The housing market in Vancouver has been an inflammatory dinner topic over the last few years. In the last 3 years alone, housing prices have risen by 50%. Early owners of property have pocketed windfall gains; for young people and those who’ve entered the game late, the dream of home ownership (and raising a family in a decent location) has become unattainable or incredibly risky. The Globe and Mail estimates that a minimum qualifying income of $171,972 is required to put a down payment on the median house price of $1.01MM. For a city where the median income is $64,242, it’s simply not realistic for most of the location population to buy a home.
The municipal and provincial governments are both at a gridlock. On one hand, they want to offer affordable housing to their constituents. On the other hand, instituting policies that allow house prices to fall would increase foreclosures and adversely affect the economy (especially the booming construction sector). A correction, however necessary, would be messy politically. Because of this, meaningful dialogue on known and potential drivers of the housing bubble (e.g., foreign ownership, interest rates, zoning restrictions, immigration, exchange rates, etc.) is not occurring. There’s no coordinated strategy being formulated to deal with the problem. Addressing symptoms like creating “more affordable housing” doesn’t address the problem.
There are two parts to this discussion: (1) How we got here, and (2) What we can do going forward. Talking about the factors leading to the housing bubble is complicated because the historical data are incomplete. People on social media, and Medium writers like Spencer Thompson and Mr Allen, put forward ideas on causes and solutions, but these can only go so far without conclusive data on the full picture. This piece aims to address the what we can do going forward: refine the design of the most fundamental building block for informed policy making — data.
Hypothesis: If the public and policymakers have a clear view of transactions in the real estate market, better policies will result.
Data should underpin policy making for housing in Vancouver (and other cities in general). Right now, there’s no single data source enabling decision makers to monitor what exactly is happening in the real estate market. There are data on the attributes of homes (i.e., e-valueBC), and some data that can be inferred about ownership, but we’re missing the holy grail of having details of transactions themselves (e.g., buyer income, nationality, borrowed amount, etc.).
Having a mechanism to capture all relevant transaction data would enable definitive answers to gnarly questions like: What is the proportion of real estate purchases by non-residents of Canada? Which policies drive certain behaviours among different segments of buyers? How old are buyers? or, What is the frequency of homes being bought and sold? If there are definitive data on transactions, leaders have no excuse against addressing the true drivers of the problem.
The BC government agrees. The province is taking action by changing the property transfer tax form to collect additional data:
“The Province intends to take steps to better inform the collective understanding of what drives growth in British Columbia’s real estate market. Estimates of the impact of foreign investment and the use of bare trusts in B.C.’s housing market have been just that — estimates. Conclusive data was not available.
Beginning in June, the property transfer tax form will collect new information from owners when they register property at the Land Title Office:
- Individuals who are not Canadian citizens or permanent residents must provide the country or state where they are a citizen.
- Corporations must provide the name, address and citizenship of directors who are not Canadian citizens or permanent residents.
- Bare trustees must provide the names, addresses and citizenship of the settlors and beneficiaries of a bare trust.”
This is a great start, but it’s not enough. For one, it’s not flexible to changes and will probably miss critical attributes that the designers could not initially anticipate, like where buyers pay income tax. Two, it relies upon slow, paper-based processes. There are so much additional data that could be captured through digital platforms that could guide policy making. We can do better.
LT2: A new way to approach land transfers
A radical, yet simple, alternative is to revamp the Land Title and Survey Authority of British Columbia (LTSA) into a public ledger system (perhaps using a blockchain). A public ledger is simply a means of publishing high-level real estate transaction details in real-time (or near real-time) to the public. Think: Facebook newsfeed of transactions, without revealing identities.
Under this design, every real estate transaction in the province would run through a single platform capturing at minimum (a) the property details, (b) attributes about the buyer and seller, without identifying who they are specifically, and (c) metadata on the transaction like date, selling price, and even the mortgaged amount. Let’s call this Land Transfer 2.0 (LT2) for simplicity.
In order to buy or sell a home, each person would register onto LT2 using a government piece of ID (e.g., passport or drivers license) and receive an anonymous token (with private login details) that would contain associated attributes of the person like income bracket, age, nationality, etc. Think of this as an anonymous profile that describes a person without showing who she/he is.
In the backend the province has a full view of all the property, buyer, seller, and transaction data. Because each person registered with their government ID, the province can associate a trove of data with that person. In effect, the province can monitor transactions for unexpected patterns, test hypotheses on drivers of prices, publish reports, and enforce rules on buying behaviour. The public can also pull from the public ledger to make their own reports and analyses. Discussions and policies would finally be guided by data.
- Rich, real-time data for the government and the public,
- A balance between privacy and innovation,
- The ability to rapidly update the data we collect,
- The ability to set controls on buying behaviour directly within the platform, and
- The potential for the public to have self-serve land transfers.
This is not a novel concept. Honduras and The Republic of Georgia are both building blockchain-based land registries, and governments around the world are exploring possible applications for public ledgers.
If successful, (i) BC could be a model for effective governance for other provinces and the world at large, and (ii) the public would be on the same page talking about causes and solutions to the problem. The province could even own the intellectual property and license it to other governments.
The goal is to add transparency to the heated and emotionally charged real estate market. LT2 is the kernel of a solution that could get us there.
In summary, there are two points of discussion on the Vancouver housing bubble: (1) how we got here, and (2) what can we do going forward. While the discussion is messy around (1), we can still provide a foundation for effective policy making for the future. By building a public ledger of real estate transactions, we’re building the foundation to build a full picture of what exactly is happening, and guide the appropriate strategy through a coherent set of policies.