Geoff Young For Mayor!

We've found our new Mayor. Someone email him and convince him to run.

From the TC today:

Services for street people grow, but so do problems
By Geoff Young

I have lived and worked in the city of Victoria for 30 years. My wife and I have chosen to raise our family in the city and to send our children to public schools here. The impact of what is happening in our downtown -- open drug use, infected needles, panhandling and urban camping -- is very real to us and I am as frustrated as many others that nothing we try seems to help.

More and more services are being offered to support the homeless and mentally ill -- shelter beds, hot meals, drop-in centres. Yet the problem grows. We can blame other levels of government, but perhaps it is time to look at what we as a city are doing. By trying to bring care and comfort to the less fortunate are we in fact enabling and attracting the very behaviours we are trying to change?

As an economist I know that incentives are powerful in shaping people's behaviour. Should we ask whether the unconditional food and shelter and support we offer, combined with our warm weather, might be drawing the vulnerable here? Are we sometimes doing too much, rather than too little?

Of course it is difficult to enforce laws against drug use, aggressive panhandling and street camping when there is no adequate treatment for mental illness or addiction and no solution to poverty. When we see people in distress it is a natural reaction to try and help.

But will enough resources ever be made available as long as we paper over problems by providing unconditional day-to-day maintenance and services, "warehousing" those with true needs in the parks, streets, squares, back alleys and church halls of the city? Are we simply reducing the pressure for the provincial government to accept its health-care, treatment and housing responsibilities?

Are we also allowing the federal government to postpone writing realistic and publicly supported drug laws? We have given up enforcing drug-possession laws downtown (neither the needle exchange nor the proposed safe injection site could exist if we did). As a result I have watched an addict injecting herself on the same steps of a downtown office building where she would be fined for smoking a cigarette. We accept that laws restricting smoking can work to change behaviour -- why are unwilling to restrict use of drugs that may be much more harmful?

And every needle drug user must find hundreds of dollars a day. It is a mathematical certainty that much of that comes from panhandling and petty crime. As a result, the social problems and growing dangers of our downtown are beginning to dominate how visitors view our city, whether they are tourists from Toronto or shoppers from Central Saanich.

As businesses and shoppers leave the downtown fewer of us are left to carry these social burdens, and our political influence diminishes. Suburban voters can avoid exposure to unpleasant reality by shopping in new malls that re-create the urban experience on private land. No one disputes that the problems of the downtown are complex, or that the upper levels of government bear much of the responsibility for conditions that appear in other cities too.

But the downtown is troubled and the trouble is spreading. Simply blaming others or letting the "experts" tell us to do more of what clearly has not been working is no solution. We must at least debate the question of whether the policies that we advocate as a city council and the way we spend our money are helping or hurting all of us.

Geoff Young is a Victoria city councillor.

This is exactly what I want a city councillor to be saying in these very difficult and paralyzed times.

On a completely different topic, someone tell me why the TSX climbs 200 points on a day when the US Fed embarks on the same stupid policy that got us into this mess in the first place? Look out, come October, the BoC will be raising rates. I won't be surprised to see a 50 basis point (0.5%) hike.

The winds of change: Y2ThisTimeIt'sDifferent

To say that there have been a lot of warning stories in the MSM this week would not, I repeat, NOT be an understatement. Here's an interesting one, thanks to Roger.

Of course, the highlights:

Tighter lending conditions around Canada's small but expanding subprime mortgage market could splash some cold water on Canada's housing sector in the months ahead.

Many of the mortgages... offered were to segments of the population, such as the self-employed and immigrants, that have been key drivers lately in the real estate market.

"If banks start holding back credit because they get nervous and ... credit-worthy borrowers can't access loans to make purchases, that could slow the economy,"

several subprime lenders are battening the hatches. Xceed raised its mortgage rates by 100 basis points in the past three weeks and Money Connect has also raised its mortgage rates. Money Connect CEO Maurice Forget said they've also withdrawn one type of product from the market aimed at self-employed people.

What could possibly be driving these mortgage lenders to change their products up here in Canada? After all, CMHC guarantees these types of loans against losses, don't they? That's what we hear up here whenever someone tells us we won't be like the US. You can read here for a little insight into the underlying trouble that will in fact spread northward, just as hit has hammered RE markets in Europe.

Meanwhile, there was more fallout from credit market turmoil. Investors hammered shares of Xceed Mortgage Corp. after the alternative mortgage lender suspended its dividend and warned that market upheaval could hurt its profitability for the rest of this year.

"At this time, we have no way of knowing how long the current market conditions will last," said Xceed chief executive Ivan Wahl. "For the duration of this period, it is going to be a difficult and challenging time for our industry, Xceed, and our investors."

On Aug. 13, Coventree disclosed it was having trouble rolling over its commercial paper while some lenders balked at its call for emergency funds.

Up here in Canada, where subprime lending is roughly an "expanding" 5% of the mortgage business, where it is expected that subprime should have no impact on the market whatsoever, it has suddenly become in vogue to blame subprime lending for the looming RE correction. But when you get someone saying that it is in fact subprime lending that has been a key driver in current market conditions, you kind of have to scratch your head a little.

What really got me though was that they're predicting that because of ABCPs now being worth less than the paper they occupy, credit-worthy borrowers won't get mortgages. I guess I'd better buy now before I'm kept out of the loans forever, then right :) ?

Think about how big a correction will be coming if subprime borrowers can't get mortgages and credit-worthy borrowers can't too. Only people with cash can buy. If this is true, and this happens, whoa is the homeowner who has to sell.

A little fun poll:

Where did Victoria go?

Report on Business has a good article about growth, trends, real estate etc. It closes with a ranking of Hot and Not cities in terms of GDP. I'm assuming Victoria falls somewhere between the Hot and the Not. Maybe that's a good thing?

HOT

Saskatoon 4.7%

Calgary 4.4%

Winnipeg 3.7%

Edmonton 3.6%

Regina 3.5%

NOT

Vancouver 2.9%

Toronto 2.7%

Quebec City 2.6%

Halifax 2.5%

Ottawa-Gatineau 2.3%

Montreal 2.1%

Hamilton 1.3%

They point out that Victoria is currently 10% above the historical RE inflation trend line. I'd thought it much higher, closer to 15%. I can't find the data I thought I'd read (maybe I'm imagining things again?). Anyone in the know, please chime in.

Why are prairie towns so hot right now? Is it because of oil? Considering that Winnipeg stands 3rd on the list I'd say no. I'm willing to venture a guess that goes something like this: incomes are pretty close across the country, within $10K or so in the same jobs in different cities; young people wanting to buy a home and raise a family look where they can get the best bang for their buck; families add to a city's growth, they get jobs, pay taxes, buy cars and furniture and start businesses too; retirees do add to a city's bottom line, but nowhere near the same scale because they pay less tax, buy less, and don't usually start businesses. Of course, the best option and most sustainable would be a healthy mix of both.

Just a wee bit of irony in this one

I'm surprised no one's mentioned this in any significant way. First, thankfully no one is hurt. From the looks of this photo, it can only be described as a miracle that no one was even scratched.

Now some questions.

I've heard that with the pace of new construction and the considerable demand for tradespeople that hiring standards have been relaxed and in some cases the ratio of journeymen to apprentices to labourers is ridiculously in favour of labourers. Not saying this had anything to do with the "Fall" of the--can we call it a wall?--at The Falls, just asking is all?

I've noticed in the house hunt that quality is pretty shoddy in some new "luxury" condos we've toured, and often wondered if the quality is shoddy in what we can see, imagine what it's like on the bits we can't. Like the structural stuff.

The Falls accident isn't the first major construction mishap I've heard of this year. I know that a clay wall came down in The Juliet when they were prepping for pouring the foundation and walls for the underground parking.

I'd be concerned if I owned a unit in one of these two places. Can I get my deposit back now that this has happened?

The past few years of crazy prices and even crazier pre-sales has me worried. Are we in for another condo crisis? This one caused not by rain screen technology but by poor quality building due to labour shortages and build 'em as quick as you can mentality?

Balanced Reporting

I've been saving this one for a couple of days. After the National Post article, Disgusted in Victoria, Victoria's mayor ALowe felt he needed to say some words in his, and the city's, defense--likely in that order too. He claims the author of Disgusted is not balanced in his reporting. Because I posted the whole article before, in an attempt to be balanced I'll give ALowe his fair shake of things.

Victoria's Mayor Responds
Re: Disgusted In Victoria, Brian Hutchinson, Sept. 1.

When I agreed to speak with Mr. Hutchinson regarding the state of Victoria's downtown I did so with the intent of providing a frank and forthright assessment of the challenges we are facing in our urban core. In exchange, I expected a balanced reporting of the problems, and solutions we are working to advance. Sadly, and perhaps not surprisingly, sensationalism triumphed once again over thoughtful and comprehensive journalism. In particular, I challenge Mr. Hutchinson's negative and one-sided characterization of our community without any reference to our consistent ranking as one of the top international travel destinations. I continue to receive feedback from many visitors who feel Victoria is a safe and beautiful city to visit.

We have never denied that our city, like so many other urban centres across the country, is confronted with the street-level impacts of escalating addiction and homelessness. And in many cases, undiagnosed and/or untreated mental illness is creating a more complex set of social and health challenges whose consequences are becoming more visible and more acute every day. These street-level impacts are not acceptable to me or to our citizens.

What does distinguish Victoria is our genuine commitment to finding a new and better way to assist these individuals:We are eagerly awaiting the recommendations from an expert panel of medical practitioners and researchers, chaired by our provincial health officer, Dr. Perry Kendall. The panel's recommendations will lead, I hope, to a new integrated model of service delivery that will represent a substantial shift in the way we respond to social and health challenges.

People must have access to stable housing, detox, treatment, health and social services if we want to end the downward spiral. Cities must be assisted in this endeavour by other levels of government who ultimately determine funding levels and service priorities. It is shameful that our streets have become the de facto institutions for the homeless, addicted and/or mentally ill.

Alan Lowe, mayor, city of Victoria.

ALowe accuses Hutchinson and the NP of sensationalism. In defense of the city, ALowe says we are consistently high-ranked as a travel destination. Wow. Thanks ALowe. Why don't you just say we consistently have over-priced RE, so that means everyone wants to be here, don't you know? ALowe "continue[s] to receive feedback from many visitors who feel Victoria is a safe and beautiful city to visit;" but notice how he doesn't mention any specifics?

ALowe could have said CondeNast Traveler Magazine, or any one of a myriad travel publications. He could have tossed some celebrity names around. But. He. Didn't. Guess what? Hutchinson did toss in some names. And big ones. Like the Auditor General. Or mention of the well known fact that this city has had big name companies cancel conferences here because of the street issue.

Hutchinson did write a balanced article. The problem in ALowe's eyes was that it was too honest. Hutchinson did editorialize on the issue for certain. But you see, he's not a bleeding heart, so therefore in direct opposition to ALowe's plans to study this issue ad naseum and at great cost to the taxpayer and still do nothing (think sewage treatment) until the provincial and the federal governments legislate action (again think sewage treatment) and commit equal money.

I won't get too political on you. Really my thoughts on this issue are irrelevant. But I will say this: for any city official, from the mayor to the city manager, to say that this city just doesn't have enough funds for extra policing and more support services (remember they wouldn't license the church basement ones) is absolutely freaking ludicrous. Property taxes have risen, both because there have been rate increases and because property values have skyrocketed. This city is swimming in cash. If they're not, then someone somewhere needs to be asked why and held to account.

Tuesday News Hunt

Not too much, if any, commentary today... but here's a bunch of links for you to discuss, or not.

Markets, dollar go up on a day when our southern neighbours feel more pain

TD says "Get ready for some rockin' and rollin'"

New homes get more expensive, more slowly (see post below for some insights into what this may mean near-term)

When in doubt, follow the smart money

I'm really waiting to see this headline read CANADA

"In fact, there were excesses going on. The market was taking risks that I think were not adequately being rewarded." Not here though, not this time, haven't you heard, "This time it's different"

Market Cycles

A regular reader sent me a fantastic article from the early 1990s written by economist Patrick Foley of Lloyd's Bank of London. The article, A market like no other is unavailable online these days, and out of respect for its source, I won't post it here, for reasons of identification. But I'll give you a synopsis of his arguments for your debate/commentary.

Foley's argument is based on the RE market in England back in 1990. At that time, prices were stable, but sales were stagnant. How can this be? As Foley suggests should be the case "the seller would simply reduce the price until buyers were attracted." The RE market is different though, "many sellers would prefer to take their house off the market rather than lower the price."

Maybe we bears should pay closer attention to the number of expired listings happening lately? If we see more listings removed prior to sale, then we know what is happening is similar to what Foley describes. What about the other's though, the ones who must sell? Foley says those indicate the next shift in the cycle.

When that happens, we see a reduction in prices. Who are forced to sell? There are plenty of reasons why someone might be forced to sell, but perhaps the first indicator would be broad reductions in new home prices, especially in completed condo developments with unsold units.

The first sign we'll see is a reduced number of sales. And the number we need to focus on is year-over-year sales, not month-to-month because the market is so seasonal. When the number of sales is reduced, so is the corresponding sales prices, so we must be careful that the weakness in the market isn't over-stated--the same factor exists on the upside, and we see it every time a high priced home sells in Victoria.

What part of the cycle is Victoria in according to Foley? Foley says prices are slower to react. In fact, when volume falls, sometimes prices spike before they begin a decline. But we witness a sharp decline in price inflation. (Considering that inflation is roughly half of what it's been over the past 2-3 years, I'd bet we fit somewhere in this part of the cycle).

What has been the trigger for cycles to end according to Foley? "...the end of the boom for all three of the most recent cycles coincides with a tightening of macroeconomic policy by the government of the day."

Foley's study period had governments raising rates due to exchange rate weakness, rather than domestic demand. Today we see the opposite: the BoC is concerned about domestic inflation, not exchange rate weakness. Foley felt that the previous economic policy would contribute to a deeper than normal trough.

Today's situation is not so black and white. In the US, it's expected that the Fed will reduce rates due to weak economic fundamentals, while their currency takes a hammering on the world market. But in Canada, it's expected that the BoC will have to reign in inflation and potentially drive the $CDN to parity. Both of these could have considerable economic constraining effects.

Based on Foley's example, it isn't clear where this Victoria market sits.