Vancouver has a problem. It is generally perceived as a wonderful place to live which few can afford. The problem is that many of those who make up a thriving city, such as young professionals establishing themselves and building families, cannot afford to buy and see no future in renting. Gradually skilled workers with multiple options are finding better futures elsewhere. And though Vancouver is doing just fine, concerns about the long term effect of losing one’s future professional class is leading some to call it a “crisis.”
Vancouver’s brain drain
Finance Minister Carole James maintains that Vancouver is experiencing a “brain drain,” an old-fashioned sounding phrase with a bit of a science fiction edge that refers to the loss of young, educated professionals who are needed for a city or region’s development from the very same area in which they were educated. In the case of Vancouver, this loss is happening due to the expense in both the city and the larger region as a whole. Many ambitious students come to Vancouver to be educated and initiated into the professional world only to find themselves priced out of the housing market in which they expected to build lives and families while becoming part of the city’s future.
James considers the “brain drain” to be a “crisis” and believes that is in no way too strong a word for the situation. As the director of Simon Fraser University’s City Program, Andy Yan studies and discusses the dynamics of Vancouver’s changes. He points out that a big loss comes from those between 35 and 45 who are “usually at the apex of their careers and thinking about their first or second child.” At that point, professionals expect their own homes and start considering situations that would provide that well-established dream.
But with the average detached home priced at a bit over $1 million, Vancouver does not seem to fit the bill. As Yan found in a previous study, Metro Vancouver’s home prices are the highest in the country, the city is the least affordable and the median household income is the lowest. The typical footholds for a young family to establish a place simply do not exist as broadly as needed. And for those with the education and skills to make great salaries in less expensive cities and the desire to add children to the mix, the choice of staying or leaving usually leads to leaving.
Vancouver home ownership
Home ownership in Vancouver is affected both by issues unique to the region and issues facing Canada as a whole. The Royal Bank of Canada expects home affordability to decline nationwide in 2019. Increased interest rates will also affect housing costs across Canada.
In Toronto, Canada’s largest housing market, home costs have risen to 79 percent of the median household income. That is a hefty sum but Vancouver’s costs are at 88 percent of the median income. This affordability gap is hitting a wide range of sectors in Vancouver and young professionals make up one group that is falling into the gap. Vancouver also has a huge debt-to-income ratio of 242 percent, with $2.42 in debt for every $1 in disposable income, which makes interest hikes more difficult to absorb.
Vancouver’s well-deserved reputation as an expensive city does not just mean that people leave. It also means that many will not move to Vancouver. Those who decide not to come, including older professionals with a great deal of experience, can be considered another aspect of the loss labelled brain drain.
Three scenarios
In a consideration of “three possible scenarios for Vancouver’s housing market,” Guy Saddy considers the possibility that:
1 – The whole thing collapses.
2 – Prices keep rising forever.
3 – The fixes work and Vancouver becomes affordable again just like all those other great examples of cities where everyone wants to live but chilled out when they realized what was happening so that a diverse group could enjoy those cities as well!
Saddy maintains the third possibility is the most likely outcome. But he also recognizes that Vancouver becoming an affordable city faces many obstacles. For example, housing continues to be bought as a speculative investment that does not provide housing. But tax schemes are also being considered that could help adjust some dynamics of the situation, for example, taxing wealth over income.
Whichever combination of the above three scenarios comes to the forefront, Vancouver is struggling with issues that confront many contemporary cities. In Vancouver’s case, the likelihood is that the conditions creating the brain drain will continue for the foreseeable future.