Vancouver Housing Crisis with Chinese Characteristics

Student Rose Wu has written a poignant commentary about how the decade-long challenges with housing affordability in Vancouver has turned into a racial discourse. Her 678-word piece in online publication The Tyee should be compulsory reading for the handful of influential politicians, academics and journalists whose campaign against the city’s high home prices has cast a pall on “Asian-looking people” while playing down the role of other major factors.

So, how did the Canadian housing story become linked to race? Specifically, what has led to the framing of this narrative as the “Vancouver housing crisis with Chinese characteristics”?

Wu doesn’t need to look far for an explanation. In separate commentaries preceding her July 4 piece, three media professionals and an academic laid out some of the themes of the “Blame the Chinese ” storyline.

The view from the ground

In a July 3 commentary in The Tyee, freelance writer Mitchell Anderson summarized the popular opinions that collectively blame China, Chinese immigrants and their money for Vancouver’s housing problems. His summary is noteworthy for not mentioning the domestic factors that have contributed to the region’s housing boom or crisis. This would include a decade of low interest rates, the surge in bank lending for home buying, the rise of alternative mortgage lenders, the region’s strong economy and jobs market, restrictive anti-supply policies and practices by the various levels of governments, the shortage of rental-only developments, the inter-generational transfer of wealth, population growth, and record tourism arrivals.

According to Anderson’s one-dimensional explanation, China’s wealthy together with its criminal elements and corrupt officials have spirited a huge amount of money out of their country into Canada’s housing market. He cites a Bloomberg story about US$800 billion leaving China since 2014 without asking if a large part of that is foreign-direct-investment projects undertaken by the country’s many large companies in various parts of the world. His suggestion that the bulk of that US$800 billion has gone into buying Metro Vancouver’s C$50 billion-per-year (US$38 billion) housing market is absurd: imagine a garter snake trying to swallow a horse.

Anderson also repeats a widely circulated story that wealthy Chinese migrants evade paying taxes after arriving in planeloads through Canada’s Business Immigration Program that ran from 1980 to 2014. The “satellite family” phenomenon is often portrayed as widespread among Chinese immigrants, where the man returns to China to work and pays no taxes to Canada while his wife and children live off welfare in their new homeland. The Canadian media’s obsession with Chinese satellite families pales in comparison with their surprising lack of interest in the far bigger tax-evasion problems posed by the country’s corporations and powerful elite.

Anderson, a frequent contributor to The Tyee, completes his negative stereotype of today’s Chinese immigrant with the inevitable reference to money-laundering. These days, “money-laundering” and “Chinese” have become mutually associated words. Credit goes largely to British Columbia’s attorney general, David Eby, who has alleged – and is yet to substantiate – that Asian immigrant gangs are laundering billions of dollars through Vancouver’s housing market, casinos, luxury-goods business, and expensive-cars trade.

The impression that Chinese gangs have swamped Vancouver with “mind-blowing” amounts of money has been largely sold to the public through regular sensational news reporting in the Canadian media, often with helpful government leaks and secret police studies. The high point of this campaign is Eby’s recent series of studies on money-laundering undertaken by supposed experts that is looking more like political theater built on dubious data and speculative assumptions. Just as troubling is that Eby and his chief investigator Peter German seem overly focused on targeting Chinese money, immigrants and criminals as the main villains. As noted in The Georgia Straight, the Eby-commissioned studies fail to address established money-laundering activities in other major sectors of the economy where the Chinese factor is far less pronounced.

Plight of the DINK couple

When you and your partner are a high-powered Double-Income-No-Kid (DINK) couple who cannot afford one of those C$20 million waterfront mansions, whom do you blame for your “housing crisis”?

Unlike Anderson’s attempt at “macro analysis,” Global News Radio CKNW host Lynda Steele offers a more personal perspective into how the Vancouver housing discussion has become so twisted.

“I should be living in a mansion in Shaughnessy, right? Champagne dreams and caviar wishes?” Steele asks half-mockingly. Instead of the high life befitting her celebrity status, she and her partner have to settle for a condo. She blames wealthy Chinese migrants and money-launderers working with greedy developers and incompetent politicians for having priced them out of the mansion.

The most telling but unstated point in her comment is that the “Vancouver housing crisis” story means different things to different people. The homeless and the poor now have to share that narrative with those who feel they should be owning multimillion-dollar single-family houses in the city.

To support her argument, Steele cites SFU urban planner Andy Yan’s 2015 “study” of 172 expensive homes in an affluent section of Vancouver’s west side. Yan was given a set of selected data by Eby, the New Democratic Party’s housing critic when it was in opposition. Suspiciously, 66% of those homes were bought by people with “non-Anglicized Chinese names.”

The study’s apparently predetermined conclusion had the desired effect of igniting national outrage for the “evidence” it provided that new Chinese immigrants and their capital had taken over Vancouver’s housing market. Over time, reporters were citing that 66% figure with no reference to the tiny sample size of 172 houses.

When Vancouver’s mayor at the time, Gregor Robertson, criticized the study’s focus on race, he was rebuffed by influential journalists Douglas Todd of the Vancouver Sun and Ian Young of the SCMP. Todd cited experts who said it was not racist to discuss the impact of global capital, regardless of their origin, on local housing cost. But he and the experts neglected to mention that the study’s flawed methodology, data selection, and small sample size had predetermined the conclusion of home ownership by race. If they had wanted to prove the impact of global capital on Vancouver’s housing prices, the Eby-Yan study was not the smoking-gun document.

In a bizarre twist, it was Young who underscored the study’s racial tone while trying to defend it from racism charges. In an interview with Maclean’s magazine, he said the study accomplished two things:

“It proves that those buyers are ethnically Chinese. I don’t think that’s disputable. If someone’s got a purely Chinese name, they’re ethnically Chinese.

“Secondly, I think to an almost irrefutable degree, it proves they have some form of Chinese as a language mother tongue.”

Yan won over the popular opinion, and his study remains as influential as ever. In a mushy piece for Maclean’s that included the usual allegations of Chinese complicity and stereotypes, author Terry Glavin hailed Yan as “the analyst who exposed Vancouver’s real-estate disaster.” City planning expert Sandy James recently praised the Eby-Yan study for proving that the arrival of “a significant group of people” had led to the “commodification of housing as a holding, not a place to live in.”

Judging from Glavin’s coverage and James’ comment, it still has not occurred to Canada’s talking heads that a survey sample of 172 houses taken from more than 42,000 Greater Vancouver homes sold in 2015 is statistically meaningless. The survey should never have seen the light of day, much less become an authoritative study of reference.

Few have noted that Eby had focused his data-collection effort on a small section of Vancouver’s west side noted for its high representation of ethnic Chinese residents. This methodology could also be applied to, say, parts of Surrey and Oak Street to show that people with “non-Anglicized Indian” and “non-Anglicized Jewish” names dominate certain neighborhoods. What does it prove? Nothing, except that the methodology was likely racially motivated and its “finding” of a high rate of Chinese home ownership was rigged from the start.

With the mainstream media and academia failing to ask critical questions, it was left to a former politician living in eastern Canada to warn about the “Yellow Peril” racist nature of the inquiry.

“Eby’s guy (Andy Yan) looked at the names of the 172 buyers, screening them for ‘non-anglicized’ Chinese names, which is … racist,” Garth Turner said in a November 2, 2015, blog piece.

“Of course just looking at names does not reveal if the buyers are Canadian citizens, landed immigrants, permanent residents or the children and spouses of people working abroad but investing here.”

If Rose Wu wants to know why, how or when the housing discussion turned racial, the Eby-Yan study of the 172 houses would be a key moment.

 

PART 2

Josh Gordon, an academic at Simon Fraser University in suburban Vancouver, in May 2016 made a sweeping declaration that “puts a lot of the blame for the housing crisis on foreign buyers, and buyers from China in particular.”

He delivered this conclusion in a rudimentary paper built largely on news clippings, the flawed Demographia survey, and his own arguments that money from China had made housing in Vancouver unaffordable for local-wage earners.

The public-policy specialist, who admits he is not a housing expert or an economist, dismisses the role of other factors in the region’s housing-price surge of 2009 to 2018. He shows little interest in analyzing domestic credit growth, the role of lending by banks or alternative mortgage providers, or the impact of quantitative easing in inflating asset prices in major cities around the world.

He supports taxes as a major solution to make housing affordable for two reasons: They discourage foreign investors from entering British Columbia’s real estate market while raising revenues, presumably for the government to build affordable homes for local residents.

Ironically, 74% of BC residents told a recent survey that the deluge of new taxes was adding to the region’s housing and living costs. At the same time, the taxes and new regulations are deterring investors, both local and foreign, from adding supply to meet the housing demand of the province’s growing population.

Since the introduction of the foreign-buyers tax in August 2016 followed by other anti-demand taxes and measures, Metro Vancouver remains mired in its housing-affordability crisis. Meanwhile, the province’s tax revenues from housing transactions have taken a big hit, with 2018 revenues plunging 24.2% to C$55.8 billion (US$41.9 billion) from the previous year.

None of this fazes Gordon, who has doubled down on his “blame foreign capital” argument in his latest June 2019 paper based on some limited data work by another analyst, the late Richard Wozny.

Jens von Bergmann, a founder of MountainMath, an independent Vancouver company that provides data analysis, has written a critique of the data and methodology that Gordon employs. He concluded his comment by calling Gordon’s paper “a mess” and its thesis that foreign ownership is the main reason for Vancouver’s unaffordable housing as “irresponsible.” Gordon has responded with a lengthy rebuttal.

While both have raised valid points about data and methodology, their dispute risks becoming a narrow academic discussion for ignoring the bigger issue of Gordon’s failure to investigate other factors behind the strength of Vancouver’s housing market. Gordon said he had found a high correlation between rising home prices and foreign ownership.

But as others have noted, correlation does not prove causation, which in this case means it is not conclusive that foreign ownership alone or largely caused the run-up in prices. For a high-volume, high-value market such as housing, a complex myriad of factors is in play, all at the same time.

The surge in Canada’s money supply – a basic building block in the understanding of modern economics – is glaringly not on his radar, as can be seen from his 2016 paper and subsequent public pronouncements. According to Statistics Canada, the country’s M2 money supply measuring the total amount of cash, checking deposits and convertible near-term money in circulation doubled from less than C$900 billion in 2009 to more than C$1.7 trillion by mid-2019.

Along with the world’s major economies, bank lending and money circulation in Canada exploded in the aftermath of the 2008-09 global financial crisis. This was the result of a concerted joint effort by the world’s leading governments and central banks to boost spending to prevent the global economy from collapsing under the weight of the US subprime crisis and that country’s disastrously expensive wars in Iraq and Afghanistan.

A large chunk of that new liquidity went into mortgage lending that ignited a global housing boom, Metro Vancouver included.

Gordon also ignores the impact of the commodities boom on Canada’s resource-heavy economy. Crude-oil prices surged to a record US$145 a barrel in 2008, and stayed above US$100 a barrel through early 2014. Other commodities also rose to record prices during this period.

Some of that wealth generated in Alberta and Canada’s other western provinces would have found their way into Metro Vancouver’s coveted real estate.

There is also a strong case for Gordon to follow up on the Strategic Insights study that C$1 trillion in personal wealth is now being passed on to the next generation. If true, the “biggest inter-generational wealth transfer in Canadian history” easily exceeds the impact of foreign money on the housing market. The Strategic Insights study looks just as, if not more, worthy of a closer examination than Wozny’s data.

The high-tech and LNG sectors are multibillion-dollar industries that are creating high-paying quality jobs while tourism is labor-intensive. All three are putting further pressure on housing demand in Metro Vancouver

In recent years, Metro Vancouver has witnessed the emergence of a high-tech sector and the liquefied-natural-gas industry along with a booming tourism trade that seem to have escaped Gordon’s attention. The high-tech and LNG sectors are multibillion-dollar industries that are creating high-paying quality jobs, while tourism is labor-intensive. All three are putting further pressure on housing demand in Metro Vancouver.

Gordon will have to study these factors exhaustively and many more before he can make the unimpeachable conclusion that foreign capital is the main or sole culprit of the region’s expensive housing.

Perhaps the most intriguing aspect of the Gordon-von Bergmann duel lies not in the merit of their respective arguments, but the media’s coverage. Gordon’s Wozny paper was given prominent coverage by the South China Morning Post and ZeroHedge as well as several local newspapers including the Vancouver Sun, Vancouver Courier and StarVancouver, while von Bergmann’s critical review was not mentioned at all (as of my writing this commentary).

Ian Young, the SCMP’s Vancouver correspondent, gave Gordon’s study the biggest endorsement that included a quote describing its finding as “unimpeachable.” Young’s unqualified support for the study – his story failed to include any opposing views – is consistent with his partisan position in the Vancouver housing debate.

Since his arrival in Vancouver at the start of this decade, he has given plenty of coverage to misbehaving Chinese immigrants, their wealth and its impact on the region’s housing market. Like Gordon, he rarely discusses the other factors driving the housing market despite the SCMP’s pledge to provide balanced reporting according to the principles of “Truth and Fairness.”

Not content with his lengthy puff piece, Young continued to market the Gordon report on Twitter at the same time as attacking its critics, which included a description of von Bergmann’s critique as “insane.”

But instead of inviting skepticism and derision from the public, the media’s lack of objectivity and impartiality has become the new norm in the housing debate.

The threat of Sinophobia

This strikes at the core of Rose Wu’s lament in online Vancouver publication The Tyee that while “my family and I haven’t contributed to the skyrocketing prices … we’ve been lumped together with all Asian-looking people.”

The harsh reality is that the Canadian public is already convinced that foreign capital, especially Chinese, is the source of Metro Vancouver’s housing crisis. The public is not interested in continuing with the discussion. The Chinese-blamers have won.

Over the past year, this guilt-by-association trend for “Asian-looking people” has extended to their alleged involvement in widespread tax evasion by satellite families, casino money-laundering and the opioids crisis.

As if these challenges weren’t enough, Chinese-Canadians must contend with three emerging major trends that will subject the community to further suspicion.

First, Chinese-Canadians, despite their mostly negative sentiments toward Beijing, have the new burden of proving they are not China’s proxy. But not without basis, there are growing fears in Canada’s policymaking and security establishments that some immigrants of Chinese descent are potential conduits of influence and espionage for Beijing.

Second, the public’s conflation of Chinese with China is becoming a public relations nightmare for the community. These days, China’s global image is in free fall on account of human-rights abuses in Xinjiang and Tibet, the riots in Hong Kong and Beijing’s worsening ties with neighboring countries and the West. Canada’s all-time-low bilateral relations with China are still reeling from Huawei-related security issues and diplomatic disputes.

Third, in line with the United States and Europe, anti-immigration xenophobia and populism are on the rise in Canada. Non-white immigrants will have to contend with increasing “go back to your country” sentiments, especially now that the US president has made it all but officially acceptable. Ethnic Chinese will be under pressure to prove their Canadianness.

Rose Wu may not have intended it, but her article speaks to the growing uncertainties for Chinese-Canadians amid the challenges brought on by an increasingly aggressive China, and the emergence of a new and troubling strain of Sinophobia in Canada.