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Tim Richter Presents to House of Commons’ HUMA Committee on Financialization

June 15, 2023 - 5:08 pm / News

Speaking Notes

Tim Richter – President & CEO
Canadian Alliance to End Homelessness
Appearing before the House of Commons Standing Committee on Human Resources, Skills and Social Development and Status of Persons with Disabilities. 
Meeting 72 
Tuesday, June 6, 2023, 4:30 p.m. to 5:30 p.m.

Good afternoon. Thank you for the opportunity to appear today. 

The term ‘financialization’ is normally raised in the context of behaviour by some housing market actors who will purchase low cost, older rental housing and increase rents to generate more profit. Often, they do this by evicting existing tenants.  

This contributes to a major problem in Canada’s housing market. Canada is losing affordable rental housing at an alarming rate. According to noted housing policy expert Steve Pomeroy, over 550,000 units below $750/month were lost between 2011 and 2021. This represents 6% of total unsubsidized rental housing in Canada. This means there are fewer and fewer affordable options for low-income households. 

But this issue alone is not the problem. The bigger issue here is the erosion of affordability in the rental housing market 

There are many experts who can give you a better analysis of the rental market and the affordability issues we face, but it strikes me there are three key factors:  

  1. A lack of rental supply. CMHC says Canada need to build 5.8 million homes (of all types) in next 9 years to “restore affordability”. Canada has built only 570,000 rental units in the last 30 years. Canada also has a dire lack of deeply affordable social, community and supportive housing. Supply constraints and increasing demand drives increased rent and decreased affordability. 
  2. The cost of new construction – it is three times more expensive to build new rental housing, than it is to purchase existing. It is also way faster. This creates a clear financial incentive to purchase old housing. 
  3. Lack of provincial regulation and tenant protection – Without tenant protections, an investor can buy a property cheap and increase rent by whatever the market will bear. In provinces where there is rent control, there is often a loophole where there is no control on vacant units, which creates a financial incentive to evict people to increase rent. 

If we only attack one element of the problem – actions of some market actors who purchase low cost, older rental housing and raise rents to generate more profit – we won’t solve the affordability problem. Further – we might actually make matters worse by pushing out desperately needed private investment.  

To restore affordability in rental housing, Canada will need around 1.74 million units of purpose-built rental housing (remember – Canada has only built 570,000 units in the last 30 years). Building this much rental housing would cost at least $609 billion. Unless governments are prepared to invest that much, we need private investment. 

It’s critical we stop the loss of low-cost rental housing AND aggressively add supply of market, affordable and deeply affordable housing.   

I’d like to propose the following seven solutions:  

  1. Make purchasing existing rental housing less economically attractive – one option to do this would be to tax purchases of rental housing by private investors above a certain number of units (to target large-scale purchases), or tax the profits from those purchases. 
  2. Create an acquisition fund to allow NGOs to purchase and renovate rental housing and protect low-cost rental. BC recently announced a program like this and as soon as it was announced, apartment owners and REITS started coming out of the woodwork to sell older buildings.  
  3. Create economic incentives to build – make it more attractive for the private and non-profit sectors to build using accelerated capital cost allowance, low-income housing tax credits and other finance or tax tools available to the federal government.  
  4. Push the provinces to put in place tenant protections to prevent renoviction. This could be potentially achieved as part of infrastructure and housing investment negotiations. 
  5. Revamp the National Housing Strategy to generate at least 350,000 deeply affordable/rent geared to income housing units including 50,000 units of supportive housing.  
  6. Provide urgent rent relief for low-income households. Canada is under a wave of new homelessness as people are being pushed out of their housing by huge increases in the cost of rent. We have proposed the creation of a Homelessness Prevention and Housing Benefit that could stop or at least significantly slow the deadly wave of new homelessness we are experiencing and protect low-income Canadians until new housing can be built. It will be far more expensive to solve homelessness after it happens than it is to prevent it in the first place. 
  7. Revamp Canada Housing Benefit. Three-quarters of people in core housing need are there only temporarily.  Housing benefits can be used to provide temporary affordability support and responding to sudden changes in housing need or affordability, leveraging existing private and near-market housing. 

Thank you all very much for this opportunity. I look forward to discussing this further with all of you.