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Despite cheap money, privatization made housing unaffordable, but organizing and public investment can reverse the tide
In 2021, after more than a decade in the same apartment in Toronto, my partner and I finally moved.We’d had enough of the landlord, who wouldn’t do repairs to the building’s outdated electrical system, and the city, which was useless at enforcing standards.
Luckily, the pandemic provided a temporary reprieve from soaring rental housing costs. We were able to pay a bit more for a better place with laundry, a dishwasher and a backyard.
But even though the rental market was leveling out, home prices were doing the opposite—they were soaring to new highs. With a cratering economy only kept afloat by government handouts—the lion’s share of which went to corporations—the Toronto housing market was going into overdrive.
Why? Because low interest rates and post-2008 investment cash had created a feedback loop that kept pushing prices up. It all comes down to Canada’s free-market approach to housing. After decades of bad policy that kept demand high and invested next to nothing in public housing, there seemed to be no limit to how inflated the housing bubble could become.
The result is the current housing crisis, which sees 235,000 Canadians go without shelter at some point over the course of any given year. The solutions to the crisis are well understood by housing advocates, but finding the political will to overcome the forces that benefit from the current system will be a challenge.
From infrastructure to investment
Canada used to build a decent amount of social housing. By ensuring that low-income renters had affordable options, the government kept the market honest and stopped housing speculation from spiraling into feedback loops.
Until around 1993, Canada funded the construction of 10,000 or more social housing units in a typical year.
So what happened in 1993? That’s the year the federal Liberals were elected on a platform of progressive promises. But once in power, they pivoted to a policy of fiscal austerity. Finance Minister Paul Martin slashed housing spending to almost nothing.
The construction of housing had been completely privatized.
Prior to 1993, housing policy involved billions for housing development, mostly through government incentive programs that made it easier to build rental housing and affordable housing options.
Activists at the time warned that the move would cause a housing crisis. They were right, but the pain wasn’t felt immediately.
The 2008 crisis gave investors an edge
Everything changed again in the 2000s. Canada’s housing market started to rise in tandem with the U.S. market, which as we know was on its way to a massive, hot, speculative investment bubble.
Borrowing money was cheap thanks to low interest rates. So billionaires, banks and other institutional investors took on a lot of debt to invest quickly in assets around the world that would rapidly increase in value. Much of this “hot” money flowed into U.S. real estate and created a big bubble—meaning prices kept going higher than things were actually worth.
In 2008, interest rates started going up. Many of the home buyers—who could only afford mortgages at low interest rates—were suddenly unable to afford the higher rates. And equally suddenly, home prices stalled. The now-insolvent homeowners couldn’t sell.
This caused a major collapse in the U.S. real estate market, which in turn destabilized the global financial system.
In the United States, housing prices collapsed and realigned with incomes.
But something else happened in Canada. Housing prices didn’t collapse—they went into overdrive. And not just in the big markets—small towns far from Toronto and Vancouver eventually became part of the bubble.
Low interest rates, high demand
From 2008 to 2022, interest rates hit rock bottom and stayed there. This fuelled an explosion in housing prices in many countries, including Canada.
These low rates fuelled demand, which made the housing market hotter and hotter. More importantly, investors representing massive pools of capital jumped into the market as prices rose, pushing prices up even further.
The combination of banks, billionaires and investment funds that drove the housing crisis can be collectively understood as ”the giant pool of money.”
The giant pool of money refers to investment dollars that are sitting around waiting for a return. Billionaires and institutional investors want to see profits. So if you’re managing a billionaire’s assets, you need to be getting into bubbles early and getting out just in time—whether that is tech stocks in the early 2000s, Collateralized Debt Obligations (CDO) in the U.S. in 2008 or Toronto and Vancouver condo units in 2020.
The giant pool of money was massively expanded by low interest rates and economic relief measures that made trillions available at effectively zero interest to institutional players. They put borrowed money into the stock market, crypto, real estate, and anything else that could net a return.
Billionaires around the world could borrow billions more for peanuts, invest that money and pocket the profits. All they needed was a new bubble.
Meanwhile, developers had started building to suit the needs of speculators instead of actual people looking for homes. As an analyst for a U.S. real estate data giant told CBC in 2020, Toronto has seen a boom in what he calls “shoe box condos”—units that are built small because their primary purpose is to be an investment, not a place to live.
So despite what looked like massive new construction on paper, many of the new “homes” didn’t meet human demand, but were instead snapped up as investment commodities.
Even in times of potential crisis, like when the COVID-19 pandemic began in 2020, the Bank of Canada kept demand high by keeping interest rates low.
This happened around the world, and not only during the pandemic. For years, every time governments tried to raise interest rates, markets in the U.S. and globally would slump into crisis territory and governments were forced to reverse course. Private capital, many observed, forced the government to keep the cheap money flowing.
And flow it did. A number of leaked documents show billions secretly flowing into real estate markets.
“Heads of government, oligarchs, business tycoons, ruling families and a Middle Eastern monarch are among the anonymous owners,” of billions of dollars of U.K. property, according to an investigation in The Guardian. Canadian investors are involved overseas as well, backing a fund that bought up “vast swathes” of properties in Ireland, jacking rents in the process.
Before 2022, a variety of causes for Canada’s long rise in housing prices were put forward: immigration and demographics, money laundering, the overall lack of house building and housing supply, among others. But it was the rise in interest rates that finally stopped housing prices from growing—and ended the debate about what was causing them to rise.
When rates were raised in 2022, it caused a spike in foreclosures as some buyers stopped being able to afford their mortgages due to increased monthly payments.
Hot Canadian money
Canadians don’t think of themselves as participating in the giant pool of money. “Hot money” usually conjures up an image of U.S. or European interests or not-so-subtly disguised laundering from the States, China, Russia or Iran.
But make no mistake: plenty of this crisis-inflaming capital is coming from inside the country. And the enabling of Real Estate Investment Trusts was a key part of it.
Real Estate Investment Trusts (REITs) are a key mechanism for speculators. Their use has exploded in the last 20 years.
Data released by Statistics Canada shows that multi-property owners have exploded as well, with about 30 per cent of the housing stock in Ontario and British Columbia being owned by owners with at least one additional property.
In addition to REITs, other large Canadian actors have pursued profits from the housing market on the scale of hundreds of billions of dollars. Large pension funds, private equity firms and others have been gobbling up Canadian real estate during the same period.
And those are the actors making money off the housing market legally. There’s also an estimated $35 billion in Toronto-area real estate that show risk indicators for money laundering.
What about people who need housing?
Speculation didn’t do much for the supply of real housing for real people who need it. But if the U.S. is any indicator, reduced home buying and a temporary crash in prices would mainly give investors a chance to tighten their grip on housing for future profits.
Many have been clamoring for a crash, hoping it will mean they will be able to buy a home one day. But that’s not quite how it works.
Economic crashes don’t tend to fall on the large landlords and developers, who typically pass burdens to renters and first-time buyers however they can. Many people who work for a living would lose their homes due to foreclosure, lose their jobs due to recession, or both.
Tenants in provinces without rent control could see increased rents as landlords pass on higher monthly mortgage payments. Institutional investors may take advantage of lower prices to take homes off the market and seek higher returns by renting them out. And high interest rates will keep even better-off renters from buying their own home.
The ratchet of market forces, in other words, tends to go in one direction. Unless collective action shifts the playing field.
Serious housing advocates know the solution: bring back the government role in building and supplying housing—specifically affordable housing in the form of social housing and co-op units.
The problem: none of these supply programs are on the table. The Liberals and Conservatives continue to serve Canada’s corporate and billionaire class, and while some of the other parties have suggested big investments in housing, none of that has been put on the table by elected governments at the scale it is needed.
The appearance of action on the housing crisis
This has posed a dilemma for Canadian governments: everyone knows the housing bubble is out of control, making housing unaffordable for most Canadians. However, neither Liberals nor Conservatives are willing to break up with lucrative donor bases made up of real estate owners, developers and landlords. Those interests are just making way too much money, and are willing to lobby hard to keep the profits flowing.
The politicians and real estate owners are sometimes one in the same—at least 20 per cent of Canada’s Members of Parliament own rental or investment housing. Both the federal housing minister and the government’s federal housing advocate are landlords.
But political parties have to seem like they’re doing something.
The 2021 election saw the Liberals promise 20,000 new affordable rental units over four years. That amount would not register any impact on prices at all. Conservative proposals, meanwhile, mostly copied the Ontario government: billion-dollar giveaways to corporations and developers through the development of choice federal lands, encouraging more hot money to enter the market.
Both parties proposed a loophole-heavy ban on foreign investors from buying homes in Canada for two years. But while secretive foreign billionaire cash is a major problem, it takes focus away from Canadian investors.
Squatting on the future
In the 1940s, Canadian veterans—fed up with the lack of housing options after a brutal war—occupied the barracks across from 24 Sussex Drive demanding it be turned into affordable housing (which at the time was defined as costing less than 20 per cent of income). They also occupied hotels in Vancouver with similar demands.
Those efforts launched the Canadian Mortgage and Housing Corporation (CMHC) and ushered in a relative golden age of affordable housing development in Canada. By the 1980s, the CMHC was building over 25,000 units a year.
Today, groups across the country are pushing to fix the housing crisis. These efforts typically start with solidarity actions to stop evictions, get repairs made, or fight rent increases. But tenant organizing, strikes, occupations and litigation are going beyond defensive actions—not unlike 80 years ago.
Grassroots organizing efforts have racked up some real wins. Rent controls have been made stronger in Ontario and B.C., while B.C. has launched comparatively aggressive plans to build and buy up housing. Quebec continues to build dynamic grassroots collective support via strong housing committees and organizing collectives like RCLALQ and FRAPRU, who get provincial money to organize across the province.
At the provincial and municipal level, various governments have been pushed to improve a host of different tools to improve housing like vacancy taxes, zoning changes and affordable supply programs.
The federal government has launched a return—nearly 30 years after Liberals slashed housing spending—to building homes again. It’s a weak start with almost meaningless targets, but a qualitative change nonetheless: the National Housing Strategy was the first return to ongoing federal action on housing in 25 years.
That gives social movements something to build on. None of this progress would have happened without the voices of tenants and advocates calling for change. It’s clear that Canadians are fed up with the disaster of the privatized market—housing is frequently cited as the number one issue facing the country.
Like in the 1940s, nothing can be taken for granted. The only way to make change is for tenants and activists to keep organizing.
