In Vancouver, house owners made more sitting on their assets than entire population did by actually working last year
Rising land value of single family homes made owners about C$25billion in 2015 in Vancouver, exceeding all employment income in the city, according to mathematician Jens von Bergmann
Top-paying jobs aren’t easy to come by in the City of Vancouver, which partly explains its spiralling unaffordability. But there are at least 75,000 tireless workers here who last year made the incredible average rate of C$126 per hour.
Sadly, these workers are not among the city’s human inhabitants.
They are its single-family homes.
In fact, the quiet efforts of these houses (or, more accurately, the dirt on which they sit) were rewarded so handsomely last year that they made their owners about C$25 billion, compared to an estimated C$19 billion in citywide employment earnings.
That’s right: the owners of single-family houses in Vancouver made more by sitting on their assets than everyone in the entire city did by actually going to work.
His calculations - which are the result of combining data from the Census and National Household Survey, the City of Vancouver, Metro Vancouver and BC Assessment – show just how much more lucrative it is to own a house in Vancouver compared to, say, slogging away in a cubicle or on the end of a shovel with the rest of the schmucks.
Lucrative ‘thumb-twiddling’ in Vancouver
So how does von Bergmann reach his conclusion that owners of single family houses earned more than all City of Vancouverites did by working?
Von Bergmann offers a slight caveat here: “Average incomes have probably risen a tiny bit more than median incomes [because of] the nature of incomes at the top … generally growing faster. But [the] effect will be very small.”
Calculating the amount “earned” by Vancouver’s single family homes is trickier. First, von Bergmann had to identify these homes, which he did by combining a City of Vancouver property outline dataset with Metro Vancouver land use data to calculate all single family and duplex properties, then subtracting stratified properties identified as having received multiple property tax bills.
In this way, he included houses with non-stratified basement suites or other dwellings, which are excluded from oft-cited census data that suggests about 47,000 single-family homes in Vancouver. Instead, von Bergmann concludes there are 78,740 single-family houses in Vancouver.
Von Bergmann then looked at the increase in value of these 78,740 properties, according to data from BC Assessment. Excluding building-value increases, the land-value-only increases averaged C$313,072, for a total land value rise of C$24.65 billion.
Von Bergmann acknowledges that there is a bit of wiggle room in his numbers, depending on exactly how one defines a single-family home, and the availability of combinable data.
“But at the end of the day it does not matter much what definition to use,” he told me. “The fact that land value increases outstrip [employment] income holds either way.”
By simply dividing the average land-value rise by the average Vancouver household’s 62 person-weeks of work per year (and assuming a 40-hour work week), von Bergmann calculates that the owners of Vancouver houses earned about C$126 per hour for what he called “thumb-twiddling”. East of Main Street, the rate was C$92 per hour; west of Main, a whopping C$173 per hour.
“I am not entirely sure why anyone would want twiddling thumbs to stay so lucrative…or why earnings from thumb-twiddling should remain tax-free [as untaxed capital gains on a principal residence],” von Bergmann said on the MountainMath site.
Not everyone agrees with Von Bergmann’s general point, that the speed, scale and taxability of house equity increases demands scrutiny.
It was in February’s throne speech, outlining her government’s agenda, that BC Premier Christy Clark made it clear she would “carefully protect the savings and equity that existing homeowners have painstakingly placed in their homes”.
“Painstaking” is not a word many would use to describe the process that last year saw the average price of a single family home in the Metro Vancouver rise by 40 per cent, hitting C$1.8million.
The Hongcouver blog is devoted to the hybrid culture of its namesake cities: Hong Kong and Vancouver. All story ideas and comments are welcome. Connect with me by email [email protected] or on Twitter, @ianjamesyoung70.