Beyond private homeownership: the affordable housing solution missing from this election
Housing is a central issue in the upcoming federal election in Canada, and based on the meager solutions on offer, it will probably stay that way for years to come. Every party is promising to help more people buy a home. But in the context of skyrocketing prices, supporting more buyers will deepen the crisis.
While the major parties have slightly different policies with various dollar amounts attached, their strategies to address the crisis are remarkably similar. They fall into three main categories:
1) Promises to increase the supply of housing:
Liberals: 35,000 affordable units, including ‘rapid housing’ along with tax incentives for landlords and developers to renovate and increase housing supply.
NDP: 500,000 affordable units over 10 years
Greens: 300,000 affordable units over the next 10 years.
Conservatives: 1,000,000 (not-so-affordable) homes over three years, as well as selling off government properties for housing developments.
2) Promises to limit property speculation;
The Liberal budget promises a new tax on “underused” housing.
The NDP is proposing a 20% tax on foreign buyers
The Greens have proposed stronger regulations on foreign investment and an ‘empty home’ tax on foreign and corporate buyers
The Conservatives have promised to bar foreign investors from buying a home for two years
3) Promises to encourage private homeownership
Liberals: more tax credits, tax-free savings accounts, and adjusting mortgage regulations.
NDP: Help more people qualify for mortgages by allowing 30-year CMHC-insured mortgages
Conservatives: help more people qualify for mortgages by tweaking the stress test and insurance requirements
Some versions of the first two strategies would help: create more affordable housing and stop speculators from using the housing market like the stock market. But anxieties about speculation are often focused exclusively on the spectre of ‘foreign investment.’ Concerns about foreign investors buying up Canadian real estate—especially from China—have been used to explain skyrocketing housing prices, often with an accompanying racist and anti-immigration sentiment.
While wealthy, international investors are undoubtedly profiting from real estate investments in Canada, this focus begs the question: should we be satisfied if it’s only Canadian money driving cycles of skyrocketing prices, renovictions and vacant homes?
It is a bitter irony that Canadian elites are now focused on ‘foreigners’ buying up ‘our land’ in a country founded on the dispossession of Indigenous peoples by foreign invaders. Moreover, speculation is not just reserved for venture capitalists: it is built into Canadian homeownership.
Homeownership as real estate speculation
This brings us to the final—and completely misguided—strategy shared by major federal parties: encourage private homeownership. Private homeownership is often synonymous with middle-class status in Canada, and over the last century, governments have introduced a range of incentives and subsidies to encourage homeownership. In the process, owning a home became a place to live and a major investment. Having a mortgage means having a vested interest in rising housing prices: investors want the value of their assets to increase. In many cases, they need housing prices to go up, or else they’ll be underwater.
Treating one’s home as an investment has other harmful side-effects. Anxieties about property values propel desires for increased policing and surveillance of neighbourhoods, and homeowners are more likely to have a NIMBY (Not In My Back Yard) attitude to anything that might adversely affect the value of their home, including nearby transition homes, social services, unmowed lawns, or anything else that might signal the presence of poor people.
So housing prices are not only being driven up by foreign investors and rich speculators: they are driven up by all homeowners who buy their home with the expectation that it will increase in value. This is not a fringe view: a few years ago, Evan Siddall, CEO of the Canadian Mortgage and Housing Corporation raised concerns about the ties between homeownership and investment:
So we know that many homebuyers make decisions to purchase or sell a house with an eye to the future. In short, they are willing to pay more for housing today in anticipation of price gains tomorrow. The more optimistic they are, the more they are willing to bid up prices. Excessive optimism about the future of house prices can lead to speculative investment and bidding wars, both of which further drive price escalation .
Siddall stops short of saying that private homeownership should be detached from speculation. Like most mainstream policymakers, he expresses sympathy for younger generations priced out of the housing market, and muses about new ways of subsidizing first-time buyers. But reforms that allow more people to ‘enter the market’ are not really solutions to the housing crisis at all. Supporting more prospective buyers means more demand, which means still-higher prices. Speculation here is inevitable: as long as housing is a private asset in a capitalist marketplace, it will be treated at least in part as a speculative investment.
The answer isn't simply 'more supply'
Other critics of homeowner subsidies have insisted that what's needed is more supply.
The art auction is a good metaphor. Giving bidders more money isn't going to affect high prices. That leads most mainstream commentators to concludes that what's needed is more supply. If art auction prices are too high, sell more art.
The most vocal proponents of supply-side solutions are self-styled YIMBYs (Yes-In-My-Back-Yard). This group argues that the housing market needs more of everything: condos, apartments, townhomes, detached homes--all of it. This leads them to support pretty much any proposal by private developers, on the basis that it means 'more housing'. This leads to support for deregulation, rezoning, and the creation of new development that often intensifies gentrification and displaces poor people and people of colour.
It's undeniable that an increased supply of affordable housing is needed. But to return to the art metaphor, why should art (or housing) be up for auction to the highest bidder? Why not create an alternative to auctions?
Community Land Trusts as a path to affordable homeownership
To meaningfully address the crisis, owning a home must be disentangled from speculation and commodification. Community Land Trusts (CLTs) are a means towards this disentanglement. Although they are neglected in the major party platforms, there are dozens of successful CLTs throughout North America. A CLT is basically a non-profit organization with a mandate to hold land and housing in trust and ensure that it remains affordable in perpetuity.
CLTs can provide affordable rentals directly, or they can partner with non-profits or cooperatives to provide affordable housing. But the mechanism that makes CLTs unique is their capacity to offer forms of homeownership that are detached from speculation and profiteering. They do this by separating ownership of land from ownership of homes. They can offer long-term ground leases that provide functional homeownership: similar to a condominium strata arrangement, residents of a CLT can renovate and repair their homes, and they may choose to sell or transfer the lease down the road. But unlike condos, CLTs use resale formulas to limit the maximum resale price, and they can ensure that the house will be resold to another low-income household. Often referred to as limited equity homeownership, this insulates CLT homes from housing booms and busts. Homeowners can still build equity and make improvements to their home, but they won’t end up with a huge profit if housing prices continue to skyrocket (or a huge loss of the housing bubble bursts).
Limited equity homeownership has crucial implications: no more renovictions, no more house flipping, no more vacant homes. Housing becomes a place to live, not an investment from which to profit.
CLTs are more efficient than market-based solutions
In Canada, CLTs are a small but growing segment of affordable housing provision, but they have a proven track record throughout North America, and supporting them should be a cornerstone of any progressive party platform. Current (and proposed) government policies aimed at promoting homeownership (tax credits, investment savings accounts, mortgage assistance) are all ways of subsidizing private homeownership. They make the house purchase more affordable for select households, but that subsidy is lost (absorbed as profit) when the house is sold again. These subsidies should be completely replaced by subsidies for CLTs. The reasoning here is simple: CLTs retain affordability over time, so they make better use of the money. Because they limit resale prices, CLTs are able pass these subsidies on to future buyers, creating permanent affordability for lower-income home buyers. For instance, a study of the Champlain Housing Trust in Burlington Vermont, concluded that initial government subsidies made it possible for 357 households to own a limited equity home. In comparison, a conventional subsidy program would have supported 152 households to privately own a home.
CLTs are flexible and adaptable to community needs
Another advantage of CLTs is that they can be shaped, governed, and controlled by the communities in which they are based, including housing residents. Whereas private and public housing tends to be designed, built, and controlled by people who will never live there, CLTs can be governed by residents and local community members. Historically, CLTs originated in the 1960s to combat the eviction and displacement of Black farmers in the American South. They employed a tripartite (1/3) model of governance, in which CLTs were governed and controlled by local community members, CLT residents, and local stakeholders and experts. These are just a few examples of the diversity of CLTs in North America:
In Ohlone territory in California, the Sogorea Te’ Land Trust is an urban Indigenous women-led organizations that facilitates the return of land to Indigenous people.
In the Parkdale neighbourhood of Toronto, the Parkdale Neighbourhood Land Trust uses the tripartite governance model to resist gentrification and provide permanently affordable housing and space for social enterprises and non-profit organizations.
Friends of Chinatown Toronto (FOCT) is exploring CLTs as a mechanism for community-controlled housing and racial justice in Chinatown.
On Denman Island where I live, the Denman CLT Association is beginning construction of an affordable housing project for seniors on the island.
This local governance model helps ensure that CLTs are rooted in local communities and connected to their priorities and the specific issues they face.
Solidarity Housing: a new CLT model
Although Canadian homeowners have been primed to welcome skyrocketing housing prices as a lucrative windfall, not all of them see it that way. Over the last decade, many homeowners have seen the value of their homes skyrocket, but they’ve also seen their neighbourhoods gutted. They might be able to sell their house for a hefty sum, but selling your home to the highest bidder doesn’t do anything to support the communities they love, and it doesn’t help neighbours who are being pushed out. A study of higher-income older adults in gentrifying neighbourhoods found that they had poorer mental health than their counterparts in low-income neighbourhoods.
The need for an alternative to private homeownership led to the creation of Solidarity Housing, a new transaction mechanism to convert privately-owned homes into CLTs. In essence, the model is a non-profit alternative to a reverse mortgage. It works like this:
In this model, ownership of the home transitions to a CLT. The original homeowner might remain in a portion of the home, or downsize to a smaller place.
The trust assumes ownership of the home and leases or rents it to new residents.
New residents support the project with rent or lease payments
The original homeowner receives a portion of these payments, enabling them to feel secure and plan for their future
The remainder goes into a fund for repairs, property taxes, and other costs.
This model allows homeowners to leverage their homes for collective solidarity, rather than private speculation. The homeowner receives stable monthly payments while supporting others to secure permanently affordable housing. The structure of monthly payments recognizes that most homeowners can’t afford to simply give away their home, but they may not need or want a large financial gain from its sale, either. New residents can put down roots in their community, knowing that their home won’t be sold out from under them.
CLTs with or without government support
CLTs are not the only solution to the housing crisis, but they are a crucial alternative and remedy to private ownership and rampant speculation. CLTs can certainly benefit from government support. CMHC financing could make it easier to take housing off the market. Subsidies could deepen the affordability of specific projects, or enable new acquisitions. But while governments should be pushed to support CLTs, another exciting thing about land trusts is that they’re not dependent on new policies or legislation. If the winner of the election fails to disentangle housing from speculation, it can be done without them.
To learn more about the Solidarity Housing model, visit www.solidarityhousing.com
To learn more about CLTs in Canada, visit http://www.communityland.ca/canadian-clts/