Frequently Asked Questions

LEASING DECISIONS IN MUSQUEAM PARK:

Decision-Model Predictions of Consumer Behaviour

 

 

1.      The problem that is to be solved relates to the market demand for leasehold properties in the Musqueam Park subdivision.  What I would like to end up with is a demand curve for the properties based on the discrete amounts of property available.  More specifically, I would like to create two versions of the demand schedule: one for the Musqueam Park property under a lease situation, like it currently it, and one for the Musqueam Park property if it was converted to freeholdings.

 

2.   Finding the demand schedule is not obvious for several reasons:

·        Discrete amounts of property are available.  A smooth demand schedule cannot be created directly.

·        The issue has been highly publicized.  The difficulties faced by leaseholders have been portrayed in a negative light, not conducive to attracting rental interest.  The publicity has led to a vacuum of interest in houses for sale in Musqueam Park.  In a survey this would lead some of the leaseholders to comment that the market value of their houses and leasehold property is, for the moment, zero, in other words, unsaleable.

·        The effects of the publicity on non-Musqueam Park leaseholders in terms of their demand for the property are indeterminate.  A survey of non-Musqueam Park residents will provide a better picture of the demand situation.

·        Groups may demand the leasehold properties for reasons other than residential (i.e. commercial), in which case the commercial demand schedule may be distinctly different from that of residential demand.

·        The biggest overall problem is that there is uncertainty regarding the government of the leasehold properties.  Current residents and future residents cannot be certain that they will receive the right to vote in local government on matters that affect them re: taxes, rents, services, and public works.

 

3.      Possible solutions to the creation of a demand schedule lie in the area of reducing the effects of uncertainty.  It is possible to compile a residential demand schedule based on results obtained from a limited-focus survey.  This would involve asking for responses based on defining what is done in certain situations by the government (fed., prov., and municipal), the Musqueam Band council, the leaseholders, and perhaps even the media.

 

NOTE: Remember, the focus is not to solve the problem of what to do regarding the leasehold situation but as regards creating a demand schedule for the Musqueam Park properties.

 

As far as I know, this specific problem has not been approached before.  Demand schedules for specific properties have most certainly been accomplished.  Investigating some of these previously completed demand schedules may provide a guide for this study, specifically with regard to the discrete quantity aspect.

 

4.      IF the solutions to the uncertainty problem were tackled, it would involve engineering the situations described in the survey, but in the real world.  If this became the case, there would be winners and losers depending on the situation.  The most likely scenarios would be:

 

Government enforces legal rights of Musqueam Band, requiring leaseholders to pay their new lease amounts and any back rent owed.

This scenario is the one taking shape at the moment in Musqueam Park.  The Musqueam Band will end up with a more stable flow of rental income.  There will also be the perception that the government will (and rightly so) uphold tenancy laws on First Nations land.  The losers, in the immediate sense, would be the Musqueam leaseholders.  Their rents would be substantially higher than they have become accustomed to.  However, the new rents must be considered in light of the past sub-market level rents which had typically been applied in Musqueam Park.

 

Musqueam band offers compromise acceptable to all Musqueam Park leaseholders, independent of government intervention.

The benefits would accrue to several groups, but mainly the Musqueam Park leaseholders.  The solution would involve at the very least an accession of voting rights to the Musqueam Park leaseholders.  It would likely also include a lower level of rent payments.  By avoiding government intervention, taxes otherwise spent in mediating a solution would be available to spend on other public services.  The Musqueam Band would gain in the sense that its flow of rental income would be more definite.

 

Given these circumstances, the costs would be to the Musqueam Band in the form of reduced rental income.  The Musqueam Band would lose some of its autonomy with regard to taxation and public service issues in Musqueam Park.

 

Musqueam band offers compromise acceptable to all Musqueam Park leaseholders, but only after government intervention.

As above, but the government would make legal expenditures.  Intervention would likely have to take the form of ad hoc legislation that may have serious political and legal repercussions in the future.  If a precedent is set for ‘bailing out’ leaseholders on First Nations land, leasehold groups throughout the country may take the opportunity to petition for assistance.  This would inevitably lead to mounting hostility from First Nations groups.

 

Government ‘bails out’ leaseholders directly through financial assistance.

In this situation, the leaseholders would clearly gain, effectively bestowed with free rent.  The Musqueam Band would have its flow of rental income stabilized.  Drawbacks would be the expenditure of government revenue that could have been of more benefit elsewhere and the precedent set for other bailouts.

 

5.      Several aspects of the situation would change in the face of more readily available government funding.  First, the government may be more inclined to offer a bailout to the leaseholders.  Depending on the scope of future bailout requests, they would deal with the expected influx of bailout requests.  This would be the solution that would make the majority of involved parties happy.  However, factoring in the wishes of the taxpayer base with regard to subsidizing the housing costs of a small minority of the population would unearth a political disinclination to provide the bailout.

 

6.   On the other hand, a complete lack of government funds in this situation would point to the most likely situation.  The Musqueam Band’s legal right to collect the court-dictated lease amounts would invariably be upheld.  The only variation in this outcome that could be hoped for by the leaseholders is that the Musqueam Band would institute a program of gradual increase in the lease rates.  Given the hard-line stance of the Musqueam chief, Ernie Campbell, this is highly unlikely.

 

7.      The issue of creating a demand schedule for the Musqueam Park properties could be shelved indefinitely.  The current situation in Musqueam Park could not be ignored for any lengthy period.  It is likely, though, that left to take its course, leaseholders would be forced to pay their rents or be evicted.  Leaseholders face a well established set of laws regarding tenant obligations and would have little possibility of being exempted therefrom.

 

8.   Other than an economist, there are few professionals needed in the creation of a demand schedule for the Musqueam Park lease properties.  In the case of an existing uncertainty model (where the uncertainty is what is currently manifest with regard to the Musqueam Park properties), any professional who can make direct comment about the nature of the level of uncertainty. For creation of a controlled-uncertainty demand schedule, any professionals who could detail possible outcomes of court settlements, local governance issues, and relevant federal and provincial legislation would provide useful insight into creating a demand schedule.  Professionals useful in creating both demand schedules would likely be found in the same professional arena: lawyers, negotiators for the Musqueam Band and from all levels of government, municipal (and GVRD) councilors.

 

9.   Several questions need to be asked of government officials:

 

      Regarding Government:

 

· In the future, what will be the nature of the relationship between self-governed First Nations lands and adjacent municipalities?

· What will be the role of municipal/provincial/federal government agencies in the administration of the Musqueam Park property leases?

· (to Musqueam Band council) What level of government representation, if any, will be offered to Musqueam Park residents in the future?

· (Musqueam Band council and prov/fed) What type of dispute resolution mechanism will be created?  Courts?  Musqueam Band council affiliated?

· What are the laws governing lease, rental, and eviction?  What process must landlords complete before eviction can take place?

 

10. I would like to ask several questions of business owners, mostly related to their willingness to lease property in Musqueam Park.  Specifically, I would ask:

 

· How much would they be willing to pay to lease property in Musqueam Park?  For how long?

· How would they develop the leased property, if at all?

· How much would they be willing to pay to lease an identical property outside of Musqueam Park?

 

11. Questions I would like to ask of residents of Musqueam Park are outlined in the preliminary version of my Musqueam Leaseholders Survey.

 

12. In order to obtain a less emotional overview of the demand situation in Musqueam Park, I would ask non-residents many of the same questions as in my Musqueam Leaseholders Survey.  Of particular importance are finding out the amounts that non-residents would be willing to pay to lease Musqueam Park properties and how much they would pay to lease identical properties outside of Musqueam Park.

 

13. Data I would like to see:

                  · valuations of the property and houses

                  · size of each property

                  · $ amount residents would pay to continue leasing

                  · $ amount non-residents would pay to lease Musqueam Park property

                  · household income in Musqueam Park (including source)

                  · age of residents in Musqueam Park

                  · amount both residents and non-residents would pay to convert Musqueam Park property to freehold

                  · annual property tax amounts

 

14. I am not currently aware of previous research done to establish a demand schedule for Musqueam Park properties.  I suspect none.  However, there has most certainly been research completed on creating demand schedules for specific regions, if not specific property areas around the lower mainland.  This is something I will attempt to find as something of a guide for me to create the Musqueam Park property demand schedule.

 

15. Special Interest Groups.  The groups that would be directly interested in the results of this study are the Musqueam Leaseholders Association and the Musqueam Band Council.  Real-estate groups operating in Vancouver may also find the information of use.  The Dept. of Native and Northern Affairs may also be interested in the results, primarily in the shift in demand between freehold and leased properties.

 

16. Groups that would be happy to see the results of this study would be those listed in #15 above.

 

17. Available data includes:

 

   · annual property tax

   · property size

   · property value (for tax purposes)

   · (to be continued)

 

18. In terms of creating a demand schedule for the Musqueam Park properties, I do not believe that any funds are available for such a project.  As for creating a situation of more controlled uncertainty, there are no funds expected from any of the municipal, provincial, or federal governments.  Legislation, by Musqueam Band council or other levels of government, is what is needed to solve the uncertainty problem.  Once the nature of the leases is clearly delineated, the leasehold situation can be more clearly modeled.

 

19. This question is not really applicable to this project.

 

20.  The Musqueam Band could use this project to better maximise their rental income from the Musqueam Park properties.  They could do this by setting rent amounts to the equilibrium amount determined by this project.

 

21.  With regard to the specific problem of creating a demand schedule for the Musqueam Park leasehold properties, no politician will lose their job.  As for solving the situation in Musqueam Park, there is a much stronger possibility that any of the provincial or federal members of government who is responsible for First Nations and related affairs will be voted out of office next election.

 

22.  Other communities have faced similar situations but less emotionally charged.  There has not been as great a push to create demand schedules for leasehold properties in their areas.  This is primarily due to the extraordinary appreciation of property values in the Musqueam Park region as opposed to other communities.  To date, I do not know of any other community that has specifically created demand schedules for leasehold properties in similar situations.

 

23.  The private sector, if fully informed about the present situation and future changes in circumstances (a rather tall order, I know), would be able to respond adequately in solving the current problem in Musqueam Park.  Nothing would be unexpected.  This would eliminate the uncertainty problems associated with creating a demand schedule for the Musqueam Park properties.  Drawing a demand schedule would be much easier under these circumstances.  It is unlikely that the private sector would ever be subject to such conditions, though.

 

24.  By legislating that the Musqueam Band must allow residents to stay (paying different levels of annual rents, from low to high amounts) the government could greatly aid in the creation of a demand curve.  Silly idea, yes.  Basically, anything the government can legislate will create a situation with trade-offs that affect the perceived value of the lease properties.  The government cannot explicitly legislate that the problem of creating a demand schedule be solved, short of legislating that someone solves it.  Legislation that sets rents from low to high amounts to allow recording of demands would not be an option for the government.  Those upon whom the experiment is conducted poorly receive direct social experimentation of this sort.