Marxism Won’t Solve Canada’s Rental Housing Crisis – Despite What Ottawa Thinks
"Marie-Josée Houle, Canada’s first housing advocate, released a series of little-noticed reports and recommendations that blame Canada’s current housing crisis on private capital, or what she calls the “financialization of housing.” Houle claims her commissioned studies “confirm” the harm done to tenants by the private sector and that this necessitates an official federal investigation and corrective action.
The reports, written by a variety of academics and housing activists, take deliberate aim at firms or investors that “profit from rent increases” – a condition that captures essentially all privately-owned rental housing, since rent increases are a necessary component of any market-based business model. These arguments, along with 51 recommendations, are collected in The Financialization of Housing in Canada: A Summary Report for the Office of the Federal Housing Advocate by University of Waterloo planning professor Martine August. Among the recommendations: regulating banks to prevent them from lending to any profit-making rental firms, prohibiting pension funds from investing in such firms, denying them access to federal mortgage insurance and other government programs, placing a cap how many rental units these firms can buy and expropriating any “affordable” housing units they might already own. Other demands include a call for coast-to-coast, iron-clad rent control, an end to Real Estate Investment Trusts’ (REITs) tax status and the abolition of all federal policies that “privilege home ownership over renting.”
The thrust of most of these recommendations is to make it impossible for profit-seeking private investors to participate in Canada’s rental housing market. With 89 percent of Canada’s approximately 4.8 million rental units already in private hands, such a policy would inevitably push the entire sector towards government ownership or oversight. Rather than fixing Canada’s housing crisis, such an extreme, ideologically-driven effort would result in widespread calamity – making it impossible to add new supply and dooming the existing rental stock to panelki-levels of disrepair. ..
In 2017, Prime Minister Justin Trudeau’s Liberal government announced a 10-year, $37 billion National Housing Strategy meant to tackle housing affordability. It hasn’t worked. Due to Canada’s inability to build new houses, condominiums and apartments in sufficient volumes to meet rising demand – largely as a result of suffocating government rules and restrictions... Canada’s housing problems have expanded into a full-blown crisis... In response, the Liberals have doubled down with additional promises to spend...
“Human rights were originally conceived to preserve liberty and hold back the overreach of the state,” observes Queen’s University law professor Bruce Pardy in an interview. “Today they’ve become the means for some people to control the behaviour of other people.” In the case of rental housing, this alleged new right is being interpreted by Houle and other housing activists to mean that private sector landlords should not be allowed to raise rents, evict tenants for non-payment or otherwise operate their property in a way that makes them money... “The report is essentially saying that the only legitimate way for people to be housed is through state provision,” says Pardy, after reviewing August’s summary report. “I consider that to be full-blown Communism.”...
If there is a difference between corporate landlords and smaller operators, says Dickie, it’s that bigger firms are more likely to run their operations in a professional and predictable manner. And this is to the advantage of tenants who appreciate regular maintenance and formalized procedures. As for claims made by one Federal Housing Advocate report that “financialization” harms “members of Black communities, recent immigrants and refugees,” the author again provides no proof to back up this volatile contention... professionally-managed apartments are much more likely to use computerized systems to select new tenants, all-but eliminating the risk of discrimination or bias...
The standard measure for industry concentration is the market share controlled by the five largest firms. In Canada’s heavily-regulated banking sector, that figure is 85 percent. The same goes for telecommunications, with the five largest Canadian phone companies accounting for 87 percent of sales.In the rental housing market, it is less than 5 percent ... the country’s second-largest landlord is Toronto Community Housing Corp., a city-owned social housing agency...
Regardless of long-term trends, however, no one doubts that Canada faces an immediate housing crisis. And the fundamental reason is an insufficient supply of new units. Rather than trying to rid rental housing of “financialization” says Frank Clayton, senior research fellow at the Centre for Urban Research and Land Development at Metropolitan Toronto University (formerly Ryerson University), he suggests we need a lot more of it...
“Back in the 1960s, there was quite a bit of ‘financialization’ in the rental housing market,” notes Clayton, taking issue with the Federal Housing Advocate’s claims that the current situation is unprecedented. Life insurance companies and syndicates of doctors and lawyers were once frequent buyers and builders of apartment buildings because of the reliable income streams they produced. A substantial portion of Canada’s current rental housing stock was built in this era due to the ample flow of private capital. But federal tax changes in the mid-1970s and provincial rent control laws led to an exodus of capital from the sector. “It no longer made sense to build purpose-built rentals,” recalls Clayton. ..
“When an owner invests in a building, they are installing new appliances and amenities and updating the structure. They are improving and modernizing the housing stock,” says CFAA president Dickie. “Up until five years ago, this would’ve been considered a good thing. Now these activists are furious that renovations lead to higher rents.”...
The mere fact that a housing project is operated on a non-profit or community basis is no guarantee that it serves the best interests of its tenants.
Consider Toronto’s Swansea Mews, a 114-unit housing complex owned by Toronto Community Housing that was abruptly closed this summer because its concrete roof collapsed, leaving one tenant hospitalized and approximately 400 displaced. How did the building fall into such a state of disrepair? While housing activists decry landlords’ habit of pouring their own money into the upkeep and enhancement of their buildings, Swansea Mews’ tenants experienced the damage caused by the opposite condition. Many of Toronto Community Housing’s units are falling apart because they haven’t been maintained to safe and proper standards. According to its current budget, the social housing behemoth faces a capital repair backlog of over $1.5 billion...
Politicians habitually prefer the excitement of announcing new projects over the mundane obligations of keeping existing operations in good repair. It is a chronic failing of public housing. Consider also New York City Housing Authority, the largest landlord in the United States. It faces a staggering US$25 billion bill to fix numerous problems throughout its 177,000 apartments, many of which have lacked heat and water in recent years. And don’t forget the disastrous Grenfell Tower fire in West London in 2017 that claimed 72 lives; it too was owned by the local public council.
As for the alleged mistreatment of visible minorities by “financialized” landlords, the Federal Housing Advocate’s own report on racialized tenants reveals that Toronto Community Housing is just as likely to remove tenants who don’t pay their rent as are private companies. Simply declaring housing to be a human right does not obviate the inevitable burdens and responsibilities of ownership. A landlord who cannot evict non-paying tenants will not be a landlord for very long. They will soon be the bankrupt owner of a derelict building...
Beyond the non-profit sector’s obvious lack of capacity and expertise in delivering large-scale housing developments, there is the matter of finding the trillions of dollars necessary to put all those shovels in the ground. In the absence of private capital, says Pavlov, it falls to Canadian taxpayers to foot the entire bill. And “there just isn’t enough money in Canada for governments to raise the taxes necessary to replace the private sector in housing,” he says. “Pushing taxes above current levels would kill the economy. It is delusional to think that government could build all the housing we need.”...
Whatever the Trudeau government and the Federal Housing Advocate may claim about the invented new right to housing, efforts to banish capitalism from rental housing will inevitably leave tenants far worse off by impeding repairs on existing buildings and preventing the creation of new supply"
