The “housing crisis” has been a recurring story in Canadian news for over seventy years. Which begs the question: if it is something so persistent, does it really fit the definition of a crisis?
The word crisis suggests something that is infrequent, surprising, and widely undesirable; something that leads to dire consequences unless it is brought under control. Examples include pandemics, natural disasters and war.In contrast, Canada’s “housing crisis” is a permanent state of affairs that harms people in, or in need of, rental housing; roughly one-third of the country’s households. The other two-thirds own homes whose values rise much faster than other investment options.
New homeowners may face high housing costs, but mortgage payments are accompanied by long-term growth in their personal wealth.
Landlords, real estate investment firms and developers operate in a stable and lucrative business environment. Even 2020 — the first year of the pandemic when entire sections of the economy were shut down — was a good year for the industry.
Banks and other mortgage providers create money, lend it, and charge interest on it. If that wasn’t already a sweet deal, the federal government assumes a share of the risk of these mortgages so that banks can make easy money worry-free.
A housing system that serves all but one group is not in a state of crisis; it is one based on structural inequality and economic exploitation.
For some readers, “exploitation” may sound too harsh a term. Renting properties is not only legal but morally acceptable, and some people argue landlords help tenants by providing them with a place to live. In the political economy tradition that informs this book, exploitation has a specific meaning; it refers to a group or class of people appropriating an unfair share of the fruits of the labour of another class.
Unlike most services and commodities, the price tag on rental units has no real relationship with the cost of providing housing. Rents are determined by “what the market will bear,” as economists say.
Even if a property has been paid for three times over (by previous tenants), landlords can charge well over the cost of maintaining that unit if that’s what similar units are going for in the market. If the financial plan for a new building is to recover costs over 20 years, but the market squeezes more out of tenants than initially forecasted, the result is higher profits sooner than expected, not cheaper rents.
The question is never if the rental property will generate profit, but rather how much profit and how soon.
A look at non-rental housing illustrates this point. In 2018, tenants in government-owned housing paid, on average $460 for a one-bedroom apartment, those in co-operative and non-profit housing paid $630, whereas tenants renting from a private company or individual paid $970. For two-bedroom units, the respective values were $700, $840, and $1,130. For three-bedroom units, the values were $850, $870, and $1,350. To state the obvious, when we remove profit from rental housing, rents drop, by a lot.
People concerned with housing justice should look at the alleged housing crisis for what it really is: a poorly regulated market that extracts income from working-class people and channels it to higher-income segments of Canadian society.
The solutions are known. What is lacking is not data or ideas or sophisticated policies. An alternative, just housing system would require landlords and developers to give up high profits, which they won’t consent to.
It takes a struggle. And in this struggle, there are no win-win solutions. Tenants movements already know this, but policy folks and everyone else must also pick a side.
This article appeared in the 2023 May/June issue.
