriously lax federal anti-money laundering measures. It has
attracted more than 10,000 signatures.

While such frustrations are unquestionably legitimate and stronger regulation is badly needed,
the narrative of putting down roots makes some people uneasy. Melissa Fong supports
affordability measures, but worries that talk of roots raises the spectre of a more insidious form
of racism: respectability politics. Its the old question of what is a good Chinese? she says.

Ian Young, author of the South China Morning Posts enormously popular Hongcouver blog, the
must-read chronicle of Vancouvers affordability woes, is more sanguine. When you have
thousands of super-rich settling in a new city in very short time, thats discomfiting people
dont know what to think, he says. But the issue here is [the buyers] millionaire-ness, not their
Chinese-ness. And I think most people get that.
An almost uniquely Vancouver reaction

And yet, hiding behind an absence of good data, government officials have mostly refused even
to admit that foreign capital is making it impossible to buy a house in Vancouver let alone act
to level the playing field, for instance via a progressive property tax.

I find it astonishing that Hong Kong, Singapore, Sydney, and London all have had right-wing,
market-friendly governments which have intervened quite aggressively in trying to address
unaffordability, yet nothing has happened here, Ley says.

Chinese New Year parade from a parade in Vancouver.

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Vancouvers Chinese New Year parade 30% of people in the city claim Chinese ancestry.
Photograph: Ben Nelms/Reuters

The debate is finally shifting, mostly thanks to a controversial study. Last year, Andy Yan, a
respected local urban planner and academic, took Vancouvers most expensive neighbourhoods
and looked for buyers in a recent six-month period with non-anglicised Chinese names that is,
names without a western first or middle name, a method he and other experts defended as an
imperfect but academically sound way of gauging tenure in Canada. Yan found that they
accounted for two-thirds of all house purchases.

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Several prominent figures in the real estate industry publicly questioned whether the study was
racist. So did Vancouvers mayor, Gregor Robertson. This cant be about race, it cant be about
dividing people, he told the CBC. Some in the Chinese community expressed discomfort with
the study as well.

Others, including Yan, were taken aback. My great-granddad paid the head tax, he told a local
newspaper. So to somehow use [concerns about] racism to protect your privilege? Thats just
absurd. This is an almost uniquely Vancouver reaction.
Indeed, there is profit to be had by capitalising on peoples discomfort around race. Young sees a
willingness on the part of politicians and the real estate industry, faced with the prospect of
unpalatable policy decisions, to maintain the status quo. There are a lot of vested interests
here, he says. To red-flag the entire conversation as racist, I find that disturbing. This is the
most profound social justice issue in Vancouver today.

Suddenly, people were talking. Eveline Xia, a 29-year-old activist, started #donthave1million, a
Twitter campaign to protest the exclusion of the middle class especially young professionals
from the housing market. People from across Vancouver tweeted photos of themselves holding
placards with their ages (usually 20s or 30s), level of education (usually high), and the
#donthave1million hashtag. The campaign inspired a series of protests and meetings, that, with
Yans study and Youngs reporting, seem to have changed the trajectory of the affordability
debate.

I think Chinese-Canadian voices have helped make it okay to talk about this stuff. Theyve
helped to disambiguate the money and policy issues from the race issue, says activist Justin
Fung.

This month, Prime Minister Justin Trudeau finally went on record as saying overseas money is
obviously a factor. Mayor Robertson spoke out in favour of a tax on absentee owners,
something that 80% of Vancouverites support.

Yet Young doubts that taxes alone will solve the problem. People shouldnt see them as an
affordability buster. The desire to get money out of China is so strong and so profound that even
those penalties being proposed likely wont make that much of a difference, he says.

Close the dysfunctional and highly politicised cash-for-citizenship scheme, experts say. But no
one expects that to happen soon.

Residents Claire Immega and Peter Harvie dont. For them, the damage has been done, and
theyre adapting by building their own house in Immegas mothers backyard.
Story of cities #38: Vancouver dumps its freeway plan for a more beautiful future

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The only reason its even an option, says Immega, looking out from the window of her
childhood home at a 25ft hedge that will have to be cleared, is because my mother has lived in
here for the past 20 years.

Immega, a lawyer, and Harvie, a property manager, face the same choice as all young
professionals in Vancouver: adapt or leave. Some choose to rent with friends. Some move home
with family. Others, like Immega and Harvie, opt for laneway homes, an in-between measure,
trading flexibility in exchange for affordability and a nicer neighbourhood. A whole sub-industry
dedicated to laneway homes has sprung up.

The couple wont ever be able to sell their house unless Immegas mother buys them out. Nor
can they build up if they start a family, thanks to strict zoning rules. Even so, they say, theyre
luckier than many.

For most of our friends, its take on a huge mortgage if they can afford one pay expensive
rents for ever, or move away. A lot are moving away.

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