Vaughn Palmer
Sun

VICTORIA – A significant cut in income taxes and a major boost in welfare rates. With those items in the mix, the B.C. budget could have sold itself.

Instead, Finance Minister Carole Taylor insisted Tuesday that it was all about “building a housing legacy” and pointed to a reputed $2-billion housing plan.

The claim was entirely misleading. Her budget provided not quite $400 million over four years for housing programs.

Most of the rest, some $1.5 billion, represented the estimated value of the cut in income taxes over the same four years.

Folks could use the savings on their tax bills to supplement their housing costs, as Taylor urged us to consider.

But the whole rationale for cutting taxes is to leave money in people’s pockets so they can choose what to do with it, undirected by the government.

Taylor could just as easily have packaged her tax cut as “building a legacy” for child care, education, retirement or buying a new car.

On the theme of putting more money into people’s pockets, the other newsworthy change was a boost in welfare payments (social assistance plus shelter allowance) of $100 a month.

The government indicated that the increase, 20 per cent, appeared to be the biggest in the history of those programs.

But Taylor didn’t make a big deal of it, distracted as she was by her insistence that the focus was housing.

The tax cut came as a surprise to many observers, though Premier Gordon Campbell did herald the prospect in a speech to the B.C. Liberal party convention in Penticton last November.

“Tax cuts work,” he told the cheering delegates.

“Within this mandate, we will provide even greater tax relief for B.C. families.”

At the time, the rumour mill touted the possibility of a 10 per-cent reduction in provincial income tax rates, which is how it turned out.

Some of the Liberals, noting the premier’s reference to “within this mandate,” suggested scheduling the relief closer to the next election.

But finance cautioned there might not be as much room to move in 2009, given fluctuations in resource revenues.

With the budget in surplus, the advice was “do it now” and the Liberals did.

“We are a government that has always run on a policy of lower taxes whenever we can,” Taylor told reporters during the budget press conference.

“No apologies for that.”

Still, some government supporters wondered about the absence of relief targeted at business and the resource industries.

Phil Hochstein, irrepressible head of the Independent Contractors and Businesses Association, even joked about this being “a left-wing government.”

The Liberals did consider a recommendation from the competition council to roll back municipal taxes on business and resource industry property.

But they rejected that advice, concluding that municipalities would only demand that Victoria make up the difference or, failing that, cut local services and blame the province.

Another thing observers looked for in the budget was an indication of how the government will be paying for the fight against climate change, promised in the speech from the throne.

Environmental groups, impressed by the throne speech, were understandably disappointed by the budget.

But Taylor disclosed that one of the first elements in the program won’t be funded by the budget.

The promised $25 million to promote the development of innovative clean energy will likely be raised by a levy on BC Hydro rates.

Details to be announced with the energy plan, scheduled for release next month.

Finance did provide $4 million to launch the climate action team, which will help set the targets for reduction in greenhouse gas in 2012 and 2016, then decide what it will take to reach the ultimate target of a 33-per-cent reduction by 2020.

Beyond that, Taylor chose not to shovel money into climate change until the specifics are at hand. She did say that when the programs are there, the funding will be provided as well.

Likewise, the budget included only a general promise to fund the recommendations arising out of the conversation on health, with money to be taken from the unallocated forecast allowances for 2008 and 2009.

The fine print contained a few hints of the looming fiscal problems in health care. The two biggest health regions are projecting a combined $119 million operating deficit in the year ahead.

And the wish list on capital projects exceeds the allocations.

Even with those concerns still to be addressed, health will consume 42 per cent of program spending in the year ahead, up from 41 per cent last year.

A reminder, here and there, that much of the future money in the budget is already spoken for, which is why they had to do the tax cuts now.

© The Vancouver Sun 2007

Renter must be a ‘phenomenal’ investor to match homeowner

Bruce Constantineau
Sun

Canadian renters face a “daunting challenge” trying to match the wealth accumulated by home owners, according to a Sauder School of Business study at the University of B.C.

It’s possible, the study said, but requires a level of investment discipline and sophistication rarely seen in North America.

“You can do it if you’re a renter but you’d need to be a phenomenal investor and 98 per cent of us are not,” said UBC professor Tsur Somerville, the study’s lead author.

The study examines the wealth homeowners can achieve by paying down a mortgage and what a renter can amass by investing the difference between owner and renter costs, along with the amount equal to a home down payment.

The study looked at data from 1979 through 2006 and found that in Vancouver, the most investment-savvy renters could have matched the wealth gains reaped by homeowners. High mortgage payments and comparatively lower rents make that situation possible.

That best-case scenario requires renters to invest 100 per cent of the difference between owner and renter payments in the Toronto Stock Exchange and pay very low investment management fees.

Under the same scenario, renters in Edmonton, Halifax, Montreal and Regina could accumulate up to 20 per cent more wealth than home buyers. But renters in Calgary and Toronto could not match the wealth gained by homeowners in those markets.

Somerville said home ownership and renting both have their own particular non-monetary advantages. Owning a property means never having to worry about eviction and being able to do what you want with it; renting can offer greater mobility and a more diversified investment portfolio.

Somerville said the capital-gains-tax exemption makes home ownership more advantageous, along with the forced-savings aspect of mortgage payments.

“In my view, that’s the biggest advantage of home ownership,” he said. “Mortgages force you to save and people really go the extra mile to make their mortgage payments.”

Somerville expects the home-ownership investment advantage will continue in the future, despite fears of an oversupply situation caused by dying baby boomers flooding the market with properties for sale.

“You’ll still have the kids of the boomers looking for homes and immigration [boosting housing demand],” he said. “Vancouver is a place where people want to move so it’s hard to imagine the circumstances where home ownership suddenly becomes unappealing and investing in the TSE becomes more appealing.

“If lots of bad things happen that somehow make Vancouver unattractive, bad things are probably happening to the stock exchange, too.”

© The Vancouver Sun 2007

Jeff Lee
Sun

VANCOUVER – The New Democratic Party opposition wants the auditor-general to monitor any loss of low-income housing in Vancouver as the city gets ready for the 2010 Olympic and Paralympic Games.

In a motion brought in the legislature on Monday, Vancouver-Mount Pleasant MLA Jenny Kwan said she’s worried that owners of single-room occupancy hotels will rush to convert their units to market housing to take advantage of the demand for accommodation for workers and tourists.

She said the province and the city, along with the 2010 bid committee, gave the International Olympic Committee assurances that people would not be made homeless as a result of the Games.

But since the Games were awarded in 2003, the city has lost more than 700 units of low-income housing, she said. She also cited a Pivot Legal Society report suggesting the number of homeless in Vancouver, now estimated at 1,400, could triple by 2010.

“What better independent watchdog than the auditor-general to monitor the situation and tell the public whether or not the commitment is being met?” she asked. “Certainly people are concerned that the Olympics is contributing to the rate of conversion that is taking place in the Downtown Eastside community.”

Vanoc has already pledged to turn 250 units in the Vancouver Athletes Village over to social housing when the Games are over. It is also working with social housing groups in the neighbouring areas to make sure the Olympics doesn’t displace people.

Last week, city council rejected civic-party opposition demands for a moratorium on the conversion of single-room occupancy hotels. However, as a disincentive to owners, it tripled to $15,000 from $5,000 the per-unit conversion fee owners must pay if they want to change over. Councillors suggested the fee was high enough to prevent most low-income housing from being lost.

Kwan’s motion was rejected by Liberal government MLAs who noted a number of B.C.-funded social-housing projects are being built in Vancouver, including 200 units at the site of the old Woodward’s building. They also said the auditor-general’s powers do not extend to civic government issues.

Joan McIntyre, the Liberal MLA for West Vancouver-Garibaldi, accused Kwan of “an ideological bias that impedes progress and [the] government’s drive to find innovative solutions to age-old problems such as affordable housing.”

Kwan pledged to keep pushing for the auditor-general’s involvement.

© The Vancouver Sun 2007

Sun

VANCOUVER – Residents of a downtown condominium complex are worried a new ground-floor restaurant will turn their quiet home into a noisy nighttime hotspot.

Joey’s, a restaurant chain with two other locations in the region, is set to build a third location below the condominium complex at 850 Burrard St., pending approval from city hall.

“They are going to have a huge bar that will be open seven days a week until one in the morning,” said Bill Runnals, who has lived on the fourth floor of the 10-storey complex for 19 years. “We live downtown and expect a certain amount of noise, and I have no problem with meat markets. I just don’t want one under my bedroom window.”

Runnals, 59, is a member of the complex’s strata council.

He said the residents are united in their opposition to the restaurant. The council has employed a lawyer, although it appears the residents have little say about what businesses lease space in the complex.

The complex is owned by Oxford Properties, which could not be reached for comment. The development includes three towers surrounding a plaza, creating an echo chamber that traps noise from ground floor business.

“The main thing is noise,” said Runnals, pointing to the now defunct Cafe Sette, which occupied the space for two years before closing last fall.

“When Cafe Sette was busy, we sure knew it, and they drew the same demographic that Joey’s is targeting.”

Joey’s representative Britt Innes said the restaurant was open to resident concerns.

© The Vancouver Sun 2007

Province

TORONTO — To mow or not to mow.

For prospective home buyers, that is a question.

But while many people say it all boils down to lifestyle choice, there’s more to consider when you opt to buy a condominium instead of a house.

For the most part, experts say soon-to-be unit owners should consider how condo fees will eat into their chequebooks.

“When you buy a condo, you’re actually buying a little piece of the condo corporation,” explains Trish Hart, a specialist at mortgage brokerage Invis.

“You don’t own a title to land. You own a piece of the pie.”

To maintain the common areas such as the roof, walkways and landscaping, co-owners pay a condo fee. Amenities such as a fitness facility, swimming pool and party room can add to this fee.

This charge affects the purchaser’s budget from the start of the buying process until the end of ownership.

For starters, half of the condo fee is included in the debt calculation required by a bank when you apply for a mortgage.

“That’s something I didn’t have to do in a single-family home,” Hart said.

The expense calculation for a single-family home includes property taxes, utilities and interest. If you choose a condo, the fee will be added to the expenses that drive down the amount the bank will lend.

For example, if the buyer’s annual income is $52,000, the typical approved mortgage for a condo unit is $190,000.

If the same buyer went for a single house, the approvable mortgage could be upped by 10 grand to $200,000.

And it’s all due to the condominium fee.

Experts are quick to add that even though it might seem to be a drawback, the fixed cost for condo maintenance can help your budgeting in the long run, acting in effect as a forced savings plan.

“With homes, you don’t think too much about the future — you don’t think, ‘I’m gonna put away $10,000 for my roof repair 10 years from now,'” said Denise Lash, host of the new reality TV show The MondoCondo.

“With condos, the law is you have to put money away every month for future repairs. You don’t have any surprises. It enables you to budget,” Lash said.

Hart added that the no-surprises nature of the condo fee — barring some major unexpected problem with the building that requires an extra levy — allows you to have a better idea what your actual cost is every month to run the property.

Lash also noted that the availability of amenities can add to your savings. “In a way, you are saving because you have a fitness club, a concierge and a party room,” she said.

“You have the advantages that when you live in a home you may pay extra for.”

The future condo owner should also consider restrictions on borrowing.

“Banks have certain restrictions on the type of condo they will finance. I have banks that won’t look at an apartment condo that’s less than 600 square feet,” Hart said. “It’s not the type of market [banks] want to get in.”

You also have to be prepared for more paperwork.

Banks require a reserve fund study to determine whether the condo corporation is financially viable.

“[Banks] want to know whether the condo corp has enough money set aside to replace the carpet in the next three years,” Hart said.

Doug Gray, author of 101 Streetsmart Condo Buying Tips for Canadians, said that for resales, look at the minutes from condo meetings.

“The minutes will say if there are hidden problems — if there’s a copper piping leaking behind that concrete wall or if there’s a leak in the roof because of age.”

© The Vancouver Province 2007