Last week, Prime Minister Justin Trudeau made a surprising admission that “Housing needs to retain its value. It’s a huge part of people’s potential for retirement and future nest egg.” Up until now, our political leaders have been reluctant to state the crux of the matter so plainly, even though it has been apparent for many years that the financialization of our housing and the decision to prioritize those who benefit from it has been the reason behind their collective inaction on housing.
Decades of treating housing as an investment, rather than a right, has led Canada to this stand on a proverbial cliff’s edge. The majority (66.5%) of Canadians are homeowners and many of those approaching retirement are betting on a property value windfall to see them through their later years. It is not only this direct benefit that they are betting on – older Canadians with pensions likely have portfolios that are also heavily invested in real estate. Many cannot fathom the notion that house prices and rental prices will have to come down for the rest of us to have any hope of housing security.
This is really what all of this is about. Focusing only on building supply and allowing the housing market to be gobbled up by investors is what has allowed things to careen out of control. More of the same will not make things better. Yet any serious measure that would truly address the housing crisis, even peripheral ones, must result in slowing or reducing property values, and our politicians have made it clear they are reluctant to allow that to happen.
For those of us who are permanently locked out of home ownership, for no reason other than being born too late to cash in, renting is hardly a better alternative. It used to be that renting was more affordable than buying and many decision makers viewed renting as a stepping stone towards the path of the holy grail of home ownership. That has not been the reality for years. The number of residents in Canada who are renters number in the millions, and that is set to increase over time.
The financialization of housing has gotten its grip on the rental market, too. It’s estimated almost 20% of Canada’s private, purpose-built rental housing stock is owned by institutional investors. These financialized landlords are motivated to extract as much profit as possible from renters, and we see this predatory behaviour reflected across the rental market. Average asking rents have reached all-time highs, jumping anywhere from 10 – 30% year-over-year in many municipalities across Canada. The result is that 1 in 3 renter households in Canada pay unaffordable rents. Without significant policy intervention, the proportion of renter households stuck paying rents they cannot afford will continue to climb for the foreseeable future. This should concern everyone, because once a household is paying 50% or more of their income towards housing costs, their risk of becoming homeless sharply increases.
This dire situation has led housing advocates to sometimes joke that the concentration of property and land ownership is ushering Canada into a neo-feudal economic order. Yet, with the troubling news that institutional investors are now buying up farmland at an astonishing rate and then leasing the land back to the farmers they bought it from, is it really that outlandish?
It’s clear Canada is at a crossroads on housing and property ownership. Our leaders are faced with a difficult decision. Will they allow the status quo to continue, protecting ownership and wealth concentration at all costs? Or will they be brave enough to meet the moment and take bold action to course correct? It remains to be seen, but we hope it is the latter.
