10. 31. 2024

Insecurity and Dispossession

HR Sodeifi

While housing affordability has been a problem in Canada for decades, it has become much more acute in the 21st century, reaching crisis levels in recent years. Neoliberal policies designed to liberalize and deregulate markets and reduce the role of the state in the economy – ultimately aiming to restore capitalist profitability – both undermined the construction of social housing and created the conditions for the accelerated commodification of homes.

We are witnessing the results. Tens of thousands of people are homeless across the country while, thanks to cutbacks, cities lack adequate resources to provide support. Some unhoused people are sheltering in tents in park encampments, under bridges, and in other public spaces, only to be attacked by police forces and right-wing politicians who, instead of fighting poverty, criminalize the poor. Hundreds of thousands of other homeless people are estimated to fall into the category of “hidden homeless”: lucky enough to have friends or family who let them stay over for a few nights, or to have a car to sleep in, but without any kind of permanent shelter. For racialized, urban Indigenous, and other marginalized people, as one might suspect, the situation is often disproportionately bad.

Slightly higher up the ladder are renters, who live in constant danger of eviction and significant rent increases. More than 40% of tenants in Canada pay unaffordable rents, where affordability is defined as personal housing expenses amounting to no more than 30% of gross income. Many renters pay more than half of their disposable income on rent – in some cases up to 80%. As a result, working families have had to cut back on many other necessities, including food, leading to a massive increase in food bank visits since 2019.

Working families and individuals who have “purchased” a home in recent years have had to take on significant mortgages – debt – while many of those with existing mortgages have seen their monthly payments increase due to higher interest rates. Many younger people have given up on the idea of ever owning their own home.

Corporate landlords and financial institutions, by contrast, are profiting from the insecurity and unaffordability of housing – profiting, that is, from housing precarity that too often leads to homelessness.

Roots of the current crisis

In 1993, the federal Liberal government of Jean Chretien, pursuing a neoliberal deficit-cutting agenda, eliminated all funding for social (government-subsidized) housing and downloaded the associated expenses to the provinces and territories. This move effectively ended the construction of social housing in Canada. It was a sharp retreat from the federal government’s active, if imperfect, involvement in creating affordable public housing in the 1960s and ’70s. A 1977 study by the right-wing Fraser Institute pointed to federal policies aimed to discourage private ownership of rental dwellings – and to encourage the development of not-for-profit and government-owned rental units – as an example of how housing policy had effectively become “an instrument to redistribute income in favour of lower income households.” The federal government’s abandonment of such policies in the 1990s coincided with the liberalization of financial rules, including the introduction of REITs (real estate investment trusts) in Canada: financial instruments able to derive income from real estate assets and benefit from preferential low tax rates. These shifts led to increased commodification of real estate and an increase in housing prices.

The chart above shows how the acceleration in residential property prices in Canada begins at roughly the same time as the construction of social housing stops and financial markets become more liberalized. A similar pattern can be seen in other countries. In the US, for example, related dynamics gave rise to a massive housing bubble and its subsequent collapse in 2008, necessitating trillions of dollars in public funds to bail out the financial system that had created the problem and benefited from it, and inaugurating the economic downturn known as the Great Recession.

Changes to housing policy and the liberalization of financial rules and regulations are only part of the reason why speculative capital has increasingly flowed towards housing. By the late 1990s, the neoliberal reshaping of the economy – initiated by the likes of UK prime minister Margaret Thatcher and US president Ronald Reagan, and designed to restore profitability by attacking labour and the post-war welfare state – was faltering. Profit rates were once again declining. In search of profit, money began to flow to the housing market, driven by financial institutions, state-sponsored pushes toward home ownership, and low interest rate policies adopted by central banks to stimulate economic activity. While in the US and many other countries, these dynamics pushed the commodification of housing into hyperdrive, in Canada the process was much slower due to more restrictive banking regulations. In turn, while the collapse of the US housing bubble resulted in the demise of major investment banks and a significant drop in the price of shelter within and beyond the United States, in Canada the recession caused only a temporary pause followed by renewed real estate market activity and price increases.

 

Despite a massive injection of public funds to bail out banks and many other corporations, business investment after the Great Recession remained subdued. Overaccumulation in the lead-up to the recession had kept overcapacity high – that is, production capacity exceeding demand – and profit expectations low. In 2012, the governor of the Bank of Canada went as far as to chastise corporations for sitting on huge piles of cash and not investing in the economy. Yet the logic of capital is to pursue profit, and if the prospect of making a profit by investing in productive business activities is dim, capital will not invest in those activities no matter how much money it has at its disposal or what the governor of a central bank says. A lot of those funds instead started flowing into the Canadian housing market. The result was a dramatic increase in the price of housing of all types.

When a working person or family purchases a house, they buy a home to live in, perhaps hoping to raise a family there and be part of a community. They are interested, in other words, in the usefulness of their home for their lives: what marxist theory calls the home’s use value. Over time, as that owner pays off their mortgage, their home becomes an asset to support their retirement, to assist the next generation, or both. Indeed, the single biggest repository of savings and wealth for most working people in Canada is their home, if they own one. 

Investors, on the other hand, aren’t concerned with a home’s use value. Investors view a home as a commodity, a potential source of profit and/or income flow. They care little about the schools nearby, the community, local parks, and quality of life. They are interested only in the exchange value of the house: how much profit they can generate from their investment, either through rents or resale. This commodification of housing, part of a process commonly referred to as “financialization,” subordinates use value to exchange value.

Commodification drove a speculative increase in Canadian home prices after the Great Recession. One clear expression of this phenomenon was (and remains) the disconnect between the increase in real incomes and housing prices.

This commodification of housing was not limited to single-family homes. When the federal government stopped funding the development of affordable housing in the 1990s, real estate investment trusts owned zero rental suites. By 2021, REITs owned nearly 200,000 units in Canada, and financial firms held nearly 30% of the country’s purpose-built rental housing – and were acquiring more at an accelerating pace. Not surprisingly, one result has been rising rents and increasing displacement of tenants. A common profit-maximization strategy among REITs has been to “re-position” lower-cost affordable buildings (“under-performing assets”) to “add value” for investors: by raising rents, cutting costs, and renovicting long-term tenants paying rent-controlled rates. 

This pattern can also be seen in the seniors’ living sector, where financial firms own 22% of long-term care homes (LTCs) and 42% of retirement properties in Canada. The neoliberal restructuring and drive towards privatization of healthcare have contributed to this trend.

In generating opportunities for investors to profit from housing, this process has effected a significant transfer of wealth from those who can least afford it to those who are better off. By the end of 2022, while the wealthiest 20% of the population accounted for more than two-thirds of Canada’s net worth, the bottom 40% accounted for just 2.6% of net worth in the country – and had seen their net worth decrease by 16.3 per cent compared to the previous year. Rent has become, increasingly, a means of dispossession. As a group, renters experience what economists call net dis-saving: they spend more than they earn. According to Statistics Canada, while the dis-saving rate worsened for households in the bottom 60% of income distribution in 2023 compared to a year earlier, those at the very top benefited from their financial asset gains during the same period.

The housing crisis we have before us is thus the fruition of nearly 40 years of capitalist restructuring of the Canadian housing market. Neoliberal ideologues believe the capitalist market is the best and most efficient means of allocating scarce resources.   What they fail to appreciate, or intentionally aim to obscure, is that capitalist production is production to create profit. Sometimes, the process of creating profit generates a beneficial result such as the output of helpful goods and services. But that benefit is incidental and not the primary goal of capitalist production. Apologists of this system point to these accidental results to propagate the false belief that capitalist markets are the solution to human needs. But as we can see clearly today, capitalist markets do not necessarily provide what is needed.

Responses from above and below

In 2017, the Trudeau Liberals, acknowledging Canada’s housing affordability “challenges,” unveiled their National Housing Strategy. It offered a very limited goal of reducing homelessness by 50% by 2027 and slightly mitigating the severity of housing supply gaps. The Trudeau government has failed to deliver on even these unambitious goals. Instead, in 2023 it announced it would remove the goods and services tax (GST) on purpose-built rental units, to “incentivize” construction. 

In provinces such as Ontario, the provincial government in power has used the housing crisis as a justification for getting rid of environmental regulations, so developers can reduce their costs and “build faster.” Despite the gutting of such regulations, and the federal government’s GST rebate, new housing starts have actually declined in the last year, as higher interest rates have made housing units less attractive to investors. Profit, or the lack thereof, is once again the determining factor.

At the grassroots level, there have been some important mobilizations by tenants taking matters into their own hands and resisting above-guideline rent increases and renovictions. In several buildings in Toronto, for example, tenants have been on a rent strike for over a year. This kind of action not only builds solidarity among tenants, but it also increases the cost of operating these buildings, making investors think twice about their plans. It also helps focus attention on housing issues more generally – including whether a home should be treated as a profit-generating commodity.

Housing is an essential and basic human need. It is a human right. We must demand that our governments ensure all people, regardless of their income, have access to a secure, long-term, adequate, and affordable home. Meeting this demand requires, first and foremost, the construction of high-quality, truly affordable social housing on a massive scale, involving all levels of governments. It is also necessary to put policies in place to ban profiteering in the housing market, expressing clearly that homes are not commodities. As well, we need to guarantee adequate income support, retirement, and pension benefits to working people, so nobody feels home ownership is the only path to a dignified old age. Ultimately, if we really want to solve the housing crisis, we need to fundamentally change the social and economic structures of our society, working towards a transformed society that places human needs above profit.