Marxism won’t solve Canada’s rental housing crisis - no matter what Ottawa thinks
By Peter Shawn Taylor, published by C2C Journal
Canadian entrepreneurs used to build over 75,000 apartment units per year. Then came rent control, tax changes and other government intrusions, and they all-but abandoned the rental housing market. Now, with rental housing once again in short supply, the private sector has returned – pouring its own capital into improving and expanding Canada’s long-ignored stock of apartment buildings. Rather than celebrating this flood of new investment, however, a federally-funded cadre of housing activists is working overtime to prevent it. Peter Shawn Taylor examines the strange, Soviet-style demands of the Federal Housing Advocate and the harm such policies will do to Canada’s tenants.
As the Trabant was to cars, so was the panelki to housing.
The East German-made Trabant, powered by an obsolete two-stroke engine and lacking in all modern conveniences, stands as stark proof of Communism’s inability to respond to market demands, produce high-quality consumer goods or keep up with technological change. The same holds true for Bulgaria’s panelkis, shoddily-constructed government apartment towers made from prefabricated concrete panels that allocated a mere 100 square feet of living space per inhabitant. Massive, soulless structures of this sort once dominated the outskirts of major cities across Eastern Europe and the Soviet Union in sprawling complexes.
Andrey Pavlov grew up in Bulgaria’s capital city of Sofia during the Communist era and recalls how the panelkis loomed over the urban landscape like a grim curse. “As with everything built during the Communist years, they were a complete disaster,” says Pavlov, now a finance professor at the Beedie School of Business at Vancouver’s Simon Fraser University, in an interview. “Not only were they depressing to live in, but the execution was terrible – there were gaps between the prefabricated panels and water constantly leaked into the units. Even brand new they were falling apart because there was no incentive to do better.”
The many failures of Communism: The underpowered, cramped, smoke-belching East German-made Trabant (left) and crumbling Bulgarian panelkis (right) are two prominent examples of the Communist system’s inability to meet basic consumer requirements or keep up with technological change. (Sources of photos: (left) D. Currie/The GDR Objectified; (right) BnR Radio Bulgaria)
Besides the terrible quality and cramped conditions, the allocation of panelkis was even worse, determined by corruption rather than need. The most desirable units – those with a view, or perhaps fewer leaks – went to Communist Party members and their families. “It was especially bad for anyone who was not politically connected. But that’s what you get when the government provides all the housing,” Pavlov warns. “The world has tried such a system many times before and it has failed every time. To see it proposed here again in Canada is very disappointing.”
The proposals Pavlov is referring to come from the office of Canada’s Federal Housing Advocate, a newly created position meant to act as a national watchdog over Canada’s housing sector. Last month Marie-Josée Houle, Canada’s first housing advocate, released a series of little-noticed reports and recommendations that blame Canada’s current housing crisis on private capital, or what she calls the “financialization of housing.” Houle claims her commissioned studies “confirm” the harm done to tenants by the private sector and that this necessitates an official federal investigation and corrective action.
‘It is a document that would make Marx and Lenin proud,’ says Pavlov, having read the Federal Housing Advocate summary report. ‘It is shocking that any government-funded agency could produce such a thing.’
The reports, written by a variety of academics and housing activists, take deliberate aim at firms or investors that “profit from rent increases” – a condition that captures essentially all privately-owned rental housing, since rent increases are a necessary component of any market-based business model. These arguments, along with 51 recommendations, are collected in The Financialization of Housing in Canada: A Summary Report for the Office of the Federal Housing Advocate by University of Waterloo planning professor Martine August. Among the recommendations: regulating banks to prevent them from lending to any profit-making rental firms, prohibiting pension funds from investing in such firms, denying them access to federal mortgage insurance and other government programs, placing a cap how many rental units these firms can buy and expropriating any “affordable” housing units they might already own. Other demands include a call for coast-to-coast, iron-clad rent control, an end to Real Estate Investment Trusts’ (REITs) tax status and the abolition of all federal policies that “privilege home ownership over renting.”
The voice of experience: Andrey Pavlov, who grew up in Communist Bulgaria and is now a finance professor at Simon Fraser University, warns Canadians about the dangers of relying solely on government-provided housing.
The thrust of most of these recommendations is to make it impossible for profit-seeking private investors to participate in Canada’s rental housing market. With 89 percent of Canada’s approximately 4.8 million rental units already in private hands, such a policy would inevitably push the entire sector towards government ownership or oversight. Rather than fixing Canada’s housing crisis, such an extreme, ideologically-driven effort would result in widespread calamity – making it impossible to add new supply and dooming the existing rental stock to panelki-levels of disrepair.
“It is a document that would make Marx and Lenin proud,” says Pavlov, having read the Federal Housing Advocate summary report. “It is shocking that any government-funded agency could produce such a thing.” And remember, he’s speaking from experience.
Canada’s Nationalized Housing Strategy
In 2017, Prime Minister Justin Trudeau’s Liberal government announced a 10-year, $37 billion National Housing Strategy meant to tackle housing affordability. It hasn’t worked. Due to Canada’s inability to build new houses, condominiums and apartments in sufficient volumes to meet rising demand – largely as a result of suffocating government rules and restrictions (see this two-part series by C2C Journal, here and here) – Canada’s housing problems have expanded into a full-blown crisis. Even the recent downturn in house prices, precipitated by the Bank of Canada’s interest rate hikes, hasn’t helped the rental market, as rents continue to climb. In response, the Liberals have doubled down with additional promises to spend over $70 billion by 2027-2028, much of it in an effort to make housing “more affordable” by funding non-profit, community and co-op housing projects.
Canada’s newest “human right”: The Trudeau government’s 2019 National Housing Strategy Act declared that Canadians have a “right” to housing and created the Federal Housing Advocate to defend this concept, appointing Marie-Josée Houle (left) to the post.
Often overlooked amid this torrent of cash is the controversial legislation that undergirds the Liberals’ housing strategy. According to the 2019 National Housing Strategy Act, the federal government “recognize[s] that the right to adequate housing is a fundamental human right.” Beyond creating this novel “right” to housing, the Act also birthed a bureaucracy to entrench the concept, including the Federal Housing Advocate and National Housing Council, an advisory body meant to inform the federal housing minister on human rights-related housing matters.
Since the dawn of modern property law, housing – whether owned or rented – has always been a commodity freely negotiated between interested buyers and sellers in an open market. No longer. The Liberals now claim to have discarded this centuries-old practise in favour of a moral imperative. Transacting for rental housing on the basis of free market principles, says Advocate Houle in a press release, means “denying people their fundamental human right to affordable, dignified, and safe housing.” It is a philosophical shift with significant economic consequences.
“Full-blown Communism”: After reviewing the Federal Housing Advocate’s list of recommendations, Queen’s University law professor Bruce Pardy concludes the ultimate aspiration is to rid the housing market entirely of private capital.
“Human rights were originally conceived to preserve liberty and hold back the overreach of the state,” observes Queen’s University law professor Bruce Pardy in an interview. “Today they’ve become the means for some people to control the behaviour of other people.” In the case of rental housing, this alleged new right is being interpreted by Houle and other housing activists to mean that private sector landlords should not be allowed to raise rents, evict tenants for non-payment or otherwise operate their property in a way that makes them money. While restrictions of this kind may sound pleasing to current tenants, such policies would make the entire concept of private ownership of rental housing untenable. “The report is essentially saying that the only legitimate way for people to be housed is through state provision,” says Pardy, after reviewing August’s summary report. “I consider that to be full-blown Communism.”
Pardy notes implementation of the various bans, restrictions and expropriations promoted in the Federal Housing Advocate’s list of recommendations are all within the realm of legislative possibility. “Constitutionally, property rights are not listed in the Charter,” he advises. Pardy, however, disputes the notion that the federal government has actually created a true “right” to housing. “All the National Housing Strategy Act does is make a statement of policy,” says Pardy, who is also the executive director of Rights Probe, a new Canadian think-tank focused on law and liberty. “It is not enforceable in law. You can’t go up in front of a judge and insist that the government give you a house because of what it says.” Since this purported new right is not enshrined in Canada’s Charter of Rights and Freedoms either, any subsequent government can simply repeal the legislation and make it disappear instantly.
‘Financialization is contributing to unaffordable rents, worsening conditions, and a rise in evictions,’ says a September press release from Houle’s office.
Regardless, the Trudeau government is currently setting policy on the basis that housing is a human right. And it is to this end that federal-appointee Houle commissioned her research reports declaiming the allegedly toxic role played by private capital in the rental housing market. She has since used her authority to request a formal review by the National Housing Council “on the human rights impacts of corporate investment in rental housing, also known as financialization.”
