“Safer Than Gold”

Real estate makes up a disproportionately large part of the Canadian economy. Prices in the sector began to balloon in the early 2000s, but it was only in the last decade that the pace of growth really started to ramp up. This speculative property market is the result of a combination of factors. These range from lax regulation, favorable mortgage policies, and decades of low interest rates, to a lack of investment in public housing stock and weak public pensions.

The social base of support for Canada’s property market is surprisingly broad. Pension funds, landlords, private equity firms, and even amateur investors all buy into Canada’s unsustainable growth model.

A misguided collective sense of hope underpins this commitment. The assumption that this broad coalition shares is that Canada can continue to endlessly inflate property values as it has for the past two decades. It is of course true that real estate will remain an attractive investment so long as interest rates stay low and quantitative easing (QE) pumps up asset values.

The global pandemic briefly halted growth in Toronto’s property market. The city has since reasserted its status as one of the most unaffordable in North America. In Vancouver, landlords and developers often sell homes at levels well above the asking price.

Flipping, or reselling property for a quick return, has been one of the causes of the exponential rise in house prices. A recent evaluation of one Vancouver property revealed that multiple flips had resulted in a more than fivefold increase in its value in just fifteen years. It is no surprise, then, that in 2015, a major asset manager described Vancouver condos as being “safer than gold.”

It comes as no surprise that the political class has failed to respond to the crisis in any meaningful way. Every Canadian political party is home to landlords with investment properties. Even if many Canadian politicians didn’t have a clear financial interest in the current property system, the barriers to transforming the housing market would still be considerable. The property market is also tied up with people’s retirement savings, huge chunks of the economy, and the overall stability of Canada’s economic model.

Maintaining the Bubble

The same policies designed to protect the value of the property of ordinary people also serves to create an inflated market in housing. Michal Rozworski, a researcher and writer who has studied Canada’s housing crisis, has drawn attention to this strange coalition between big capital and homeowners. The problem, according to Rozworski, is that

those policies [designed to protect homeowners] also help fuel the market, and fuel all the investors who cash in on it. Because you’re protecting that whole market, you’re not just protecting the pension of some small-time investor — their one asset — but the millionaires for whom this is another passive income stream.

Policies that encourage homeownership are beneficial to the investor class. “If everyone sees themselves as a potential owner,” Rozworski says, “it’s easy to get them to identify with the kind of policy that ultimately benefits landlords and keeps the whole system unaffordable. Capital has gotten smarter.”

Real estate, like all sectors of the market, is deeply affected by domestic monetary and fiscal policies. Governments use both tools to create stable economic growth. While fiscal policy does this through taxation and spending, monetary policy involves managing the supply of money and credit through a central bank.

Rozworski notes that there are some crucial similarities between how the US government handled the 2008 recession and what is now happening in Canada:

What happened after 2008 was just inflation of asset prices because of QE. And because there was no fiscal policy, there were no real investment opportunities for banks or private capital. So a lot of capital was directed toward housing, art, superyachts. There’s a similar dynamic at play in Canada right now.

As part of the COVID-19 recovery plan, the United States has moved more toward fiscal policy to support its ailing economy. This shift is obviously “not enough,” as Rozworski observes. Nevertheless, it does show the United States takes its role as a “borrower of last resort” seriously. Its government is using this position to “create investment opportunities and give productive outlets to the capital sloshing around out there.”

Because fiscal policy can boost demand, it is able to “mop up capital from other places and increase returns to other parts of the economy.” Rozworski observes that this is particularly helpful in a place like Canada, which is largely deindustrialized and lacking in productive industries.

The Canadian government, in contrast to its US counterpart, remains reliant on “aggressive monetary policy.” Without a turn toward a serious fiscal policy, investors will continue to store cash in housing, further inflating a market that is already overloaded.

The Campaign Against Landlords

The hardships resulting from the pandemic have triggered a nationwide upsurge in tenant activism. Activists have fought and won major battles in Toronto, Montreal, Vancouver, and beyond. This wave suggests that, even if Justin Trudeau’s government is unwilling to break with neoliberalism over housing, the public is looking for change.

In Toronto, tenant and neighborhood organizations such as Parkdale Organize have pooled together resources and information under the “Keep Your Rent” banner. Neighbors have worked together to try to stop large companies like Starlight and MetCap from carrying out evictions and excessively increasing rents.

Large-scale public demonstrations fighting eviction legislation and demanding fairness have been commonplace. So, too, has direct action. Toronto activists even took over a vacant unit and turned it into a food bank.

Activists in Montreal have organized similar actions. Opponents of the housing system in the city are resisting evictions and the ongoing citywide inflation of house prices. Monika, a Montreal-based activist who works with Verdun, Ensemble Contre la Gentrification, explains that her organization has both long-term and short-term goals. These include fighting for the “decommodification of housing” and “helping neighbors avoid evictions, or pushing local politicians to pass real tenant protection bylaws.”

The campaign being waged by renters against the owners of Le Manoir Lafontaine is hard for passerby to miss: tenants have draped blue banners over their balconies that display messages of solidarity and resistance. Like many property owners in Montreal, the building’s owners are capitalizing on the suffering caused by the pandemic, targeting tenants for rental arrears and evicting them if they can’t pay.

Landlords then use these evictions as an opportunity to raise rents. They refer to the strictly cosmetic renovations carried out while their properties lie vacant as justification for these hikes. Across the country, activists have caught on to this trick and are fighting fiercely against these “renovictions.”

In Vancouver, activists from the Vancouver Tenants Union (VTU) have been fighting for tenants’ rights in the world’s second-least affordable city. “The pandemic has been the worst crisis of renters’ lives, and we are bearing the full brunt of the economic damage,” says Mazdak Gharibnavaz, a VTU organizer:

Almost 90,000 rental households across the province fell into rent debt when shutdowns were put in place by the [British Columbia] Government. While we initially fought for and won an eviction ban, the lifting of the eviction ban — and the refusal by the government to cancel this rent debt — means that these households have been at an increased threat of eviction for non-payment of rent.

The VTU is currently focusing on the fight against evictions and rental debt, but Gharibnavaz insists that we should not lose sight of the broader structural problems:

In the long run, we must end the financial incentive to evict renters from their homes. That means real rent controls that tie the increase in rents to the unit and not the tenancy. We need vacancy control to stop the incentive to kick out tenants by regulating the rent increase allowed between tenancies. And we must address the complete power imbalance in the relationship between tenants and landlords — the pandemic has laid bare the inhumanity of our for-profit housing systems.

Transcending the Market

What’s meant when we talk about the housing crisis depends on who you ask. Really, there are two crises — one caused by the unattainability of ownership and another caused by the unaffordability of rents. Although these problems are the result of the same root causes, the angle from which we approach the problem affects the way we understand what the solution is.

Rozworski believes that the severity of the affordability crisis will most likely lead us to revise our deep-rooted bias in favor of ownership. “In some ways, the ownership ideology needs replacing,” he says. “It’s not that surprising that owning is seen as the desired outcome for those that might conceivably afford it, because your alternative is super-precarious, insanely expensive rent.”

In his eyes, what the Left needs to do is to demand policies that respond directly to the horrible rental situation. This is what will really move the needle for the working class — not attempts to make home buying more equitable. Rozworski cautions that those on the Left “have to be clear that this is not about lowering expectations.” Rather, attempts to reform the housing market should aim to overcome “the binary of owning a home or being forever locked into precarious renting.”

What might this look like? “Fundamentally,” he says, “you have to change housing from an investment asset to a home for people.” Changing this underlying logic means discussing options like the large-scale construction of public housing. Achieving these goals will require a “strong tenants’ movement that has the power to reduce or stabilize rent, which is another way of saying that we need to reduce and regulate returns from housing as an investment.”

Solutions to the crisis must also include a plan for pensions. The need for a nest egg in retirement is a crucial driver of ownership and the hope for never-ending value inflation. As Rozworski notes, a lack of retirement security “pushes people into home ownership, because at least you have an asset to sell to downsize when you don’t have a sufficient pension.” To change this logic, the Left must undermine the structures that force people to see housing as a retirement vehicle.

For socialists, it is crucially important to aim for the twin goals of supporting tenant organizations and building movements demanding large-scale public housing. These struggles will only succeed if we can make public pensions more generous, while strengthening controls and regulations that will make real estate a less lucrative investment. Above all, we must assert that housing is a right, not a commodity.