VICTORIA — Amid mounting calls for the provincial government to do something about unaffordable housing prices, the B.C. Liberals have begun researching the options for taking action, particularly in and around Metro Vancouver.

“Stay tuned,” said Premier Christy Clark this week, when pressed on the issue by Opposition leader Horgan. “Affordability in the Lower Mainland and across the province is a central issue for us. We are giving that some very serious thought and putting some hard work into working our way through that.”

Stay tuned for what, Horgan wanted to know.

“We need to attack affordability from a number of different fronts,” replied Clark. “We’re making sure we look across the world to see what’s worked and what hasn’t, to see what’s had unintended consequences and what hasn’t.”

Those unintended consequences were paramount in her thinking. “We want to make sure that whatever measure we’re able to take is one that’s fair and is one that respects the fact that people who have invested in their homes — many of whom will already have large mortgages — don’t see the government take away some of their equity. They’ve worked for that equity. They’ve paid for that equity — in many cases they’ve mortgaged against the equity.

She cited a cautionary example from 1993, when the then New Democratic Party government brought in hefty tax increases that disproportionately hit homeowners on Vancouver’s west side. The resulting tax revolt soon persuaded then premier Mike Harcourt to back off.

“I think the opposition would be well advised to support government in making sure that we don’t move in a way that is hasty, like in 1993, and clobber people who really didn’t deserve it and couldn’t afford it,” said Clark.

Partisan shots notwithstanding, the premier did grant that the critics have raised a valid issue. “Because, you know, most people would love to be able to buy a place in the place where they grew up,” she said. “People understandably want to come here from all over the world. But many people who grew up in Vancouver and have made it their home all their lives would like to be able to stay there. That’s a question of affordability, and it’s something we are very much seized with.”

Finance Minister Mike de Jong confirmed research into the options is underway in an interview with me Thursday on Voice of B.C. on Shaw TV. The work is not complete nor has the government reached any final conclusions.

But I gather the preliminary findings have cast doubt on some common assumptions about the problem.

First, there’s little evidence of speculation-driven price increases in the market for condos and townhouses, which constitute the main options for entry-level buyers. Second, foreign ownership is not great enough to be driving up prices except in the market for homes and properties at the highest end.

Third, prices for detached single-family homes are being driven upward by two factors that have little to do with real estate speculation and/or foreign ownership. Rather, it is because they aren’t building them any more in Vancouver and the existing stock is shrinking, owing to the trend toward densification, when detached homes are torn down and replaced with multiple dwellings.

The supply is shrinking and everyone wants one? Of course prices are soaring.

De Jong echoed Clark’s concerns about any deliberate effort to drive down prices because it would be wiping out the sometimes meagre equity that mortgage-holders have built up in their home.

“Those who are expressing a concern, if you really assess what they are seeking, it is a reduction in the value of homes in Vancouver and that will have consequences for a lot of families,” he told reporters earlier this week.

Take the not-untypical example of $700,000 house with a $630,000 mortgage. Even a 10 per cent reduction in the market value of the place would put those homeowners on the verge of being underwater.

He’s skeptical, too, about the results from elsewhere: “In other jurisdictions, under the guise of trying to regulate property values, all you have really seen is governments taking in a lot more revenue and not having any impact on housing affordability.”

De Jong also has reservations about the calls for a tax on speculation — how would it be defined? — and a ban on foreign ownership — how would it be policed and not become a heavy-handed barrier to foreign investment in a province that hopes to attract same?

The foregoing concerns have resolved into some guiding principles for whatever action the Liberals take on this front.

The prime goal is to help first-time buyers get into the market. The main thing to avoid is wiping out equity for those who’ve already taken the plunge. And de Jong would prefer the response to be self-financing, rather than becoming another cash grab like the existing ($900 million a year and counting) property transfer tax.

One possibility would be to increase the current $475,000 exemption for first-time homebuyers from the property purchase tax, to be financed via a surtax on purchases of those homes at the high end, where foreign ownership is a factor.

Pure speculation at this point. But well in keeping with the Liberal preference for a measured response to what they regard as a concern that falls well short of a crisis.

vpalmer@vancouversun.com

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