Entries from March 2009 ↓

Every time we drive down East Hastings, Dorothy says the same thing. “This is so sad.”

She said it again Wednesday, as we passed the old Carnegie Library, now a drop-in centre for the destitute, its ornate architecture and sculpted dome a counterpoint to the misery below. The sidewalk in front is covered with street dwellers, while fifty feet away, in the alley, dozens more huddle near a dirty blue dumpster. Two cops in a Vancouver Police cruiser in front of us look dispassionately at a woman in a gray sweatshirt shooting up on the pavement.

But, East Hastings is a little different now in the cold March sun, with long sections of buildings which stood for more than a century, razed. The vacant lots sit behind high chain-link, festooned by signs with “opportunity” and “development potential” splashed across them. Hard to know if this is tangible proof attempts to yuppify the city’s worst neighbourhood have failed, or just another pre-emptive pre-Olympic strike to cleanse the streets.

A few blocks away, the condos are so thick they blot out the sun. But looking up into the maze there are scores of units staring blankly back without curtains or occupants. Everyone here is so aware of the collapse of the giant $500-million Ritz project, and now the desperation sales of unsold units in half-built buildings.

Turned out the floor manager in the hotel I spoke at was a Toronto refugee, here for more than a decade. The recession, he confides, is a monster. Hotel business has plunged all across the city. The complex across the road, in the heart of Van’s most fashionable shopping district – Louis Vitton, Hermes — has found it necessary to close off an entire tower as occupancy rates crash.

The group I spoke to was uniformly professional, serious money managers, investment bankers, specialty corporate lawyers and accountants, the kind of folks who regularly flit around the continent on business. The conversations inevitably turned to real estate, as they all do in the Lower Mainland. I don’t think anyone liked the words coming from my lips. The declines here, I said, have just begun. And don’t even think about the aftermath of the 2010 games…

Of course, this is still Vancouver. Wealth abounds. In the few kilometres along Granville from the airport to the harbour it’s tough to find a listing under $1.2 million. The average city price is now $653,000, down 15% from the peak. Sales were up and listings down in February, but the mood on the street seems to have changed. After all, with first-time buyers walking away from condo deals, the fuel is being removed from the local real estate blaze.

And in the country’s most unaffordable city, where the average family long ago realized it could not afford the average home, reality is overdue. Especially now.

While indistinguishable forms huddled behind the library at Main and East Hastings, in Ottawa the Chief Parliament Budget Officer was telling reporters the country will have a deficit of $38 billion this year, another $35 billion next year. Was it just three years ago the surplus was $12 billion? Meanwhile in Montreal, the head of the CBC informed stunned employees 800 of them would soon be without jobs.

I’m sure it was tragic, desperate, devastating news.

Unless you live beside a dumpster.

For today’s blog, ’100,000 glimmers,’ go here.

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The first time I lost my mind and went to the House of Commons, Mike Wilson was designing something called the GST. The geniuses in the finance department wanted it to apply to the full cost of new houses which, of course, would have been a disaster.

Wilson called me in, asked my opinion, and in half an hour there was a plan. Apply the tax, but rebate most of it and police the hell out of builders so they did not use it as a profit grab.

The GST was brought in when the feds had a $40 billion annual deficit and needed a way to climb out of the hole. It worked. Within half a decade the deficit was gone, and so was Wilson. The Liberals took power and wisely kept the tax, achieving balanced budgets and then surpluses. In the last two years the GST has been slashed, and we are now headed for a deficit of at least $60 billion over two years.

Oh well.

But this is not about the GST. Instead, the PST. For those of you in Ontario, it’s about a tax increase of Herculean proportion, which will probably roll West in the coming few years.

The provincial government of Dalton McGuinty is on the verge of harmonizing its own sales tax with the national tax (as Quebec and the Atlantic provinces have done). Businesses are lobbying hard for this to happen, since it would give them the ability to deduct PST payments on their inputs as business expenses. They claim it would make the economy more efficient, since only one combined tax would need be calculated and remitted, instead of two. They also say consumer prices could drop (yeah, right) when the PST becomes deductible for them.

Maybe so.

But the flip side is a tax increase. The GST applies to services, but the PST does not. By combining them, there would suddenly be a 13% tax on all kinds of things to which only the GST now applies. Like real estate commissions. Legal fees. Home appraisals. Financial advisors. Couriers. Plumbers. Carpenters. Flooring guys.

On the sale of a $400,000 home, this will mean an extra seventeen hundred dollars in commission alone. In a recession. In a housing collapse. We’re not making this up.

Mr. McGuinty says he needs it to run Ontario.  And he wants to know what you think. Tell him.