VANCOUVER—A Vancouver academic says new housing data shows that foreign money fuelled the region’s extreme disconnect between incomes and home prices, but not everyone agrees with his analysis.

Using newly-released data from Statistics Canada, Josh Gordon, a professor at Simon Fraser University’s School of Public Policy, has shown that the Metro Vancouver cities that developed the widest gap between home prices and incomes also had the highest share of non-resident ownership.

Gordon used a measure called the price-to-income ratio: the lower the number, the more closely home prices match what a local income earner could pay. For instance, Calgary has a price-to-income ratio of 3.9, Montreal’s is 4.1, Toronto has a relatively high ratio of 8.9, and Vancouver tops Canadian cities at 11.4.

But, Gordon said, a breakdown of some Metro Vancouver municipalities shows an “extreme” price-to-income ratio: The ratio is over 30 for the City of Vancouver and West Vancouver, and sits at just over 25 for Richmond.

For years, analysts have noted a mismatch between the very expensive homes in some Vancouver neighbourhoods and low reported incomes.

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In 2016, Jens von Bergmann, a Vancouver-based data analyst, released a report showing that Vancouver has unusual pockets of poverty in neighbourhoods where homes are priced in the multi-millions, and an unusually high percentage of owner households whose shelter costs are higher than their reported incomes.

Gordon based his analysis on a 2017 report by Richard Wozny, a real estate analyst who died in February 2018. Wozny warned that the extreme disconnect between home prices and incomes pointed to either tax evasion, or a taxation system in need of updating to capture the wealth being generated by unbridled real estate speculation.

Gordon took Wozny’s analysis and added new data published by Statistics Canada, showing the percentage of non-resident owners. He said that analysis shows “a remarkably strong relationship” between high price-to-income ratios and non-resident ownership.

“The money that’s being used to purchase or maintain that housing is likely coming from abroad,” Gordon said.

“We can infer that non-resident ownership typically means foreign ownership, which is ownership primarily based on foreign income and wealth.”

Gordon said the “satellite family” model is one possible explanation for high home prices and low reported incomes. The immigration pattern, in which the family “breadwinner” lives and works mostly in Asia while the spouse and children live in B.C., has been common in Metro Vancouver for more than 30 years.

Under tax treaties Canada has signed with other countries, people who do not make their income in Canada can declare themselves a non-resident of Canada for tax purposes.

“It’s not always tax evasion, but we have tax avoidance happening,” Gordon said.

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“This is a way of avoiding taxes that most people think should be paid because the family is residing in Canada and using services.”

Nathanael Lauster, a sociology professor at the University of British Columbia, warned against demonizing satellite families “as either associated with money laundering or associated with nefarious ways of avoiding taxes in Canada.”

“I worry that that is a problem,” Lauster said, “because that’s not actually reflective of what most of these satellite families are encountering on the ground.”

Breadwinners often return to their home country to work because they have trouble getting credentials recognized or finding a job that pays well, Lauster said.

Lauster critiqued Gordon’s analysis as treating Metro Vancouver municipalities as separate entities, rather than recognizing that the urban core — the City of Vancouver — will always have more very wealthy and very poor people than the suburbs, as well as more expensive housing.

He said there could be other explanations for why reported income is low.

“He doesn’t clearly lay out the difference between income and wealth and there are real limits in understanding how wealth is working,” Lauster said.

“It means we’re not paying attention to other aspects of wealth that don’t really show up in taxation data, including wealth that might be evading Canadian taxes legally or illegally.”

In the 2018 budget, B.C.’s NDP government introduced a speculation tax that applies to vacant homes, but also to people who own homes in B.C. but do not earn income here.

Gordon argued the tax has been effective: Home prices have been dropping, in sharp contrast to the steep escalation in prices that peaked in 2016.

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