We must immediately begin disentangling our economy from the financialization of housing

Petition updateRequire landlords to appear at House of Commons Review of Financialization & Rent GougingWe must immediately begin disentangling our economy from the financialization of housing

Anne LandryCalgary, Canada

6 мар. 2024 г.

Leilani Farha, Global Director of THE SHIFT and Former United Nations Special Rapporteur on the Right to Adequate Housing stated the following in her BRIEF dated May 23, 2023 to the House of Commons HUMA Committee Review regarding financialization of housing, rent gouging, renovictions and related issues (at page 6):

“…With evidence clearly indicating that the failure to tackle financialization has profoundly harmful impacts on people across Canada, we cannot delay this endeavour. We must immediately begin disentangling our economy from the financialization of housing and ensure, at a very minimum, that all people in Canada have a decent, dignified, secure and affordable place to call home.” [Emphasis added]

And stated the following at pages 2 and 3:

“…With positive economic performance derived from the housing industry itself, one would expect an improvement in housing conditions for people across all social strats in Canada. Evidence reveals the opposite trends, with a rise in homelessness in cities across the country and increasing housing unaffordability. The unaffordability of rental housing makes tenants poorer and less able to contribute to local economies through spending…
…REITs [Real Estate Investment Trusts] are provided preferential tax treatment. REITs – unlike all other trusts – enjoy exemption from corporate tax when certain conditions are met. The Office of the Parliamentary Budget Officer estimates that eliminating these tax rules and subjecting REITs to the standard corporate tax would generate an additional $285.9m between 2023 and 2027, highlighting the substantial financial benefits investors gain from these tax advantages…
…Canadian landlord/tenant legislation has also provided investors with operational advantages – advantages which make running their businesses in a profitable way far easier. Saskatchewan, Nunavut, and Alberta have free-market conditions, which facilitates the setting of higher rents by landlords. Renters in Calgary, for example, saw the average rent for a one-bedroom apartment increase by 27% between August 2021 and August 2022, often by hundreds of dollars per month….”

[Emphasis added]

NOTE the following in the BRIEF to the National Housing Council Review of financialization of purpose-built rental housing by THE SHIFT (Leilani Farha - Global Director, Julieta Perucca – Deputy Director, Sam Freeman – Director of Legal Research & Advocacy) – at pages 11 to 12, 14, 15:

“…Governments in Canada must regulate businesses in a manner that is consistent with the obligation to progressively realize the right to housing. In keeping with the Guiding Principles [United Nations Guiding Principles on Business and Human Rights], governments must ensure businesses refrain from activities that have a negative impact on the right to housing, and go even further to ensure that businesses help realize the right, by producing needed affordable housing in keeping with the international human rights law definition of affordability. Furthermore, some of the profits made by private enterprises through housing must be redirected to ensure adequate housing is available for low-income households. (See UN Rapporteur report.)

The need for this review panel, along with many of the submissions from tenants, indicates that governments in Canada have not sufficiently met their human rights obligations to regulate institutional investors in housing to ensure they do no harm, nor have they managed to ensure they contribute to addressing real housing need in the country…

…Recommendation No. 1: The Council should recommend that the National Housing Strategy be immediately updated to reflect, integrate and advance the Federal government’s commitment to progressively realize the right to housing under the National Housing Strategy Act. For this to be effective, in light of the multi-jurisdictional nature of housing, a whole of government approach will be required. This includes ensuring coherence across different orders of government and federal ministries, so that policies related to, for example, immigration and climate change also serve to advance the progressive realization of the right to housing...

…The NHS [National Housing Strategy] must outline the Federal Government’s expectations with respect to tenant protections at provincial and territorial levels. These expectations should be met in order to receive housing related transfer payments, and would include, inter alia:

a. Legislated rent control.

b. A prohibition on no-fault eviction.

c. An overhaul of the AGI [Above Guideline Increase] system to ensure it is used rarely, and only under the strictest conditions and without creating unaffordability for tenants.

d. The implementation of vacancy control.

e. Funding for municipal eviction prevention programmes.

f. Supplementary social transfer funds for provinces and territories who agree to raise social assistance rates to a level that meets cost of living requirements, including average rental prices.

g. Legislation to require redevelopment projects to ensure meaningful engagement with residents, monetary and logistical assistance with re-location during the redevelopment project, one-to-one replacement of affordable units, the right of return for residents to a unit of similar size and cost, whilst also creating additional affordable units, as set out under Recommendations 2(d)…
…Housing Supply Fiscal Programmes All grant, loan and subsidy programmes included in the NHS [National Housing Strategy] for existing and new PBR [Purpose-Built Rental housing] – directed at institutional investor landlords as well as others, including non-profits – must require human rights outcomes, prioritizing those in greatest housing need…

…Accountability The NHS should mandate the Parliamentary Budget Office to conduct an assessment of public expenditure (subsidies and foregone taxes/fees, etc.) to assess if the Government of Canada is using the maximum of its available resources to progressively realize the right to housing in keeping with the requirements of the NHSA [National Housing Strategy Act]…
…Recommendation No. 2 The Council should recommend that the Minister regulate all institutional investors involving in the financialization of PBR, to ensure that they are contributing to the progressive realization of the right to housing, and hold them accountable to international human rights obligations and standards….
...Recommendation No. 3: The Office of the Federal Housing Advocate should request the National Housing Council to continue its investigations into the financialization of housing by requesting review panels on new and emerging forms of financialization including short-term rentals, student housing, and long-term care homes."

[Emphasis added]

Also, please NOTE the following comments during the public Oral Hearing on October 24, 2023 (Session 2) of the National Housing Council Review of financialization of purpose-built rental housing by THE SHIFT (Leilani Farha - Global Director, Julieta Perucca – Deputy Director, Sam Freeman – Director of Legal Research & Advocacy):

Sam Freeman, Director of Legal Research & Advocacy – THE SHIFT

“…I want to direct my comments today at the financialized purpose-built rental business model, why it is not a solution to the housing crisis, and I want to finish with some suggestions to the Penal for potential ways forward.

With regards to the business model, yesterday you heard that financialization is driven by the maximization of shareholder profits. This is because investors owe a fiduciary duty to their shareholders which they say compels them to maximize profit on their behalf, above any obligations they may have to uphold human rights. Enjoyment or realization of human rights by tenants is thus never a consideration. This stands in direct conflict with the human rights framework which regards investors' duty to human rights holders as trumping the fiduciary duty to shareholders.

It should also be understood that while profit maximization is at the heart of the business model, the real end game for investors in purpose-built rentals is to increase the valuation of the property; that is, they want to increase the intrinsic value to more than they paid for it. This approach allows them to both make huge profits on the sale of property but also increases the leverage power of their assets, allowing them access to additional finance and an increased ability to expand their investment activities and portfolios. In some communities and cities, this leads to a conglomerate of investors akin to monopoly. It's vital to understand the practices to increase the valuation of property are systematic and are baked into the business model. For example, rent increases are often mapped out in a predetermined timetable upon the sale of a property to demonstrate how all units can reach market rent by a certain date, thus securing a certain valuation to a property. Zero consideration is given to who is living in a unit and their ability to afford a rent increase. Alongside this, they often institute standardized suites of measures to increase their revenues over time.

With respect to acquisitions, the business model purposefully targets apartment buildings that house tenants that are paying affordable rent, with many of these tenants being from disadvantaged groups. Yesterday, Dr. Lewis gave some alarming evidence showing how financialization disproportionately impacts human rights-protected groups. This can be understood as discrimination. Under international human rights law, discrimination requires immediate redress as equality and non-discrimination are pillars of human rights….

…Investors have been operating in the Canadian purpose-built rental sector for many years, and during this time rental housing has become less affordable, less secure, and less available to many of those who need it most. The housing crisis has only become more severe whilst investors have thrived. This suggests purpose-built rental investors are not a solution to the housing crisis, but their business model may well be a cause of it.

Under the National Housing Strategy Act, Canada has committed to creating a robust human rights-based housing system. Financialization is a clear obstruction to that goal. We agree with the recommendations that were made yesterday and want to emphasize those related to the need for stronger tenant protections. We also think that the Panel is well-placed to make overarching recommendations to Minister Fraser. Using human rights standards, Minister Fraser must commit to a whole-of-government approach to review all laws and policies that contribute to the financialization of housing, with a view to reforming the National Housing Strategy so it may be effective at progressively realizing the right to housing. This must be done within a specified time frame. To assist the Minister in this endeavour, the Federal Government could mandate the Parliamentary Budget Officer to assess public expenditure in line with human rights standards, including the use of the maximum available resources and progressive realization.

Finally, and in addition to the recommendations within our written submission, we suggest that the Review Panel urge Minister Fraser to establish new relationships with the largest purpose-built rental investors in Canada. Governments have to lead and not be led by the private sector and have to use human rights standards to do so. The Minister should be reminded that in line with the United Nations' Business and Human Rights Guidelines, he has a duty to protect tenants from harm and has to ensure investors contribute to the progressive realization of the right to housing, including for those at the lowest incomes…. [See United Nations Guiding Principles on Business and Human Rights.]

…Under international human rights law, all governments have what we call a duty to protect. They have to protect against breaches of human rights committed by private actors and they have to take all reasonable steps to ensure that private actors do not engage in activities which breach human rights…
…Maybe just to give one further example from the OECD. There's legislation in Denmark now which is intended to really get at the heart of the kind of damaging business practices that are involved in the financialization of rental housing and purpose-built rental housing, in particular the idea of this kind of raising rents toward undertaking renovations and what they call modernizations to justify rent increases. Denmark, again Catalonia, Spain. I will happily send you a copy of the legislation after the session. But it effectively prohibits investors from raising rents for a period of 5 years, I believe, after the purchase of a building, in justification for undertaking modernization. It also enhances tenant protections and I think allows for greater tenant participation. So it's referred to as the Blackstone law. It's intended to get at this idea of investor landlords. And it seems to be successful, according to statements by the Minister in Denmark….”

[Emphasis added]

Leilani Farha, Global Director – THE SHIFT

“…Affordability, for example. I mean, governments would be well-placed to tell institutional landlords that housing should be affordable, commensurate to income, household income, that affordability under international law is not what markets can command. And so when setting rents or increasing rents, that's something that has to be considered, above guideline rent, increases that are imposed have nothing to do with whether tenants can afford those increases, which is why we see tenants on strike….

“…One of the things we want -- yesterday you heard a lot about the harm caused by institutional investors in the purpose-built rental space. And I want to make sure that the Panel understands that under human rights, there are two obligations. The institutional investor should do no harm, but they must also contribute to the progressive realization of the right to housing. In other words, it's not just keep them at bay, keep them from evicting into homelessness, keep them from demovictions, as people call them. It's also what are they contributing to the realization of the right to housing for the groups who most need it? And that's really where you start getting into a lot of these fiscal, monetary housing programs and policies, some of which were discussed yesterday. Okay, are we incentivizing, is the Government of Canada, CMHC, incentivizing in a way that actually is resulting in these actors meeting their positive obligation to progressively realize the right to housing. Right? So they should do no harm, but they should also be positively implementing the progressive realization of the right to housing….”

[Emphasis added]