Will eliminating “monster homes” help or hurt the ALR?
With a turnover in provincial government, the NDP didn’t waste time in implementing several policies to strengthen one legacy that many British Columbians, regardless of partisanship, are proud of: the Agricultural Land Reserve. One such policy intended on protecting the ALR from speculators is the recent legislation to limit house sizes on the ALR to 5,400 sq.ft. throughout the province.
In response to the mansions being built within its city limits, the new Richmond council is pushing it a step further and voted to limit homes on farmland to 4,300 sq.ft.
I say this as a staunch supporter of the Agricultural Land Reserve: limiting home sizes could hurt small business in BC and promote massive corporate takeovers of local farms. Limiting home sizes is a damaging way allegedly fight one type of speculation, only to open the door to another, while also risking our regional food security in the process.
With the Township of Langley council throwing “Monster Homes” toward a Council Priority Planning meeting, it’s time to convey a better argument against this than “boohoo, I want to build my big house and now I can’t.” Sorry, but no one has pity for people who want 10,000 sq.ft. homes.
First of all, reducing home sizes doesn’t really fight speculation at all. Speculation is defined as “investment in stocks, property, or other ventures in the hope of gain but with the risk of loss.” When someone purchases ALR land to build a massive home, there is no speculation. There is zero increase in land value when the massive home is built. There is no risk in the purchase because the buyer knew exactly what the limitations of the property were when they bought it and built a building within those rules. In fact, building a massive home actually decreases the chance of speculation because speculators want to pay the least amount possible for the land for future development. Buying land with a substantial “improvement value” such as huge mansion is an incredible deterrent to speculation.
Speculation on the ALR happens when a buyer believes that the land he/she/they are purchasing on the cheap may be excluded from the ALR in the future for the purposes of re-development or re-zoning for smaller lots and, now ironically, smaller homes, hence substantially increasing their home value. This legislation does nothing to defend the ALR from this. In fact, the legislation might actually stir many homeowners who intended to build larger homes to now change their strategy and try to get an exclusion.
Which leads me to the crux of my argument. Farmers don’t become farmers by accident. It is becoming increasingly rare for elderly farmers to pass down the family business to younger generations. Farming doesn’t have the same appeal as it use to, especially for young people in Metro Vancouver surrounded by many other opportunities. There will now be even less incentive to be a farmer than there was before. Your farm business needs to more than compensate for the lack of housing appreciation for it to make sense (a business minded person can’t underestimate the expected appreciation of the housing market – if all other home appreciate 6% when yours appreciates 2%, that should be considered a loss). What is the main way to make farming viable in a capitalist society? Co-housing or keeping it in the family.
Hiring outside help is expensive, so what we see are farmers, often immigrants or those of Indo-Canadian descent, who come from a very different culture where multiple generations living in the same household is the norm. So instead of three or four families buying off-site properties or trying to build multiple homes on one property, they build one large one. Not only is it more economical for the family, it is actually a vastly reduced footprint which is better for the environment. Even one 10,000 sq.ft. house with a 3,400 sq.ft. footprint is more sustainable than three 4,500 sq.ft. homes with 1,500 sq.ft. footprints.
Will substantially reducing home size limits deter rich buyers from building massive estates on farmland? Certainly. But it will also deter middle class farmers from getting into or even continuing to work the land. Which is more important for our regional food security? Not only will farmland have an even harder time to appreciate relative to other properties (which means it will make it harder for them to sell/retire), but now they can’t improve their land relative to non-ALR properties either.
What happens when all those who were going to farm their land are now deterred from farming? They will sell. Who will they sell to? In an industry already desperate to attract farmers and now with multiple generational farming families being attacked by the government, enter the corporations. As in the United States, where large corporations have all but taken over due to the economy of scale, expect the same to happen here.
There is already a major saturation of farmland already on the market (as I write this on December 28, 2018 – a usual low inventory period – there are currently 357 homes over 5 acres for sale in the Fraser Valley) with few buyers (there have been 61 sales in the Fraser Valley over the last 90 days… an average of 20 per month, a sales to listing ratio of 5.6%). There is a disproportionate number of 65+ year-old baby boomer farmers looking at “late retirement” in the coming 5-10 years. This combination can expect increased inventory and decreased land value potential which will push land prices down.
While the intent of a short-sited government was to reduce farmland prices for young farmers, that isn’t what is likely to happen. Instead, it has created an environment ripe for corporations looking to consolidate 10-100 acre parcels into larger American-style mega farms. Instead of owner-operators and small business entrepreneurs, large farming corporations will push the agricultural industry to reduce full-time employment, automate farming systems and empower an American-style powerful anti-regulation lobby that has an extreme interest in capital instead of food security and health. Welcome to the land of unintended consequences.
The real solution
If the provincial government, Richmond council, and future municipalities really wanted to tackle the problem of estates on the ALR, that is, homeowners who buy farmland to live on fancy estates instead of use the land for farming, all they would have needed to do is change the tax legislation.
One of the incentives for people to people to buy on farmland, whether they farm the property or not, is the farm tax exemption. The current exemption threshold, however, is, quite frankly, a joke:
a) $10,000 on land less than .8 hectares (1.98 acres);
b) $2,500 on land between .8 hectares (1.98 acres) and 4 hectares (10 acres);
c) on land larger than 4 hectares (10 acres), you must earn $2,500 plus five per cent of the actual value of any farm land in excess of 4 hectares;
d) $10,000, in order to qualify unused land where the area in production by the owner makes up at least 25 per cent of the portion of the parcel outside the ALR. Some sales of qualifying agricultural products must occur every year.
How quickly do you think someone could gross $2,500 or $10,000 with one of the many different qualified farm uses?
Literally, a few legal marijuana plants could get you a tax exemption (don’t quote me on the legalities or plant yields – it isn’t my specialty). Regardless, showing the government such low gross revenue to gain a massive tax exemption doesn’t exactly promote sustainable farming in anyway.
To promote farming and fight both speculation and non-farm uses of ALR land, this threshold needs to be substantially increases AND, I believe, farm exemptions should be approved by the ALC on a case-by-case basis to prove to the ALC that the farm is actually a farm. Otherwise, let them pay an exorbitant tax on their 10,000 sq.ft. estate – even on a sliding scale so that the larger the property, the greater tax percentage you pay for not farming on farm land.
It isn’t as if this wasn’t considered before. The BC Liberal government looked into this in 2016, but that apparently went no where. The NDP had the opportunity to do the right thing, but for whatever reason, dropped the ball on this one and is instigating a witch hunt against a small demographic in two industries they don’t understand.
A personal note
The hardest thing about writing this argument is that it puts me at odds with many of the people I look up to and appreciate. Richmond Councillor Harold Steeves and many others have fought tirelessly to protect the ALR from sprawl, exemptions, and other invasions. While I completely agree with the intent, I simply believe the majority of my pro-ALR peers are too focused on their lobby instead of looking at the larger picture. This issue shows why allies in other industries are needed as we provide a different paradigm. Developers, investors and speculators (and Realtors) think differently than farmers, politicians and activists. If we are to protect the ALR, we need to see the bigger picture and anticipate how the capitalist system evolves and adapts.
Brad Richert, Langley