The City of Vancouver is looking for ways to reset a housing market in which its residents are battered by both high prices and a low availability, and putting local buyers at the front of the line for any new presale real estate opportunities is one of the policies it is considering.
But as some recent voluntary efforts by developers to prioritize local buyers show, it's easier to declare a "locals-first policy" than it is to verify and enforce that locals end up living in a newly constructed condo or townhouse.
Similar to the province's 15-per-cent foreign-buyer real-estate tax, the city policy is aimed at non-resident investors who have been shown to buy a disproportionate share of the city's high-end condos.
Andy Yan, director of the City Program at Simon Fraser University, broke down the foreign ownership numbers from Statistics Canada and the CMHC and found that condominiums valued higher than $1.5-million had a remarkably high share of foreign ownership, as high as 19 per cent in Vancouver. The city-wide percentage of foreign ownership of all home types was just 7.6 per cent and 4.8 per cent in Vancouver's metro area.
Before even having these numbers the city had already concluded that foreign buyers were distorting the market for new condos.
On Oct. 17, 2017, Vancouver's city council passed a motion to begin "a policy framework for new development applications that gives residents who live and work in Metro Vancouver the first opportunity to purchase new presale homes in Vancouver."
So far, such moves have been applied only to individual projects. One of the first came in 2016 when the West Vancouver district attached a locals' first presale period to the its approval of the six-building, 120-condo unit Sewell's Landing project.
Council's motion could eventually make locals-first the default in any new building application across the city.
That has prompted some developers to move now, and announce they are voluntarily adopting a locals-first policy.
Westbank Corp. opened up a locals-first buying period on Dec. 14 for its 57-floor, 331-unit, Butterfly building project for 969 Burrard St. in Vancouver, the company posted a long document explaining the policy on its website. The company also states it has done similar programs in the past, designed to give a 30-day exclusive buying period for literal locals (as in they lived in the neighbourhood of the development) and another 60 days for residents of Greater Vancouver.
"The sales team also verifies driver's licenses, utility bills and employment letters to insure the buyer included in the Local First program meets the criteria," the document says. "All buyers are asked to sign a declaration to confirm they meet the program's criteria."
The Butterfly document says that in addition to a 30-day window, at any time whenpresales are open if a foreign buyer and a local expressed interest in the same condo unit the tie would go to the local buyer.
"To be perfectly frank, it's a window-washing exercise," says Josh Gordon , assistant professor at the Simon Fraser University School of Public Policy. "This will have very little effect."
For example, what if a buyer was found to have falsified the declaration of " localness" they signed, would that cancel the sales contract? "We have never had to enforce a declaration before so we are unsure what legal consequences would be exactly if buyer does not live up to declaration," according to Michael Braun, director of sales and marketing for Westbank.
Even how the companies define and screen for locals is ripe for abuse, Mr. Gordon says. Locally registered shell corporations with foreign owners, for example, might slip by as "local." A recent civil case involving a $750,000 home purchase in PortCoquitlam, B.C., showed some Chinese overseas investors will go to extreme measures – such as having nine individuals each smuggle packets of $50,000 in cash across the border into Canada – in order to disguise the origin of real estate funds.
There's the more widely known practice of a foreign buyer transferring money to a relative or other agent in Canada to purchase the home on their behalf.
"We understand and acknowledge that a family member may be helping out another family member to purchase a home in Vancouver [a common reality in a high-priced housing market] and do not specially track that," Mr. Braun says.
Butterfly units start at $960,000.
Until policymakers are better able to establish residency of property owners – for example by tracking whether an owner declares income in the province – announcing a development will be locals' first "is more or less a meaningless pledge," Mr. Gordon says.