Canada’s Housing Bubble Warns What Happens When a Community’s Lifeblood Drains Away

by A.R. Naraghi

5 August 2016

As average Toronto house prices smash through the $780k barrier, the pressure for young people to get a foot on the property ladder before it’s too late has never been so intense. But as well as competing with thousands of others in the same boat, young first-time buyers are also having to contend with cash-rich foreign investors and a lack of involvement in community planning. What happens when the lifeblood of any community — those in their 20s and 30s — decides to leave?

By now, everyone has a fairly clear picture of what is taking place: an influx of global capital (largely from the Middle East and Asia), years of broken promises on affordable housing by successive governments, and low interest rates have created a situation where home-ownership for first-time buyers is becoming a desolate dream.

For those lucky enough to acquire a home, escalating prices have meant going deeply into debt to gain a foothold in the market, dangerously shrinking their margin for error. A report released last year by the Canadian Centre for Policy Alternatives, suggests that one in ten homeowners under 40 could be underwater on their mortgages — meaning their debts will be greater than their assets — if real estate prices crash as expected at some point.

Toronto is increasingly becoming a place where the fastest growing demographic, those under 35, can no longer think of living there as an integral part of their future. Vancouver already faces an almost existential threat, with many millennials frustrated by their inability to find even a condo at prices their wages can accommodate. In the UK, London for some time now has been transformed to investing vehicle.

The amount of overseas investment in Canada, particularly in the Vancouver and Toronto housing markets, is increasing rapidly. Foreign speculators are snapping up investment properties and often leaving them empty. This drives up real estate prices and encourages the construction of luxury suites rather than affordable family homes.

No homes should be empty when last year in British Columbia 1365 children and young people lived in temporary accommodation, while street homelessness is rising rapidly in Vancouver. That so many properties are empty highlights the fact that they were never intended to be homes, but financial instruments: a way of placing a winning bet for foreign investors whose commitment to the city’s communities is at best skin-deep.

The prime minister, Justin Trudeau, has categorized the issue as “a very significant crisis” and called for measures that would make housing more affordable across Canada. But he and his government have yet to offer concrete solutions to the problem.

The silent misery persists globally. Sadiq Khan, London’s newly elected Labour mayor, told The Guardian: “There is no point in building homes if they are bought by investors in the Middle East and Asia. I don’t want homes being left empty. I don’t want us to be the world’s capital for money laundering. I want to give first dibs to Londoners.”

A frank conversation about housing begins by sticking to facts. The problem with foreign real estate investors is not their nationality; it’s where the capital goes after the sale. The Panama Papers showed how people can invest in housing and then direct the profits into shell companies, later funnelling the money into offshore tax havens so that the dividends can be brought back to Canada tax-free.

The idea of foreigners owning properties in Toronto, London and Vancouver should not be disturbing — these are multicultural cities and always will be. The issue is that these buyers are not earning domestically and are fuelling unaffordability while eroding any sense of community belonging.

Ryan Holmes, founder of the Vancouver-based social media platform Hootsuite, recently decried the gloomy state of affairs. “Unaffordability is emptying Vancouver of one of its most valuable assets — young people who grew up in the city and who are invested in it,” Holmes wrote. “Vancouver risks becoming an economic ghost town, a city with no viable economy — other than the service industry catering to wealthy residents and tourists.”

In addition to high prices, Toronto is starting to show other worrying signs. The city’s chief planner, Jennifer Keesmaat, says she is concerned the lack of representation by young people and other demographic groups in property development decisions may eventually drive them away from the city. According to Keesmaat, “We undertook some research recently … and discovered that the participants at our public meetings are primarily over 55, white homeowners. And of course, we know in the city, the fastest growing demographic is under 35, that almost 50% of the population is non-white and 50% of the population are renters.”

When young people’s housing is precarious, and their employment prospects unstable, they’re going to start feeling disconnected from their communities, and consequently less inclined to engage with mainstream politics.

The Millennial Dialogue Report recently wrote that “Canadian millennials are estranged from politicians” – observing that 70% of young people feel their views are ignored by most politicians. Similar sentiments exist in Britain and the United States. Young people were uniquely punished by the financial crisis in 2008 and are rightfully angry and disillusioned.

But there is another side to the story; young people are starting to mobilize within grassroots movements such as Take Back the City, Black Lives Matter and the Spanish citizens’ platform Barcelona en Comú. They share an aim to inject political and social consciousness at a time when trust in establishment politics has plummeted and economies are entangled in hyperbolic neoliberal globalization. Of course, challenging the status quo never goes unopposed, and yes, at times the barriers might seem insurmountable; but the words and actions put forth by such groups expose the limitations of the prevailing political systems and call for sensible policies and participatory democracy. Best of all, they can inspire more involvement from demographic groups that have until now been voiceless.

Maybe the solution to the housing crisis doesn’t lie entirely in government policy or political ideologies but in the joining of local, civic groups to similar transnational social movements: those that are redefining the terms of struggle globally by challenging super trade deals, addressing climate change, and demanding more receptive government. It’s a blueprint that could offer practical steps to set into motion a different vision for inclusive politics.

Photo: Alex Costin/Flickr

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