A report from a University of British Columbia associate professor posits that the Immigrant Investor Program should be reinstated, and the proceeds invested in rental housing—of which the scarcity has reached crisis level in Metro Vancouver.
The IIP—which essentially gave internationals permanent residency in exchange for $800,000 interest-free loans, to be repaid in five years—was discontinued four years ago, but James Tansey of the Sauder School of Business at UBC believes that was a mistake.
“If we have this investor demand for immigrants wanting to move to Canada and establish themselves principally from China and Asia and have a housing problem where there’s a shortfall of investment, my proposal is the federal government should at least look at a modified version of it where deposits made fund the gaps between what it costs to build starter properties and rental properties,” said Tansey. “I have no issue with that capital being tied up for 10 or 15 years as a form of a mortgage, and I’d have no issue with some of that capital not being refundable and it being a cost of a program.
“We had 50,000 people in the line for that program when it was cancelled, and even 2,000 a year paying $1mln a year would be $2bln annually into the space.”
Tansey was spurred to action by what he considers misinformation about the purported impact foreign purchasers of real estate actually have locally. He makes a cogent case.
“If you look at all the immigrant investors that came into B.C. in one year, if every one of them bought an above-average-cost house—maybe a home for a few million dollars—the total cost of that spending would have been $500mln in Metro Vancouver,” said Tansey. “There was $37bln of residential real estate transactions last year, and if you look at the 1,100 people from the Quebec version, it’s far too few of them to have an effect. The supply side issues are much more significant and I think it’s simple economics: If the number of new household formations in Metro Vancouver is higher than the rate of housing starts, and housing is already fully subscribed, you’re always going to have more people looking for homes than there are homes available, and it’s just going to drive up prices.”
However, the Quebec Immigrant Investor Program hasn’t been cancelled. It has been reported that those who use it don’t even bother touching down at Pierre Elliott Trudeau International Airport in Montreal. Instead, they go straight to British Columbia.
“How naive are we that people are going to use the Quebec program and set up a home in Montreal? I’m sure some do, but by far the majority end up coming to Vancouver, and some go to Toronto,” said Robert Mogensen, a broker with The Mortgage Advantage.
Vancouver is in the throes of an all-out affordability crisis, and Mogensen believes anything that could exacerbate it, however slim the chance, is not worth the risk.
“I think bringing it back under the guise of using that investment interest to construct much-needed rental housing in the Vancouver market sounds like a bit of a red herring to me,” he said. “If that went to a vote, I would vote no. I think we, as Canadians, should control our own destiny in that regard and if rental housing is required, then the federal government, CMHC and others should be involved in producing that product. And we are in crisis.”
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