Redefining the Canadian housing paradigm - Part I

[00:00:05] Gabriel Miller: Welcome to the Big Thinking Podcast, where we talk to leading researchers about their work on some of the most important and interesting questions of our time. I’m Gabriel Miller and I’m the President and CEO of the Federation for the Humanities and Social Sciences.  

[00:00:21] The roots of Canada’s current housing crisis woes go back decades, but the problem has deepened since the onset of the Covid-19 pandemic.

[00:00:30] Today I am joined by Nemoy Lewis, Assistant Professor at the School of Urban and Regional Planning at the Toronto Metropolitan University to discuss Canada’s affordable housing crisis.

[00:00:43] Gabriel Miller: Well, it's wonderful to be with you today. And thank you so much for being able to make the time. I want to ask you a little bit about yourself. And in particular, I want to ask you, when do you remember first thinking that housing was an issue that you'd be interested in studying?

[00:01:02] Nemoy Lewis: So, this all really started probably in my, my third or fourth year of my undergrad in where I was taking a post war suburbs class. And I was interested to understand a bit more about housing and its origins and the policies that, that are responsible for the allocation of housing.

[00:01:25] While I was taking this course, there was a lot of images that were, you know, being placed on the slides of the lecture. And I remember, like, raising my hand and asking a question to the professor - and this is, again, this is more of like the post war suburbs, right - and I remember asking the professor: “where are all the Black people in all these pictures that you're showing?” I've just seen, you know, a lot of white families standing in front of the homes. And I remember her response was "you're jumping ahead". And that then triggered me to want to learn more about housing.

[00:02:10] And this was happening at a time where, around the 2008 housing crisis, at the time that there was a lot of folks that were losing their homes, and we knew very little about those experiences. We knew a lot about, you know, where folks were losing their homes. We learned a lot about the failures of policy, the failure of government.

[00:02:31] But we knew very little about those lived experiences. And I remember asking the prof, you know, if I could come and see her during office hours and she was like, yeah, you know, and we had a good conversation about the history of housing for Black Americans.

[00:02:48] And I was very astonished about the things that she was sharing with me. And it triggered me to do a bit more research on the topic itself. And then following that research, I was like, okay, you know what, I want to study more about, those lived experiences for African Americans in the U. S. and not situate the, the 2008 housing crisis as this sort of new and recent phenomenon, but situate it in a longer history of discrimination and racism African Americans have experienced, in pursuit of home ownership or, acquiring, housing.  

[00:03:24] Gabriel Miller: You know, it's interesting to think about that 2008 housing crisis. And I hadn't been thinking about it since you just mentioned it, but obviously a huge flurry of concern and discussion around housing, how it was being paid for, how it was being financed at that time, we're now going through another period, it feels like a really intense anxiety and public discussion around housing.

[00:03:51] I wanted to ask you how you characterize the crisis we're seeing right now, what are the symptoms of that crisis? And also, how do you put it into a historical context? Where do you see the roots of the problems we're observing?  

[00:04:07] Nemoy Lewis: I definitely think that we are in a crisis, but I'd rather characterize it as a housing emergency. And the reason why I say that is, I think that the situation is become very dire in where a lot of folks have been, you know, have largely been unable to afford housing for a very long time. And housing has become a huge problem in terms of cost and as such, you know, there's a lot of policy that have been implemented to sort of address this crisis.

[00:04:40] But in turn, what I found was that, a lot of these policies have sort of helped to exacerbate the problem as opposed to solving the issue. And, you know, what is happening across the city is you have a lot of folks who are having to make difficult decisions that they've never had to make.  

[00:05:00]  And what I mean by that is, folks are skipping meals and folks are cutting back on groceries and also folks are relying extensively on food bank because of the rising cost of shelter in major urban centers across this country.

[00:05:16] And as a result, folks are not living a healthy lifestyle, and as a result of these sacrifices that folks are making in order to remain housed, it begs the question then, how are folks surviving? And then this leads to a much bigger problem that's happening in specific communities in where folks are having to rely extensively on payday loan services in order to make ends meet.  

[00:05:44] And so folks are becoming further indebted in order to even remain housed or to be in close proximity of employment, in close proximity of, care services or social services, or even, in close proximity of family.

[00:06:02] I think this is becoming a big problem. and I think, you know, we need to change or have a paradigm shift in the way that we view housing.  

[00:06:09] Gabriel Miller: It sounds like you're saying not only do we have an issue around the affordability of housing, but that that issue is at the center of a, a broader affordability emergency for people that's affecting what they eat, their emotional, mental health, no doubt, their sense of security, their relationships.

[00:06:30] Is that a fair, understanding of what you're saying?

[00:06:32] Nemoy Lewis: Yes. you know, and I think even to, to delve into the psychological standpoint, there are a lot of folks who they want to do better, do better in terms of, you know, providing their children more specifically with better living environments. But because of how cost prohibitive this market is, a lot of folks are feeling like, you know, they're either failing as a parent to providing their children with a safe living environment.

[00:07:02] And that being the fact that sometimes like, eveparn though the housing is vastly unaffordable, some folks are finding that they're living in very uninhabitable conditions in where they're paying exorbitant rents and the apartments are overrun by infestation and, you know, some of the issues with respect to mold or other physical deficiencies, that are limiting the enjoyment of those particular rental units or properties.  

[00:07:30] Gabriel Miller: You've talked about the need for a new paradigm around housing, and I want to come to that, but before we do, I want to give you a chance to expand on a comment you made where you said that you feel like, government policies in many cases, perhaps even intended or sold as a solution to this housing emergency have been exacerbating it, have been compounding the emergency.

[00:07:55] Can you give us an example of the sort of policy you have in mind when you say that?

[00:08:03] Nemoy Lewis: The provincial government, made a number of changes to the landlord or the Residential Tenancy Act.  

[00:08:09] This is in Ontario, I should say. And one of those changes was the introduction of vacancy decontrol. And there was also the introduction of above guideline rental increase, which allows a landlord to recoup any capital expenditure that they've put into the property.

[00:08:28] And this particular policy allows a landlord, if approved, they can increase the rent by a maximum of nine percent spread out over three years, and not inclusive of the provincial annual guideline increase. And so these policies were introduced as a way to incentivize developers to build more purpose built rentals in the market.

[00:08:55] But in turn, developers didn't build more purpose-built rentals. In fact, they built more condominiums instead of purpose-built rentals, but in turn what these two policies enabled was, for landlords to essentially: one being vacancy decontrol, which essentially allows a landlord to charge whatever the market can bear upon a unit turnover.

[00:09:21] And so this policy helped landlords essentially force out tenants who are protected under rent control in order to bring in more affluent or higher income renters who can help them in their profit maximization strategies. And then you had the above guideline rental increase, which was supposed to encourage landlords to reinvest their profits into the properties into: one, extending the life of the property itself and two, improve the quality of living. But I think one of the things that the government, you know, didn't see coming was the fact that how this particular policy could be used as a part of the landlord's profit maximization strategy and a way to circumvent rent control in where, for instance, the provincial guideline increase for next year is 2.5%.

[00:10:21] So if a landlord was to be approved for an above guideline rental increase, that means that for that next year, for tenants residing at that property, their rents would increase by 5.5%. And we know that wages and salaries are not increasing at the same rate.  

[00:10:39] Gabriel Miller: It was fascinating reading about this before the conversation today, because I knew that there were caps on annual increases in rent, but I hadn't known that those caps could be pushed up if a landlord was making some kind of investment in the property and it's really clear I think how that could result in a situation where you start having really unsustainable annual increases in in people's rents and how that could make a building and then a neighborhood and a community unaffordable this really leads in to a broader topic that you've been looking at, which is the, the financialization of housing generally.

[00:11:22] And I wonder if you could expand a bit on that idea and how it's been playing out in Toronto and Ontario and Canada in, well, really, I guess the last 20 or 30 years.

[00:11:38] Nemoy Lewis: Okay, very good question. So, there's been a lot of debate at whether financialization is a real thing. A lot of other folks have talked about financialization as this political ideology to sort of destabilize the capitalist society within Canada. You know, from my perspective, um, yes, it's a, it's a real thing.

[00:11:59] And so there's been a lot of debate as well around what is a financialized landlord, and so as a result we came up with a definition in describing what is a financialized landlord to build on that clarity of who these types of landlords are. And so we define financialized landlord as a purchasing company either privately held, so such as like an asset manager, or a publicly traded company such as a real estate investment trust, which acquires rental properties at scale.

[00:12:31] Scale is what we argue helps to differentiate these sort of landlords from the everyday profiteering landlord, that's operating the market, but it's also, their access to lawyers and portfolio analysts that help them in their profit maximization strategy, but also to make sure that these profit maximization strategy are legal.

[00:12:52] And essentially these types of landlords apply financial logics, metrics and priorities to generate what we call lucrative returns for their shareholders, unit holders, and investors.  

[00:13:05] Gabriel Miller: Let's talk for a minute then about, how this combination of policy decisions and a growing financialization of housing then play out in specific communities. Let's think of a Black, or predominantly Black community in a Canadian, major Canadian city, perhaps Toronto. Just describe a bit what the experience of these policies and this trend playing out in those communities is like.

[00:13:33] What effect is it having on, on the places people live, where they raise their children, and what their communities look like?

[00:13:41] Nemoy Lewis: So, very good question. So, one of the things that we did to understanding the impacts of these particular landlords that I described earlier on specific communities in the absence of having ownership data for all the rental properties across the city. We relied extensively on multifamily acquisition data over the last 27 years.

[00:14:06] So, we examined, multifamily acquisition data in the city of Toronto, from 1995 to the end of 2022.  

[00:14:15] Gabriel Miller: So, this is the acquisition of apartment buildings.  

[00:14:19] Nemoy Lewis: Yes, that is correct. So these are the acquisition of apartment buildings and we, there wasn't any study that we've seen that has extensively analyzed the housing ecosystem to this degree in where understanding who are the buyers, who are the actors that are acquiring rental properties in communities across the city.

[00:14:42] And so we were more specifically interested in Black Canadians. And the reason why we were interested in Black Canadians really stemmed from, a report that was released by the Wellesley Institute that found that, in census tracts where Black Canadians were the majority or where Black Canadians, accounted for 36 percent of the population in those census tracts that those particular uh, census tracts experienced more than two times the amount of evictions than those in where Black Canadians were, uh, approximately 2%.

[00:15:19] But the story sort of stops right there, and we don't know a whole lot about who are the actors. And so in order for us to understand who those actors are, we then acquired, as I mentioned, the 27 years of data. And then what we did was we then cleaned that data in assigning you know, who are categorizing who were financialized landlords based on those acquisition data for those last 27 years, and then we merged that data with, StatsCan’s demographic data.

[00:15:52] We found that 73 percent of the units that were acquired during that, study period were acquired by financialized landlords. And when we increase the percentage of our benchmark of Black Canadians in those dissemination areas, there was even a further increase in terms of the number of units that were acquired by financialized landlords in those geographies.

[00:16:15] And so when we looked at that particular data, we saw that there was a significant concentration of units that were being acquired by financialized landlords. But then what that said to us was the concern of, um, an oligopolistic rental market that is essentially being created in those particular geographies and where you have a few major landlords that are controlling the rental market.  

[00:16:42] Gabriel Miller: Yeah so you know the picture that comes into view are folks who are disproportionately dependent on the rental market a rental market that through a combination of policy and financial trends is falling more and more into the hands of a smaller group of sort of mega investors and that, that's driving the rent burden, as you've put it on people living in those buildings and you really get a picture of people who are hanging on month to month paycheck to paycheck trying to just keep their heads above water.  

[00:17:22] It seems that this emergency reached a breaking point for many people during COVID-19, as I understand it, and I wanted to ask you if you could describe a bit what experience that set off for a lot of the folks who are living with this rent burden that you've been talking about.

[00:17:40] Nemoy Lewis: So, let's take one step back. So for Black renters, the idea of being rent burden is not new. I think one of the things that is interesting is, at the start of the pandemic, housing precarity started to land on the doorsteps of people historically that never experienced housing insecurity.

[00:18:04] So this wasn't something that was new to Black Canadians. Black Canadians have been complaining about housing affordability for decades. But I think what the pandemic did it helped to shine a bright light on the issues and it helped to shine light on what those lived experiences are like, especially in a global pandemic in where you have this health crisis and, a lot of Black renters residing in some of these communities in Toronto are precariously employed, meaning that in some cases that if they don't work, they don't get paid.

[00:18:44] And if they don't get paid, they can't pay their rents. So as a result, you know, folks found themselves in very difficult positions because, either they lost their jobs, or their hours were cut. And one of the things I argue is that sort of the pandemic could have been the perfect storm for, um, folks to, you know, to rein in affordability or for folks to, to find more affordable accommodation.

[00:19:10] The difficulty, as I mentioned earlier, was that folks were losing their jobs and didn't have the income to present to the landlords that they had a stable income. And this was also happening when we know that rents were falling off the cliff, and folks were leaving the city and folks were entering into home ownership.

[00:19:30] And this all while the border was closed. And so we didn't have a lot of tourists come into the country and utilizing Airbnb services or short-term rental services.

[00:19:40] And so a lot of folks that could have renegotiated their lease or move to different parts of the city or acquire more habitable conditions in terms of rentals. They weren't able to do so because of the fact that they couldn't enjoy the luxuries of working from home and making the same salary.  

[00:19:59] Gabriel Miller: You've made a very persuasive case, that there's clear ways that our current system in our current paradigm, things are not working nearly as well as they should, but I've also heard you suggest that we need an even more fundamental reimagination or revisitation of our housing paradigm of, you know, taking you back to your class and university on 1950 suburbs and that paradigm that's probably been with us in some form since then.

[00:20:234 Is it time for a much deeper rethink of the way we house people in Canada? And what does that rethink need to do?

[00:20:43] Nemoy Lewis: I think one of the things that - you know, I also learned from that class was sort of the discourse around home ownership. And that discourse was around like the idea that this will be the biggest investment that one will make in their lifetime. And, you know, and while that might be true, what I think what's important is understanding now is that we need to rethink in terms of not recognizing a home for is exchange value, but rather recognizing the home for its use value.

[00:21:17] And I think that has become lost on our society and in where folks continue or even encouraged by the state itself to see their homes as an investment because the home is what's supposed to help you with your long-term financial security. and it's also supposed to help in terms of, helping you, you know, if you want to start a business, you can essentially, you know, tap into the equity of your home to help finance that or to help finance your children's education.

[00:21:48] The difficulty is that there are many folks that are seeing housing as an investment and there are many folks who are imagining the types of homes that their parents bought, and they grew up in. And I think we don't have the sort of, the vast resources of land that's available for everyone to have a single detached home with a white picket fence.

[00:22:14] And I think that we need to change our way of thinking of the home as no longer as an investment, but rather a place that provides shelter. And I think, secondly, we should not envisage a home in this physical form of, um, you know, single detached home, I think that we need to think about, more sustainable development, so, like, increasing our density in certain communities, but I think in also to do that, we also need to be building housing that are big enough to house families and not individuals.

[00:22:49] Like, you know, someone that's living alone or a bachelor. And I think, you know, that needs to change. And so, while the government talks about, you know, the rise of foreign speculators in the market, I push back on that sort of rhetoric because I think it's quite dangerous because it's almost creates this us versus them dichotomy.

[00:23:12] And in fact, you know, data shows that foreign buyers only account for 1 percent of transactions, and the difficulty that we have is that, you know, when you you're putting this sort of rhetoric out in the public discourse, and creating policies to curb foreign investment, I don't think we're actually trying to address the problems.

[00:23:33] And in fact, some of the biggest speculators in the market, I would argue, are domestic speculators. And those are individuals that continue to see the real estate market or housing as an investment. And this is why we see an increase in folks during the pandemic who bought second and third homes.

[00:23:54] Gabriel Miller: Makes me think that there are obviously the policy and the financial dimensions of this, but then there's some pretty, pretty personal ones about our ideas about what it means to own a home and what its purpose is. Your comments have made me just reflect on myself. My wife and I live in a semi-detached home in Ottawa.

[00:24:14] And we've been in this house now for, I don't know, six or seven years. And I realized. It was only in the last couple of years that I, this feeling I had that I had to get into a detached home started to fade. And, she would ask me, she'd say, well, why would you want to move again? And I couldn't really explain it, but I realized it was so deeply ingrained in me that there's somehow a kind of insecurity in not having your own little box with, you know, its own front lawn and its own backyard and its no shared walls that was driving me.  

[00:24:49] I'm wondering just from a personal point of view: did you grow up with an idea of the home that you thought you'd want in the future? And and are you are those ideas changing you live in Toronto. So reality is probably forcing you to change some of your aspirations but I just wonder has it changed your own thoughts and feelings about the kind of place you want to live in?

[00:25:09] Nemoy Lewis: I think my, you know, growing up, um, I grew up in an apartment, so I've never, you know, always lived in a single-family detached home. However, I, it was one of those things where, you know, I had family members who did and because of them living in single detached homes, I was like, you know, had this aspiration of that's what I want for myself and this, you know, as you mentioned, you know, not having to have a shared wall, and actually having my own privacy, my own backyard and et cetera.

[00:25:47] And I think with the rising cost of housing, that sort of idea, it didn't fade, but it sort of forced me to, to rethink that idea of, of what, what is it that I desire in terms of a home. And part of that also stems from the fact that understanding how the cost of single detached homes have like really soared and it's, you know, significantly out of reach for a vast amount of Canadians.

[00:26:20] And as a result, I've had to rethink that strategy in terms of, you know, where do I want to live because, we need to create more sustainable communities. And I, and I don't think building more single detached homes is going to help us get closer to that idea of building more sustainable communities.

[00:26:40] I live in Toronto; I don't want to commute in my car to work every day. I ride the public transit.

[00:26:49] What we need to make sure is that all Canadians have access to living spaces in those particular developments that are in close proximity to these transit corridors. And those spaces are not just allocated to the highest bidder.

[00:27:04] Gabriel Miller: This challenge, this issue, this emergency, as you've helped us understand, was decades in the making. I'm sure it won't be solved in a year or two, but thinking about solutions or at least steps we can take to make progress. If we imagine a world where the federal or provincial minister of housing rides the TTC and you get on one day and you're sitting beside them and you get to talking, what would be one thing you would urge, decision makers to realize or to change or to take action on to start improving the housing system for Canadians and for Black Canadians in particular.  

[00:27:55] Nemoy Lewis: That’s a very good question, I don't necessarily think that there is a one magic solution to this, you know, growing problem. However, I do think that there are certain immediate policy changes that I think that we could retract in order to: one improve affordability in the market and one that being, um, you know, I think that we need to abandon vacancy decontrol.

[00:28:22] We've seen that, you know, that particular policy is not, um, it, it didn't help to, you know, incentivize developers to build purpose-built rentals in the market, but rather it in turn helped to exacerbate affordability problems in the market because we essentially allow landlords to, you know, charge new tenants, whatever the market can bear. And I have one particular example that I want to give of this particular, failure of this policy.  

[00:28:52] Gabriel Miller: And just before you do, I want to make sure everyone understands. Can you just vacancy decontrol? This is the idea that the normal limit on annual rent increases doesn't apply to a vacant unit. Is that right?  

[00:29:10] Nemoy Lewis: That is correct.  

[00:29:11] And so one particular example that I, I like to give is there was one particular property, uh, which is in the North Albion community, which is, um, in the Northwest quadrant of the city in North Etobicoke. And so this property in 2018 was acquired by Starlight Investment, uh, which is the largest private landlord in this country with over 61,000 units under management.

[00:29:37] And so they acquired this two-tower property in the North Albion community. And 12 months later, Starlight filed 456 evictions. So to put that into context, between these two towers, there's 759 units. So approximately 60% of the units received an evictions notice.

[00:30:03] And, but we know that this is most likely, not all units received an evictions, but rather there were some units that actually received multiple evictions notice. And then to also put this into perspective, roughly between 91 and 94% of those are evictions were for nonpayment of rent. That would give the idea that folks do not want to pay their rent and they're either withholding their rent, but rather after speaking with tenants at this particular property.

[00:30:34] It's that the rents are vastly unaffordable and they can no longer make some of the sacrifices that they once were able to make, in the past. And as a result, they just can't afford the rents that are being charged. And so to put that, further into perspective: In the subsequent year in 2020, at the height of the pandemic, Starlight increased rents on new leases by 25.3%

[00:31:01] That is about 11 times higher than the rate of inflation for shelter in the province of Ontario for that year, and over 19 times higher than the rate of inflation for the city of Toronto for that year in 2020. And these particular landlords operate on three principles, high rents, high occupancy, and policies that help them to expeditiously remove non-paying tenants that don't fit within their profit maximization strategies.

[00:31:34] Gabriel Miller: Well, this has been a super helpful conversation, you know, these questions about housing, they affect us all so directly, so personally, and yet I think a lot of the issues, whether it's, for buyers or it's for renters are not that well understood and the system is pretty opaque and, you know, what I found in our conversation it really helped pull back the curtain on, some of the policies and some of their effects on real people and I think there's huge value in that.

[00:32:10] Gabriel Miller: Thank you for listening to the Big Thinking Podcast and to my guest, Nemoy Lewis, Assistant Professor at the Toronto Metropolitan University. I also want to thank our friends and partners at the Social Sciences and Humanities Research Council, whose support helps make this podcast possible.

[00:32:26] Finally, thank you to CitedMedia for their support in producing the Big Thinking Podcast. Let us know what you thought of this episode and share your feedback with us on social media. Follow us for more episodes on Spotify, Apple Podcast and Google Podcast. À la prochaine!