Monied Interests

Definition

The financialization of housing is the concept whereby houses, mortgages, apartments, condos, or other forms of accommodation are treated as assets for financial investment as opposed to being valued based on their use as shelter for someone.[1] Financialization in Canada (and in most developed countries globally) has helped transform the primary function of housing away from a place to live and towards financial investment for real estate operating companies, private equity firms, travel companies, asset managers, and other investors.

The commodification of housing similarly prioritizes a property based on its value in exchange as opposed to its value in use, as a home.

 

Why are we talking about this for Calgary?

The financialization of housing includes en masse purchasing, by large corporations, of housing or large-scale property developments, which is then marketed towards specific demographics for the purpose of profit generation. Some major examples of this include seniors living facilities or nursing homes in which real estate operating companies capitalize on a particularly vulnerable group with fixed incomes, student housing often called purpose-built student accommodation which capitalizes on rapid turnover of students and the ability to charge by the number of beds versus number of units, short-term rentals for housing tourists which capitalize on high nightly rental fees, or market housing for the general public which capitalizes on lack of rent caps and low vacancy rates.

There is also the phenomenon within the industry for en masse purchasing of housing the company considers “undervalued.” These purchases are then re-positioned as higher-end rentals, with the goal of generating a return on profit and often with the impact of displacing low-income and marginalized groups.

Prioritizing profit and shareholder value for investors necessarily leads to the primary objective of housing – to ensure someone has a place to live – becoming an almost irrelevant side feature. When your goal is to increase the price of a product or reduce the amount of your expenses to create more profit, you are operating in direct opposition to affordability. Prioritizing profit also allows things tangential to housing – urban design, climate response, culture building, community programming – to be seen as “luxuries,” and “value adds” as opposed to basic accommodation needs or critical city and community infrastructure. Effectively, because the things that are most profitable are not necessarily the things that are best for a city’s population, continuing to allow the financialization of housing means we are deprioritizing civilian needs for the sake of profit – and not even profit for all but profit for a select group of people – those who can afford to own homes, investment groups who buy up rental properties, or private landlords who use this basic need as passive income.

In 2019, Canada passed the right to adequate housing as part of the National Housing Strategy Act. What is particularly important within the Act is its adoption of the right to housing as defined by international law, which includes minimum criteria: “security of tenure; affordability; habitability; accessibility; a location proximate to opportunities and services and free from danger; cultural adequacy; and availability of services and infrastructure”[2] This is an important distinction because many local housing strategies focus housing assessments on suitability as it relates to building standards: size compared to family unit, and overall affordability. International law goes further, and as a result, provides a more accurate description of people’s housing needs – categorizing accessibility, security, location, and culture as not just necessities but as rights. Additionally, according to international law, nation-states are meant to progressively realize the right to housing, which means both positioning resources to realize this right and preventing measures that create barriers to this right.[3]

Unfortunately, although this act was passed nearly 6 years ago, we aren’t often seeing the through-line of the international definition of housing in our existing housing supply, in provincial polices, in urban planning, or generally in the housing conversation. We continue to see profit and monied interests drive much of housing planning and development. Take, for example, urban sprawl – which necessitates additional strains on city infrastructure often without the adequate taxbase to offset the strain (wastewater management, garbage disposal, snow clearing, emergency services, traffic pollution…etc.) but which provides developers with significantly more land in which to build additional properties and increase their asset portfolios far more than adding infill properties would. Take, for another example, Calgary’s rezoning amendment, which is a blanket, city-wide classification of all existing residential land uses to a base residential district to allow for greater housing variety in all communities – a win, by all accounts, for increasing housing development across the city, but which a huge portion of municipal candidates for all wards are campaigning on repealing.

We are big supporters of many of the initiatives the City of Calgary has undertaken (including rezoning) to increase market and affordable housing supply, incentivize developers, redistribute city land, and reduce wait times for permitting etc. But where we still see the housing conversations revolve around investment opportunity, property values, neighbourhood character, sprawl, and reduced density is in everyday conversations, in campaign policies, in community engagement surveys. This, even as we also hear more and more complaints about the impact of homelessness and street-level drug use and mental illness on these communities.

 

What part of the housing puzzle does financialization address:

In another of our blog essays, we talk about the recommendations by the Canadian Human Rights Commission for the government to limit the impact of financialization on the housing sector. You can find the official document here and our other essay here. But in this essay, we want to talk about our power as a voting class to elect people who are both aware of how financialization is creating long-term housing barriers for huge percentages of the population and are willing to use their leverage as a government body to better regulate the industry. Individuals can’t do anything about the financialization of housing except vote for elected officials who don’t keep pretending that it’s in our collective best interest to allow housing prices to continue to inflate way beyond wages.

When we talk about voting against our own interests, we’re talking about how often we as a voting class vote for people and policies that do not benefit the majority of the population but a few select people whose income and wealth typically insulates them from the consequences of housing poverty.

Voting against housing solutions like affordability, social housing, or increased density because you like where you live and you are confident you will be able to support your kids, or you are sure your kids will be able to find the same success as you, is what investors would call risky. Voting against housing solutions because you’re confident you have enough money to find housing regardless of the consequences of commodification is risky. Voting against housing solutions because you believe you’ll be able to live in your home for the remainder of your life or because you have enough money to move into a facility or because you have kids you believe will be able to care for you, is risky. Voting against housing solutions because your neighbourhood has a certain “character” and you think the only thing threatening that is increased density is not only risky, it suggests a misunderstanding of how communities evolve, develop, and deteriorate.

Every single one of us could lose our housing if hit by the wrong circumstances.

Maybe you have enough money to get housing somewhere else, or maybe you have enough of a support network to not end up homeless, but rising costs of living, climate emergencies, personal misfortunes like the death of a partner or health deterioration means no one is bulletproof.

There will be changes to housing whether we want there to be or not. Fighting affordable housing or supportive housing programs, working against rezoning, campaigning for more short-term rentals, and commercial spaces for economic reasons only means we’re kicking the can down the road. Continuing on the path of housing financialization means more poverty, more homelessness, more public mental health crises, more addiction, and overall more community issues. But we are not powerless. We have control over whether we help guide the changing landscape of our cities now to create better outcomes for all citizens or whether we wait until the crisis forces those changes upon us in ways we don’t yet know or understand. Choosing to vote for someone in favour of affordable housing, rezoning, social services, and housing regulations means existing communities and neighbourhoods will change for the collective better.

And that’s a good thing! We believe, as a community, that we DO owe each other something. The idea that your rights are infringed upon because you have to abide by the annoyances, inconveniences, or frustrations created by dealing with your neighbours, the homeless, the general public  – this is the price paid for all of the benefits of living in a society – public services, community, culture, socialization, supports – the idea that we don’t owe each other anything is the kind of rhetoric that gets created during times of uncertainty – the instinct to protect yourself and your loved ones over any other person or group because you feel as though if you don’t do it, no one else will. Community has always, and will always, be the most effective way of shouldering the collective challenges of living.

Sacrificing one perceived, limited good (quiet streets or pretty views) for a widespread, tangible good (less homelessness, fewer mental health crises, less open drug use) is a critical part of creating a society that takes care of all of its citizens. But when we stop thinking of collective good, when we allow profit to steer future development, when we vote against public interest out of spite or fear, we play right into the hands of those who get all the benefits and experience none of the consequences of rampant housing poverty in the city.

One of the main driving forces of the housing crisis in major cities around the world has been the financialization of rental housing, seniors’ housing, multi-generational family housing, social housing, and student housing. Governments at all levels have the capacity, the tools, and the power to decrease the power of the financial sector, reduce lending to financialized landlords and developers, remove tax incentives for Real Estate Investment Trusts, and regulate investment funds. [4] They have the capacity to improve the quality of life for all citizens and, as a voting class, we are at a critical juncture to be able to elect people who believe fundamentally in housing as a human right not as a means to investment profit.

Check out the rest of the content on our Vote Housing page (https://alphahousecalgary.com/votehousing ), where we have a lot of great information and commentary about housing in Calgary

 

[1] THE FINANCIALIZATION OF HOUSING IN CANADA A Summary Report for the Office of the Federal Housing Advocate Martine August June 2022 https://publications.gc.ca/collections/collection_2023/ccdp-chrc/HR34-7-2022-eng.pdf

[2] https://laws-lois.justice.gc.ca/eng/acts/n-11.2/FullText.html

[3] https://publications.gc.ca/collections/collection_2023/ccdp-chrc/HR34-7-2022-eng.pdf

[4] https://www.policyalternatives.ca/news-research/financialization-of-housing-must-be-confronted-d1/