A Rent Strike Was Inevitable
By Lou Seltz
With government orders to ‘stay at home’ since March, housing is at the very heart of the COVID-19 crisis. Yet while mortgage freezes have ensured homeowners will be able to follow these rules, the Canadian government has done almost nothing to protect renters.
Rent strike tags are growing more common across Montreal.
This is clearly a big deal for Montreal—nearly two-thirds of households are renters in the municipality. Many of these tenants work in the service and retail industry, the first to be let go in the crisis. But even across North America, the proportion of tenant households are growing as more are priced out of homeownership. Roughly a third of these tenants weren’t able to pay rent the first week of April in either the US or in Canada. Even as governments scramble to find shelter for homeless populations to help curb the spread of the virus, a new wave of unemployed workers are forced to sleep on the streets, no longer able to afford rent.
The Canadian government announced it will be providing rent relief to businesses who cannot afford to pay their landlords, but says that support for household rent will come in the form of general income payments. The Canada Emergency Response Benefit (CERB) has the least restrictions on eligibility compared with other support, but still does not cover all households left without income in the crisis. Even for those who do qualify, CERB’s monthly payments of $2000 won't come close to covering rent for many tenants. British Columbia and PEI have implemented rent supplements separate from income assistance, but these are also not enough to cover most rental payments. There is a pause on eviction in most provinces, but not on rent payment, meaning that tenants can be evicted once the moratorium is over, unlikely to suddenly be able to come up with extra funds to backpay missed rent.
These policies are inadequate because they don’t admit that Canada was deep in a housing crisis—and faced record levels of household debt—long before the pandemic began. The roots of the crisis can be traced back to the 1980s and 90s, when the government began rolling back federal funding for social and affordable housing as well as cutting social security expenditures. Instead, it began to promote homeownership as a responsible way to save for retirement. At the same time, Canada implanted new federally-insured mortgage-backed securitization (MBS) programmes, making mortgage-lending interest one of the most profitable operations for commercial banks. By reducing the risk for investors, MBS increased global investment in mortgages and reduces mortgage rates. Government promotion of MBS as an investment tool for banks, together with pushing homeownership as an investment tool for households, began to drive up the cost of housing.
Government policy has also allowed landlords to become financialized, with real estate becoming an increasingly important method of building wealth for institutional investors. Rather than being owned by an individual landlord or housing company, ownership of apartments is increasingly spread among a diffuse array of investors through securities. Private equity funds, real estate investment trusts (REITs), and asset management firms use homes as financial assets that can be traded on international markets, linking global capital with local housing markets. While it is not new for landlords to try to maximize profits from tenants, financialized landlords focus on investor yields exclusively.
Both trends—the financialization of homeownership and the financialization of the landlord—have marked an overall shift from valuing housing for its ‘use value’ as a social good, towards its ‘exchange value’ as a commodity. These dynamics have fed into each other, with increasing overall demand for real estate investment driving up housing prices and creating the perception for speculative investors that real estate is a high-performing financial asset, and for households that is a necessary investment for financial security into old age. Unfortunately, this type of policy-created housing crisis is not unique to Canada. A 2017 UN Human Rights Council report traces how by “providing tax subsidies for homeownership, tax breaks for investors, and bailouts for banks and financial institutions,” countries around the world “have subsidized the excessive financialization of housing at the expense of programmes for those in desperate need of housing.”
As it stands, tenants could face an even tighter housing market after the crisis. New construction is stalling, which could have a significant effect over time. On the other hand, house prices are falling as people are less likely to move due to logistical constraints falling income. While this should theoretically make housing a less desirable investment, housing has been considered the safest investment for decades—even during the 2008 crash, real estate speculation by financialized investors surged. As real estate prices drop and central banks keep interest rates low, institutional investors are known to use such moments of crisis as opportunities for expanding their housing portfolios.
While the inescapability of neoliberal capitalism has come to be taken for granted in North America, the very fact that housing became commodified through specific policies indicates that there is a solution to the housing crisis. A report from the Canadian Centre for Policy Alternatives urges that rent subsidies be increased, landlords given access to business aid packages, and unemployed, low-income households should be exempt from rent in government housing through transfers to municipal governments. Rent subsidies ensure low-income households stay housed during and after the pandemic, allowing income supplements to be spent on other necessities such as food. Even before the crisis, half of Canadian renters had less than a month’s savings, meaning that most additional support tenant households receive will be spend almost immediately, serving as the most efficient type of economic stimulus during the expected post-COVID recession.
Governments must also immediately expand the supply of public housing to ensure homeless and precariously housed populations have continued access to housing. This could be done quickly by purchasing vacant buildings safe for emergency housing but would require cooperation from all levels of government. In the long term, governments should also revamp funding for social and affordable housing, which has the added benefit of boosting employment in a downturn. Ensuring housing markets are healthy enough that renters will be less vulnerable in another crisis will require a seismic reversal from decades of policy that promoted the financialization of housing.