How the Government Contributes to Racism in Vancouver

My ethnic group is in the majority in Vancouver so I might not be the best at judging things, but from reading online message boards and overhearing people in the city, I think racism in Vancouver is on the rise. In particular, the target seems to be the Chinese. It’s an awkward topic to talk about—almost certainly someone will view something in this post as racist, discriminatory, or politically incorrect, but I believe ignoring these problems because they’re uncomfortable to talk about is a really bad idea, simply exacerbating the problem.

My (completely unproven) hypothesis is that a major cause of this increased racism is increasing inequality and a shift away from whites being the dominant ethnic group. However, I think the government is playing a major role in contributing to the growth of this racism.

 My core hypothesis

Probably the biggest thing that has lead to the growth in racism is Vancouver’s housing bubble, both because it grossly increases inequality and because of the narrative explaining the bubble.

The inequality coming out of the bubble is easy to understand. Essentially, the people who bought houses fifteen years ago are now multimillionaires, not out of hard work, but because they won the housing lottery. Meanwhile, anyone who didn’t—such as those who were only ten years old at the time— is having a hard time even finding an affordable place to rent.

While the housing-lottery multimillionaires can temporarily gain a certain satisfaction from calling the millennials “entitled” for having the gall to complain that they want a place to live, even the appeal of self-righteous fades over time. Thus, as the inequality grows, people look for an outsider to blame.

As a result, a narrative is created to explain the housing bubble, and in Vancouver, that narrative is that the rich Chinese are taking over, laundering illegally-obtained money in Vancouver real estate. The real estate industry loves this story and has promoted it for years. Though most stats only show 5-10% of sales are to foreigners, realtors want their customers to believe that they need to buy now, or be forever priced out. Saying millionaires from other countries are coming to buy Vancouver houses helps with that message. Thus, people blame foreigners for the inequality, and racism starts to rise.

The foreign influence

Like most of these narratives, I believe there is some truth to the “foreign money” explanation. One real estate company claimed over a third of the single family homes it sold in a year were bought by people affiliated mainland China. Another study showed that 88% of the most expensive homes in the most expensive neighborhoods were purchased by people with Chinese names.

What’s more, recently a study came out that showed an inverse correlation between housing prices and taxable income. In other words, the most expensive real estate is owned by the people claiming the lowest incomes, while the less expensive real estate is owned by the people with the highest income.

One explanation for this discrepancy might be that the elderly live in the most expensive areas of the city because they were able to buy before prices exploded. But, the explanation that most people seem to believe is that foreigners are buying up all the houses in expensive areas with illegally-obtained money, money they don’t declare on their income taxes.

The implication is that, when it comes to paying for government infrastructure, wealthy foreigners who cheat on their taxes are being subsidized by poorer Canadians. And that narrative becomes stronger with every anecdote of foreign students and housewives buying multimillion dollar homes.

The government’s role

So, I think there is some truth to the foreign influence in the real estate market, but I think the government has had a role to play too. What’s more, government actions are exacerbating the rise in racism.

The most noteworthy action is the government keeping interest rates at emergency low levels for a decade—an action that I believe has had as big an impact on the housing market as foreigners. I’ve written about that before, so I won’t repeat myself, except to say that this is a government action that greatly increases inequalities, and therefore, in my opinion, increases resentment and racism. If the housing market weren’t bubbly, there would be no strength behind the narrative that the Chinese are taking over.

But the bigger issue is the discrepancy between the government’s policies about immigration and housing. Christy Clark and the provincial liberal government in general—who take large political donations from real estate developers—have said that that high prices are caused by limited housing supply. Essentially, they want people to believe that if we just build more condos (as their donors want), the problem will go away.

There might be some truth to this argument, but if the government truly believed this, they’d actually try to do something to curtail foreign demand as well, when in fact, they are doing nothing, or are actively encouraging foreign demand.

For instance, several stories have arisen recently about Vancouver presale condos being marketed to foreigners before locals. Clark could have addressed this issue in the foreign buyers tax she introduced—a tax that essentially blames the real estate bubble on foreigners. But instead, she made new condo sales exempt from the tax.

One great way to breed resentment about foreigners is to sell a limited amount of a highly-valued commodity, but to give foreigners first dibs, and the government to respond to this by saying, “yeah, we don’t think that’s a problem at all.”

Other immigration programs

Other immigration programs are equally to blame. If the government truly thinks supply is an issue, why is the government increasing immigration, driving even more demand? Investor immigration programs seem to come and go every few years. With those, “investors” typically either give money to the government for a few years, or agree to spend a certain amount of money in Canada (e.g. buy a house) and then they can live here. Yet the stats show that people who enter the country as refugees end up paying more Canadian income tax than these millionaire “investors”. So, the government is encouraging foreign demand for housing in Canada without actually recruiting people who want to contribute to Canada.

The Temporary Foreign Worker program is particularly egregious. Workers are imported from countries to do jobs that “Canadian’s don’t want to do”. Anyone with a basic understanding of economics knows that there are almost no jobs that people won’t do as long as you offer them a worthwhile salary. If you increase salaries, eventually you’ll find someone who will do the job. So the Temporary Foreign Worker program is actually in existence so that businesses don’t have to pay market-rates for their labor. Thus, this program both imports bodies—further increasing the demand for housing—and decreases wages. It’s yet another good way to make locals angry at foreigners.

Foreign Money

What’s more, the government seems reluctant to discourage foreign speculation in Vancouver real estate. In fact, if you’re a foreigner, getting a mortgage can actually be easier than if you are a Canadian. If a foreigner has a 35% down, that’s all they need to qualify for a mortgage in Canada.  They don’t need a credit history, or even a source of income. That’s insufficient for a Canadian, but, if you’re new in town, you’re good to go. In a way, it looks like the system is actually designed to make it as easy as possible to launder foreign money in real estate.

Of course, government agencies such as that Canada Revenue Agency are supposed to guard against money laundering and fraud. But, when it comes to real estate, they’re afraid of examining the affairs of Chinese immigrants too closely because they don’t want to appear racist.

The bottom line

Thus, Vancouver has a real estate market that’s been pushed out of the reach of locals, in no small part because of the actions of government, while the narrative—including the narrative from the provincial government—is that foreigners are responsible. The government claims supply is the problem, but takes actions to increase the real estate demand by foreigners, to the extent of giving them preferential treatment for mortgages and ignoring money laundering laws. Confronted with this powerful narrative, if you’re a local, it’s difficult not to hold foreigners responsible for your inability to afford a house.

(My personal view is that foreigners have played a role in the housing bubble, but not as big a role as the government. What’s more, I believe, the government has the means to curtail the impact of foreigners on the housing market if it chooses to do so, so I mostly hold the government responsible.)

Regardless of the truth, in light of this narrative, it’s not surprising to me that racism seems to be on the rise in Vancouver. In no small part, Trump’s ascendency was a consequence of the traditionally dominant whites in the USA struggling as globalization drove down wages and eliminated middle-class American jobs. “Make America Great Again” is a slogan designed to speak to exactly these people. Thus, it wouldn’t surprise me if traditionally multi-cultural, left-wing British Columbia sees the rise of a similar racist right-wing politician in the next few years.