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McDONALD: Income inequality — just as dangerous as any forest fire or flood

March 23, 2018 - 1:13 PM

OPINION


If it is ever built, the super luxe condo at the top of the Westcorp tower in Kelowna will sit more than 120 metres in the air and command breath-taking views.

Valued at more than $10 million, this oasis of oppulence willl sit behind security gates only three blocks away from the Kelowna Gospel Mission on Leon Avenue.

Should the eventual owner care to look down from the panoramic view their condo will afford them, he or she should just be able to make out the people shuffling around Kelowna’s skid row.

The physical distance between them isn’t that great, but the financial gulf between the owner of the condo and the guy pushing his shopping cart down Leon might as well be a million miles.

While the condo is still a marketing concept at this point, if it becomes a reality there will be no more stark a display of income inequality in the Central Okanagan.

And if social science is to be believed, that “beacon of light” as the tower is described by its marketers will also signal a danger to the community and its way of life that’s just as real as a forest fire or flash flood.

As measured by the Gini coefficient, British Columbia already sits alongside Ontario as having the greatest income gap between the top earners and those collecting bottles and cans for a living.

While the most extreme examples of this are playing out amidst the gleaming towers in Vancouver’s Coal Harbour and Yaletown, the pernicious effects of income inequality are starting now to show in the Central Okanagan.

But wait, you ask, why should I give one damn about the difference in net worth between the rich guy living in the sky palace and the woman forced to sleep in the Cornerstone emergency shelter?

There is reams of data available but the upshot is this; on the whole, societies with the widest income inequality consistently score worse on a variety of social measures including life expectancy, crime rates and the overall mental health of a community. Income inequality isolates citizens from one another, increases mistrust between social groups and sows divisions between social classes.

Now I’m not saying we’re going to see mob rule Kelowna but at its extreme, income inequality can lead to a breakdown of society, as more of everything is concentrated in the hands of the few. The physical manifestation of this can take the form of civil unrest — riots and demonstrations at first, outright rebellion or war at its latter stages.

So I was at first baffled this week by the continued attacks and predictions of doom by the mayors of Kelowna and West Kelowna on the recent efforts by the provincial government to cool the effects of real estate speculation in B.C.

After all, Kelowna Mayor Colin Basran in particular has made much of his council’s efforts to provide more rental and supportive housing to the segment of society most affected by sky-high real estate prices and rents.

But as an important piece of Kelowna's financial-real estate complex, I should perhaps expect nothing else but his efforts to save the golden goose.

That’s right. I’m talking about the cabal of banks, credit unions, realtors and developers who all have a vested interest in an ongoing real estate bull market.

For despite the flaming rhetoric from Basran and West Kelowna mayor Doug Findlater, there is very little evidence the Central Okanagan economy will fall apart should the speculation tax come about.

Even the city’s own staff report concludes that while the speculation tax could have a signficant impact, it will primarily affect the real estate market and out-of-province purchasers in particular, and that’s the bread-and-butter of the financial-real estate complex.

The first argument you will hear is that the financial-real estate complex cannot be separated from the wider economy and that what benefits the complex members trickles down to the tradespeople who build the houses and beyond.

In other words, it’s too big and important to let fail.

When there is balance within the financial-real estate complex — a roughly equal amount of buyers and sellers — things generally work out well. House prices increase modestly in tandem with wage gains and so do the rents investors have to charge to cover their mortgage.

But when the rest of the world decides they want in on what makes the Okanagan special, that balance is lost to price surges and rent increases that far outpace any wage gains made in the same market.

This might not matter to you if you made your pile in Alberta or Manitoba and only want to stay here for a few months in the summer but it matters to the rest of us who aren’t directly involved in the real estate market and need a place to live.

Both Basran and Findlater have made a lot of noise about the uncertainty the new tax measures create around the real estate market but it’s that uncertainty that will help cool speculation.

Before this, the only certainty was that real estate prices and rents would keep rising, making investment here a no-brainer; any uncertainty was borne by those who didn’t yet (or never would) own their own home and aren’t part of the financial-real estate complex.

We used to have a rule during brain-storming sessions in the newsroom; you couldn't just slag another person’s idea if you couldn’t also come up with a better one of your own.

But so far, all I’ve seen from Basran and Findlater is their almost-comic thanks-but-no-thanks rejection of the tax measures, with little effort made to provide a better solution.

That makes me think there is no solution in their eyes, at least not one that wouldn’t throw the baby out with the bathwater.

I’m sure both mayors and their councils, trapped in the echo chamber of social media, may be tempted to think the financial-real estate complex is the only constituency that matters.

But there are a lot of locals who have watched housing affordability and homelessness get worse, not better, during the last four years no matter how many times Mayor Basran touts council’s achievements.

That leads me to another number that should matter very much to members of the financial-real estate complex come municipal election time next October.

The guy in the Westcorp condo may have millions of dollars more than the guy trying to hack out a living at Sun-Rype but they both only have one vote.

— John McDonald is a long-time reporter, editor and photographer from the Central Okanagan with a strong curiosity about local affairs. You can reach him at jmcdonald@infonews.ca.

News from © InfoTel News Ltd, 2018
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