The cost of housing continues to rise across the city. What propels this spectacular growth? Most observers blandly ascribe it to the grim laws of "supply and demand." If you accept this, then the answer is simple: increase supply, and prices will stabilize. But with dozens of condo projects currently in different phases of completion, supply does not appear to be a problem. In fact, many factors contribute to the current bubble in housing prices, and a big one is speculation.

Every step in the process is subject to speculation, from the sale of the land, to the presale of the condominiums, to the resale of the same condominiums. And Vancouver's land and condo market are part of an international marketplace which has as much in common with the trading of stocks and bonds as it does with meeting the needs of actual people looking for housing.

The sale of a piece of land itself is only the first step in the immense pyramid of speculation that propels the housing market. According to BC Land Assessment records, 7 West Hastings sold in March of 2005 for $1,120,000. A bit more than a year later, in June 2006, it sold for $1,700,000, a rise of about 52%. Up the street from there, 53 West Hastings sold for $1,425,000 in March 2006, according to the same records. The property had previously sold for $525,000 in August 2000 and $1,200,000 in May 2003. So the speculation starts here, but contrary to received wisdom, it does not stop here.

The "presale" of the suites, a relatively recent addition to the speculative game—an import from Hong Kong—comes next. Writing in the Globe and Mail, Mary Lynn Young explains that developers "build hype and sell units by creating a pecking order of potential buyers prior to the official launch date or grand opening of a development." Young says that some developers have "database mailouts" to "super VIPs" and request a deposit of between $5,000 and $10,000 "just to get in the door of presale events." Young said that in May 2006 "two thirds" of the 440 unit Espana development sold "to VIPs."

At this stage, the casino-like aspect of the market becomes clearly visible. While some of the presales are for individuals and families who will reside at the location, many are bought as speculative instruments, again for the same reason stocks and bonds are bought and sold.

Flipping suites, that is, buying a condo with the intention of reselling it, sometimes before the building is even completed, is part of Vancouver's speculative culture. As far as I know, no one has records of the dimensions of this type of speculation. A quick look at BC Land Assessment records shows many condominiums held by a company, a group of investors, or a person who does not reside at the address.

One building, at 1328 West Pender in the Coal Harbour area, lists 199 suites on the Land Assessment records. Of these, 110 list a "bulk mail" address—the address at which the listed owner wants his or her property-related mail sent—as the same as that of the property in question. So, 89 of the condominiums, or about 45% of the suites in question, are held by people or companies whose mailing address is different from the specific suite in question. A closer look shows 16 of the 89 suites are held by people whose mailing addresses are in the United States, five are held by people with addresses in Hong Kong, and others are held by people in Singapore, London, Germany, and Japan. Most of these condos owned by people wanting their mail sent elsewhere have listed addresses elsewhere in Vancouver or its suburbs. So locals are playing the market as well.

Some of the owners who want their mail sent elsewhere may have listed their business address, or they may have bought the suite for their adult child, or they may visit Vancouver regularly on business and need a suite here, but undoubtedly the majority indicates a speculative investment.

The city plays a huge role in facilitating land speculation, primarily by refusing to apply constraints to the "great game," but also by actually creating speculative tools to be bought and sold by developers, also known as ''density bonus transfers.” The city portrays the bonus transfers as incentives for developers to work on projects that would not otherwise be viable, or profitable enough. Developers in Gastown, along Hastings, and other heritage-designated sites and areas, have come to expect the tool. It is as good as cash. The recipient can resell the density bonus as one would sell any speculative device (stock, bond etc) to another Vancouver developer or use it for his or her next project (it has a limit as to where in the city it can be used).

Opposition? What Opposition? The example of 553 West Hastings

One of the busiest developers in the Gastown and Hastings Street area currently is Robert Fung and his company The Salient Group. In 2003, Fung, who previously worked for Concord Pacific, finished his first project, the Vancouver City Award of Merit-winning Taylor Building at 310 Water Street in Gastown. And Fung has made Gastown and its immediate vicinity the focus of all his work since. He and his group are developing, or own, land at 24 Water, 30 Water, 36 Water, 308 Water, and 1 Gaolers Mews mall in Gastown, as well as 53 West Hastings and 157 West Hastings. Known for his painstaking work rehabilitating Heritage buildings, Fung is renovating the old Grand Hotel and the Terminus Hotel, both in Gastown.

In late September 2006, Fung and Salient got the green light from city council to develop 53 West Hasting, the Paris Block (1907). The project plans to create 29 live/work studios. The prices, based on Fung's previous work, will be expensive. I watched the final council vote on the City's web site. The project passed unanimously without any debate or even any substantive questions from council. ( NPA Councilor Suzanne Anton asked some questions about tax abatement for residents). The site's previous owner came to council in June 2005 seeking a development permit for the building. At that time, according to a city report, "the owner enter[ed] into a Housing Agreement with the city, protecting rents for 20 of the 50 units at 110% of the shelter component of income assistance ($357.50) for a period of six years." The only thing this council got on the current project was a piddling $280,000 under ex-councilor Jim Green's toothless SRA conversion charge, the cost of one half of one downtown condo.

This is not a story about an evil developer. Developers develop, and Fung's work is highly regarded. But why, in the midst of a city-wide housing crisis, does our ineffectual City government, and the so called "opposition," wrest so little from the developer of a project located at the epicenter of this crisis? The area is in the middle of a tsunami of development, and it should have been easy to get significant concessions from the developer. Opposition? What opposition?