The frenzy has taken a visible toll on one of the world’s “most livable cities,” resulting in hollowed-out neighbourhoods, absentee investors, and vacant, decrepit homes as huge numbers of investment properties simply sit unoccupied. What statisticians have been slow to chart has been ruefully documented in popular blogs like Vancouver Vanishes and Beautiful Empty Homes of Vancouver, which tracks empty, multi-million-dollar character and heritage houses.


Frustration has hit a boil, and it’s been on full display at a series of “emergency” housing town halls, headlined by the front bench of the Opposition NDP. Hundreds have turned out to sit in church basements to voice their concerns, and their anger. At one held last week at St. Paul’s Church in Vancouver’s Mount Pleasant neighbourhood, a new advocacy group with a darkly intimidating acronym HALT—Housing Action for Local Taxpayers—turned up with picket signs.

Among the day’s speakers was David Eby. The Vancouver MLA, a lawyer touted as a future NDP leader, is among those priced out of the local market. Eby and his wife, a nurse currently in medical school, recently sold their 530-sq.-ft., one-bedroom condo in Kitsilano, which was too cramped for the two of them and their 19-month-old toddler. “A two-bedroom condo in my constituency starts at $600,000—a non-starter for us,” he says. So they’re renting a $2,700-a-month two-bedroom condo at UBC. It is, to put it mildly, a sobering thought: the man many believe could one day lead B.C. might soon be priced out of the province’s foremost city.
Eby bristles at the Boomer notion this is all just a bunch of Millennial whining. “The expectation that young people have is not as advertised—it’s not a detached home they’re after. It’s: ‘Can I have a separate bedroom for my kids?’ If you spend 10 minutes talking to any of the Millennials who are just holding on in this city by their fingernails, you’ll realize very quickly these people are anything but entitled,” he says. “They’re living in substandard rental accommodation just for the privilege of being in Vancouver, and contributing to the economy here—and they won’t do that forever. They’re going to vote with their feet.”


Last November, the 38-year-old lawyer and former head of the B.C. Civil Liberties Association helped Andy Yan, acting director of SFU’s City Program, with his headline-grabbing study on home buying in Eby’s West Side riding. In addition to the incendiary data involving Chinese names, the study revealed that 36 per cent of owners on homes worth an average of $3.05 million listed their occupations as housewives or students with little or no income. Fully 18 per cent of the 172 homes purchased were not mortgaged by banks. That means on Vancouver’s West Side alone over a six-month period last year, roughly $100 million in cash came pouring into Canada, almost all of it from China. Yet the homeowners would in all likelihood pay little or no income tax. The total value of all homes sold in the study period topped a half-billion dollars.


Predictably, when Yan’s study was published, a chorus of voices, including former developer Bob Ransford, jumped to criticize Yan: “The danger is intolerance, racism, singling out certain groups of people saying they’re to blame for this,” said Ransford. But such labels have failed to muffle the debate, particularly as more and more Chinese-Canadian voices have begun calling out white developers and academics for making the claim. Fung, the software engineer, says he’s among those “deeply pissed off” by what he considers a slur: “The only people claiming racism are white Anglo-Saxon males—that’s it. These are the same guys trying to label Andy Yan—whose grandparents paid the head tax—a racist? It’s absurd.”

That sentiment is shared by Ian Young, the South China Morning Post’s Vancouver correspondent and author of the popular Hongcouver blog. Young, who is ethnically Chinese and was raised in Australia and Hong Kong, says the issue is one of money, not of race. “What defines those people in terms of their behaviour here in Vancouver, and in terms of their impact on affordability, is not their ‘Chineseness,’ it’s their ‘millionaireness,’ ” he says. “The idea that there is commonality to be found in the Chineseness—I find that kind of insulting. Why would you think that someone was better defined by the colour of their skin than the colour of their money?”
This is why Fung believes it is so vitally important for Chinese-Canadian voices to encourage a debate over the impact of foreign investment on the local market. “Chinese people have a tendency to be a little quiet, we tend to want to not create ripples—culturally it’s something we’re not comfortable with.”


One oft-cited culprit for the barrage of offshore money are government programs aimed at bringing wealthy foreigners to this country—namely Canada’s now-infamous Immigrant Investor Program. Created in 1986 by the Mulroney government, it granted permanent residency to any foreign citizen willing to fork over $800,000, repayable without interest after five years. In effect, Canada had a nearly two-decade run of selling passports—on the cheap. (The U.S. demanded its investor-class immigrants create at least 10 jobs each, and Australia charged twice what Canada did.)


In recent years, it became increasingly common for investor-class immigrants to set their children up in Canada to study, while the family’s main breadwinner continued to work and pay income taxes elsewhere. One federal study unearthed by Young showed that even after five years in Canada more than 60 per cent of investor-class immigrants reported no annual income earnings at all. And those who did reported earnings of just $21,000—less than that of refugees.

When the program was finally suspended in 2012, and subsequently cancelled altogether two years later, there was a backlog of some 65,000 applicants. Quebec, meanwhile, is still running its own, identical version. But very few of its investor-class immigrants actually remain in the province. Data collected by Vancouver lawyer Richard Kurland shows that 94 per cent of those who arrived in Quebec in 2008 left shortly thereafter—most bound for metro Vancouver.
David Duff, a professor at the University of British Columbia’s Peter A. Allard School of Law, calls such schemes “bizarre” since they do nothing to prevent wealthy newcomers from dodging Canadian income taxes, providing they spend less than 183 days per year in the country and maintain a residence and business overseas. “Others wonder why these folks get to be treated that way while the rest of us get taxed on our worldwide income,” says Duff, “And the consequence, as we’ve all seen, is the bidding up of house prices in Vancouver.” He’s seen it first-hand: Duff recently sold his own tony West Side home to an offshore buyer.



There’s another side to the story, however. Yuen Pau Woo, the former president of the Asia-Pacific Foundation of Canada, doesn’t dispute the impact of so-called “millionaire migrants” on Vancouver’s affordability crisis. But he takes issue with the notion Canada isn’t receiving anything in return. Eventually, Woo says, many wealthy Chinese who used the program to gain access to Canada seek to “align” their personal lives in Canada with their business interests overseas—if for no other reason than to minimize the stress of living apart from their families for six months of the year. As evidence, he points to the half-dozen Chinese firms, including Poly Culture Group, a division of a massive Chinese conglomerate, that he’s helped convince to set up shop in the Lower Mainland through a venture called HQ Vancouver. “Every single one has a Vancouver connection,” he says—usually a CEO or chairman who already owns a house in the city or sends his children to school there. “How many more of these kinds of opportunities are out there waiting for us to activate them?”


The silent, happy majority in all this, of course, is the thousands of Canadian homeowners who have sold their homes for an enormous profit, and the millions more watching their home values climb into the stratosphere—more than 70 per cent of Canadian households own their own home, and many are watching their property values soar with an eye to their retirement. In Richmond Hill, Ont., a Toronto suburb favoured by many Chinese investors, standard four-bedroom homes are now typically priced around $1.3 million, and routinely sell for $300,000 over asking. For now, this is a distinctly uptown economic problem.


With so much cash sloshing about, people outside Canada’s urban hot zones are understandably keen to join the merriment. Last spring, politicians and economic development officials in Nova Scotia welcomed with fanfare the purchase of a series of properties by DongDu International Group, a Shanghai-based development company touting plans for two full-service vacation resorts catering to wealthy, young Chinese professionals. It was hoped the developments would bring much-needed economic activity to the stagnant region of Guysborough County, northeast of Halifax. An additional pair of properties DongDu bought in the capital were supposed to be the beachhead for a centre of excellence for the film industry.


Draped in a souvenir tartan scarf, and accompanied by local dignitaries, the company’s founder, Li Hailin, traipsed through the grass in Guysborough last May for a groundbreaking. Since then, however, nary a shovel has touched the 1,300 hectares of land on the Eastern Shore, leaving many to wonder whether the development plans are for real. Michael Mosher, warden of the district of St. Mary’s, says his council has not yet seen a formal proposal, or a definite timeline. “Because of the state of the global economy,” he said, “they want to make sure when they launch the project, they’ve got the right timing.” A spokeswoman for the Halifax Partnership says the city’s economic development agency is no longer working directly with DongDu, noting that a memorandum of co-operation it signed with the firm expires next month. A request for an interview left with DongDu’s offices in Halifax went unanswered.


Still, even if Chinese investors are disproportionately focused on Toronto and Vancouver, there can be little doubt they’re playing a role in keeping the country’s decade-long housing boom from collapsing under its own weight. It’s difficult to overstate just how important real estate has been for the Canadian economy in recent years. A report a few years ago by Altus Group, a Toronto-based property consulting firm, estimated that home renovations alone contributed as much as four per cent of Canada’s GDP in 2014, or about $64 billion. Add in new home construction, realtors, lawyers and other associated industries and the residential housing industry is responsible for as much as 20 per cent of Canada’s economy. That’s to say nothing of the cottage industry in reality TV the country has spawned over the past decade—everything from Love It or List It and Property Brothers to the ubiquitous Mike Holmes.


With Canadians already owing $1.65 on average for every dollar of disposable income they earn, there were ready signs that domestic buyers were tapped out. The sudden influx of Chinese money over the past couple of years was akin to throwing gasoline onto a slowly dying fire. Which is why no politician in their right mind is likely to take a hard stance against foreign buyers. Says Duff, the UBC law professor, “Nobody wants to shut it down, because it’s like a drug. We always need another fix.”


The multi-trillion-dollar question for Canada’s vulnerable housing market, and the economy that increasingly depends on it, is whether China’s interest in buying Canada is a simply a passing fancy or a stabilizing long-term play. It’s one of the concerns the CMHC hopes to address by charting the behaviour of foreign buyers over time. “If investors are primarily in the market to make a quick buck—to buy a unit, make a capital gain over six months to a year, flip the unit and get out—that can be problematic behaviour,” says Dugan, the chief economist. “We would want to be able to measure to what extent that’s going on.”


Those who have studied the Chinese appetite for buying foreign properties sketch a less dramatic picture, albeit one that’s still less than reassuring. A survey of 150 agents in China by Investorist, an Australian company that markets international properties online, found the vast majority of would-be Chinese purchasers, nearly 90 per cent, have a budget between $500,000 and $1 million—not unlike many Canadians who are seeking to buy a home in Vancouver or Toronto these days. “The majority of Chinese buyers are families that can afford an investment property and possibly a second one,” says Jon Ellis, the company’s founder. “These are mom-and-pop investors who might own a car dealership or a bakery.” Moreover, the report found that most Chinese seeking to buy overseas “wish to use leverage where possible,” which may also have something to do with the need to circumvent Beijing’s $50,000-per-year limit on foreign transactions.

It all points to a group of foreign buyers that, while large and motivated, remain financially mortal, and can therefore be expected to panic alongside everyone else if Canada’s housing market begins to falter. And, as foreign money continues to flood both Toronto and Vancouver, there’s plenty of evidence of ultra-sketchy, speculative behavior that’s not limited to offshore buyers: bidding wars, properties purchased unseen and without conditions, so-called “shadow flipping” by realtors, the creation of shell corporations allowing buyers to avoid being named in transaction documents, accusations of money laundering, and unfair tax avoidance. The list goes on.
The risks for Canada don’t end there. While the turbulent Chinese economy has so far prompted China’s elite to move their money to locales perceived as safer, a full-blown crisis in the Middle Kingdom could well have the opposite effect. If offshore investors suddenly believe their livelihoods are at risk, they may have no choice but to quickly offload overseas houses and other assets in order to pay back creditors. In other words, instead of simply fretting about overzealous Canadians sparking a major housing crash, now we need to worry about a made-in-China crisis, too.

Can anything be done? In B.C., a group of economists is proposing a two per cent anti-speculation tax, which would penalize buyers who let homes sit empty. The idea is to generate a little revenue ($90 million is anticipated in the first year), but more important, to track activity: How many units are owned by people who don’t pay any tax in British Columbia? How many condo units are owned by people who don’t rent them out, and leave them vacant? How is this money entering Canada? At this point, the government doesn’t have a clue.
“If the flow starts in a clandestine way there is no way to regulate it at the other end,” says David Mulroney, former Canadian ambassador to China, adding that every time he spoke to university students in China he was asked whether it was true Canada is a haven for Chinese fraudsters. “We have no idea where the money is coming from, how it was sourced—all of it contributes to an alarming lack of awareness in the local real estate markets,” says Mulroney, current president of St. Michael’s College at the University of Toronto.

Others point to countries like Australia, which requires foreign purchases to be vetted by its foreign investment review board and approved only if they contribute to the creation of new housing stock. A similar approach has been proposed for the U.K. Ellis, however, says the policy hasn’t done much to rein in house prices Down Under, since there are many ways for determined offshore investors to circumvent the rules.

In any case, it’s not exactly Canada as the country imagines itself—cowering from foreigners willing to pay for a taste of our order and civility; wondering if the next big purchase will nudge us into social dislocation, or corruption requiring aggressive government intervention. If for no one else, you’d hope we might get ahead of the problem for the sake of Paul Shen, who’s settling into his new home in Victoria. Should such dark forebodings come to pass, the life he followed his heart to find will look eerily similar to the one he left behind.
—with files from Jessica Meyers in Beijing