A New ‘Yellow Peril’

On August 15, 2018, the New Zealand parliament passed an unprecedented law barring most foreign buyers from purchasing homes, fulfilling the Labour government’s campaign promise to implement a foreign buyer ban. As citizens of the country with both the hottest housing market in the world and the highest rate of homelessness among OECD countries, New Zealanders watched this development with great anticipation and expectation.

Both the language of the bill and the press coverage that this law has received have been careful not to specify any particular ethnicity or nationality of buyers. But undoubtedly the issue of mainland Chinese investor-immigrants underpinned a considerable part of the debate about passing the ban. Chinese investor-immigrants make up the largest proportion (60 percent in 2016) of foreign buyers in Auckland, the most populous city in New Zealand and the hardest hit in the housing crisis. And despite the non-racial framing of their legislation, the Labour Party has faced criticism in the past when it published and defended controversial statistics about the proportion of Chinese home ownership in 2015 that were entirely based on whether the last name of the buyer sounded Chinese.

New Zealand may thus far be the only country to resort to the drastic measure of banning foreign buyers in response to investors from China. But a new “Yellow Peril” has reached the shores of both Western urban centers and Asian financial capitals, from Hong Kong and Singapore to Australia and Canada. Often accused of investing huge amounts of (presumably embezzled, even in the Chinese government’s eyes) capital into real estate in Western countries, then raising property values through expensive rebuilding and ultimately leaving many homes empty, the presence of rich Chinese immigrants has decidedly become a global bogeyman. With rising anger against Chinese homebuyers has come a resurgent wave of racism and xenophobia against mainland Chinese immigrants and ethnically Chinese people. The rise of China has also colored Chinese investments in general as potentially concerning for national security, though at the moment Chinese residential property investments are a minimal worry for Western countries.

But does the image of the rich investor-immigrant reflect the bulk of newcomers from mainland China? Though the presence of large numbers of mainland Chinese investors–and their outsized impact on housing markets–is often undeniable, their numbers still frequently represent a minority of Chinese immigrants.

Take Vancouver, British Columbia as an example. In 2013, only around 23 percent of all immigrants from China who arrived in BC were considered part of the investor class, which was already down from 42.4 percent in 2009. In contrast, 48.3 percent of recent Chinese immigrants—nearly half–in Vancouver find themselves in the low-income category in the census. These low-income immigrants aspire to buy homes too, but a majority of them spend over 30 percent of their income paying for home ownership or rent. Furthermore, many poor Chinese ethnic enclave areas do exist within the Vancouver region, despite the stereotype of the rich Chinese Vancouverite. Though many Chinese investors may indeed have been counted among the low-income because of their failure to report income earned in China, the truth remains that many mainland Chinese immigrants often work hard while struggling to afford homes and make ends meet in their new environments.

Hong Kong, a city facing a similar housing crisis, is another clear example of where public discourse fails to match on-the-ground reality around mainland Chinese immigration. Local political debates often paint two images of recent mainland immigrants – the investor-immigrant courted by the pro-Beijing government, and the more prevalent image of the uncivilized, welfare-leeching poor immigrant from the rural areas of China. But some recent immigrants arrive in Hong Kong not as speculators or job-seekers, but rather as spouses to Hong Kong residents, with as many as 40 percent of marriages in the last decade composing of a partner from the Mainland. Frequently, both partners are low-skilled and thus economically precarious. Often, estrangement and divorce can end disastrously for the partner from the mainland whose only reason for moving to Hong Kong may have been their marriage. Furthermore, many low-income mainland immigrants often work hard in industries such as construction and retail service, at proportions consistently higher than that of local residents and immigrants from developed countries. These industries, central to Hong Kong’s real estate and service-oriented economy, have been and will continue to be short of workers, a demand that locals have yet been unable to fulfill. And yet mainland immigrants still make up a large portion of the poorest working-class neighborhoods in Hong Kong where the poverty rate can rise to almost 25 percent. The contributions of these mainland immigrants and their simultaneous poverty defy the stereotypes that the Hong Kong political sphere has often used to avoid tackling the problems of integrating them into Hong Kong society.

Bucked by New Zealand’s bold action, many leaders in other countries are echoing the call to implement foreign buyer bans in their own countries. A power-broker in the British Columbia legislature, Andrew Weaver, immediately jumped on the news to propose that Vancouver’s housing crisis deserved an equally radical response. No doubt, racists and xenophobes will rejoice at the possibility of keeping the Chinese out. But politicians like Andrew Weaver who sincerely want to deliver on housing affordability ought to pause before banning foreign buyers. Though a flat ban seems like a simple solution, it scapegoats Chinese residents and neglects the fact that housing speculation by domestic investors are just as fundamental to the affordability crises of many cities. This is especially the case in hyper-capitalist cities such as Hong Kong, where one commentator called domestic property developers a “landed aristocracy.”

Furthermore, housing experts have begun to agree that an equally important measure to expand affordable housing is to increase housing supply to meet existing demand. Many cities struggle to find the funds to invest more in public housing or incentives for private affordable housing, but a simple solution can be found by taxing the root of the problem–housing speculation. In fact, this is precisely what Vancouver has done, although with perhaps too many exemptions. A newly-introduced empty homes tax generated CAD $30 million in the first year of implementation, opening up new possibilities for affordable housing and homeless programs. Were other cities to adopt similar proposals–as is set to happen in Hong Kong—and more importantly raise the tax high enough to be punitive and restrict loopholes, governments would significantly reduce wealth inequality, force numerous vacant properties onto the market, and raise revenues to tackle housing crises head-on and over the long term. Such measures would also broaden the reach of welfare, undercutting arguments that immigrants compete with locals for public handouts, and improving the likelihood of social integration for new arrivals through better housing.

Overzealous investment and empty homes in expensive housing markets have undoubtedly hurt local residents. But a flat ban on foreign home buying risks harming many low-income immigrants and fuels the racist conflation of all immigrants with the image of the sleazy investor. Rather than targeting immigrants and harming those working hard to make it in a new country, governments can and ought to target speculation and invest in home construction instead. Only then can housing in the metropoles of the world become both affordable and welcoming.

Photo: “Dense west end apartments from Burrard Street Bridge”