One of my favourite cinematic scenes occurs in Woody Allen’s 1977 film Annie Hall. While standing in a movie lineup, Allen is upset by a pretentious academic pontificating about Marshall McLuhan’s work. After a brief exchange during which he tells the fellow he doesn’t know what he’s talking about, Allen drags McLuhan into the scene who reconfirms the loud mouth is wrong, at which point Allen turns to the audience and says “Boy, if life were only like this.”
I was reminded of this scene by Mayor Gregor Robertson’s recent call for a speculation tax. If only we, like Woody Allen, could drag someone into the discussion to tell us what really is required to address Vancouver’s lack of housing affordability.
They would probably paraphrase the proverb: “Complex problems do not have a simple solution.”
While I question whether taxes on speculators or empty houses are the answer, over the coming weeks I will look at some possible solutions. But first it may be helpful to better understand how we got to where we are today.
For decades, the primary housing choices in Canada were owning a single-family dwelling or renting an apartment or townhouse.
For those who could not afford market housing, there was government funded public housing, and subsequently government funded non-profit rental and cooperative projects. However, since the early 1990s, the federal government has withdrawn from funding new projects.
In the early 1970s, condominium ownership was introduced. Over the subsequent five decades, condominium apartments and townhouses have become increasingly popular for both first-time buyers and last-time buyers, especially those ready to downsize or “rightsize.”
In the beginning, condominium developments were financed and completed, a show suite was set up, and units were sold. However, this changed in the mid-'80s when CBC’s The National featured a story on people lining up outside a Toronto marketing trailer on Bay Street.
They were hoping to buy at The Polo Club, the first Toronto condominium to offer much smaller, more affordable suites. The project was sold by Priority Registration, a new marketing approach created by Stan Kates, a creative advertising executive, in which potential buyers had to ‘get on a list’ to be eligible to buy.
People lined up because they were each given the same appointment time. When they became anxious and tried to get into the sales centre they could not, since there was no handle on the door. Kates discovered this idea by accident after a door handle fell off an earlier sales centre. He incorporated it into future projects since it too enhanced buyer anxiety.
Inside the sales trailer, potential buyers discovered there were limited floor layouts to choose from. This was to speed up decision making. To further enhance anxiety, each sale was announced over a loud speaker. When people asked for a brochure, they were often told they were all gone, but were offered paper and pen to copy floor plans off the wall.
Kates firmly believed pre-sale marketing was selling a dream, while post-completion marketing was selling reality. “And never try selling during construction,” he once told me, “Since you’re just selling a mess!”
While Kates never sold any projects in Vancouver, local marketing firms designed their own high performance pre-sale marketing strategies. They had to, because financial institutions no longer relied on analysts’ reports and underwriting intelligence to determine if a project would be viable; they insisted on presales.
With their elaborate presentation centres and extensive advertising, pre-sale programs can be very expensive and add to project costs. However, when done well, they can often achieve higher sales prices than the finished product might achieve, especially when there is limited competition.
When there is good supply and competition, prices do not always rise.
This was evident in some recent Real Estate Board statistics as reported in the June issue of Vancouver Magazine.
While single-family house prices have been increasing significantly, condominium prices have not always kept up with inflation, and in many instances have dropped. In Grandview, they have dropped 5.8 per cent over the last five years.
Does this really warrant a speculation tax on condos?
michaelarthurgeller@gmail.com
Twitter @michaelgeller
