April 9, 2020
A version of this article was published in Passage.
With the economy grinding to a halt due to the social distancing measures and emergency lockdowns imposed in order to fight COVID-19, more than a million of Canadians have lost their jobs and are filing for employment insurance.
This poses a unique danger to tenants. A half century of housing and tax policies that discriminate against tenants has highly stratified who rents and who owns their accommodations by income — as of 2016, the average household income of Canadian homeowners was nearly double that of renters.
Many tenants are now, or soon will be, having to choose between buying groceries and paying rent, as the government’s support programs exclude a great deal of people. Moreover, while many homeowners are being allowed to defer their mortgage payments, tenants have yet to receive any targeted support, other than formal evictions being put on hold in much of the country.
A pause on formal evictions, however, isn’t good enough. Many evictions happen informally, through harassment, intimidation or a simple desire on the tenant’s part to move on and not get into a protracted fight. Landlords as a class aren’t renowned for their charity, and we’ve already begun to hear about tenants being threatened and locked out, including a nurse working 15-hour days to fight COVID-19.
Many people are at real risk of finding themselves homeless during this crisis. This matters even more than usual because, due to decades of inaction, our homeless population is in greater danger due to COVID-19. Our homeless shelters are chronically overcrowded, and it’s impossible to effectively maintain social distancing. As more homeless people test positive for COVID-19, it’s even crueler than usual to be pushing people onto the streets.
This brings us back to landlords. As the rent strike spreads from the residential to the commercial and retail sector, and as the Airbnb short-term rental market has effectively been destroyed by travel restrictions, many landlords are also seeing their income evaporate overnight. Given that in the past few years real estate investors were strongly incentivized to load up on debt and hold over-leveraged bets, many landlords will soon find themselves insolvent and unable to make good on their mortgage payments. Before long, a sufficiently drawn-out rent strike will cascade through the economy and turn into a widespread consumer and commercial debt default. In other words, if things get bad enough for enough people, a short time from now we’ll have a real estate market crash and a financial crisis to compound our trouble.
Those of us watching the overheated real estate markets in Vancouver or Toronto may feel a twinge of schadenfreude. Short-term rental platforms have removed thousands of units from our rental markets, and we’re better off without them. There’s not a lot of sympathy to go around for the Airbnb speculator. Regardless, these are real problems that will prompt the government to act: Eventually, someone is going to end up getting a bailout. The issue for those of us on the left is who, exactly, will be on the receiving end, as modern real estate financing depends on a long chain that stretches from a tenant all the way down to mortgage securities markets.
This crisis presents a unique opportunity. If and when the time to bailout the real estate market comes, we will be presented with a choice in how to use public funding. The default choice is to prop up the mortgage securities market — as we’ve already begun to do — let smaller landlords hang out to dry, and sit back and watch as large, well-capitalized, corporations buy up their properties on the cheap. We’ll indirectly bailout the financial system and allow inequality to worsen.
Instead, we should nationalize landlords’ housing units.
The bailout could work like this: any residential property owner can sell their units in exchange for their accumulated equity plus inflation. The provincial or federal government would assume their debts, and continue housing their tenants, if any. Existing tenants would avoid being evicted during this crisis, and units that are currently empty can be provided to tenants on social housing waiting lists. This would also guarantee the financial system, and allow scores of landlords to avoid fire-sales of their assets. More importantly, this could add thousands of sorely needed affordable social housing units to our housing mix, and begin to correct decades of policy mistakes.
Social housing is an essential part of our social welfare system. Being homeless causes so much instability that it effectively locks you out of both the formal economy and many government services, as well as the labour market income needed to access the vast majority of housing in Canada, which is private.
The government used to understand this conundrum, and in the post-war era we began to significantly invest in the construction of social housing: From the mid-1960s to the mid-90s, social housing accounted for about 10 per cent of all new housing.
That changed in the early-to-mid 1990s with governments at the federal and provincial levels, which rapidly divested and ceased building and supporting social housing. For the last 25 years we’ve been starving the social housing sector, and watched as waiting lists lengthened and rates of homelessness exploded.
Tenants need to be protected from eviction, and to prevent them from going bankrupt by extension we must also help their landlords. But public money ought not go to private profit. By nationalizing the assets of soon-to-be insolvent landlords and Airbnb real estate speculators, we can ameliorate a costly market crash, prevent economic inequality from rapidly worsening, prevent more tenants from becoming homeless, take currently homeless people off the streets by housing them in now-empty short-term rental properties, and restore a crucially needed sector of our social welfare system.
The time to act might come sooner than you think. We should be prepared.