Re-financing the Housing Bubble: Strategies of the Neoliberal State

In the four years since the financial crisis of 2008 brought a North American-wide collapse in housing prices, the Canadian government has successfully taken measures to bring real-estate prices back to their pre-crash levels. Following in the tracks of the American effort to rescue financial capital, the past four years have seen a joint effort by all levels of Canadian government to re-inflate the housing bubble by deregulating finance, extending new lines of direct investment into real-estate and lowering interest rates. The Canadian government has effectively called on the real-estate industry to lead the economy out of the recession, facing down typical historical patterns in which real-estate is the last industry to recover from system-wide crisis. Next to resource extraction, the only real growth industry in Canada since 2008 has been real-estate.

Yet today, as in 2008, the real-estate bubble is reaching a “tipping point,” according to a recent report by Canada’s Royal LePage. In cities like Vancouver and Toronto, housing prices have climbed to unprecedented levels, with Vancouver prices reaching up to 11 times the city’s average family income. The Bank of Canada has identified the Vancouver market as “ground zero” for the coming financial crisis, and from its perch at a distance, The Economist observes Canadian housing is “more overvalued than it was in America at the peak of its bubble.” All forms of debt are multiplying, but household debt in particular is currently higher in Canada than it was in the United States prior to the subprime crisis, with debt-to-income ratios reaching 153 per cent.

Federal exit from recession

In the two years following the global recession, federal banks across the world lowered interest rates in an effort to loosen the credit crunch and stimulate new rounds of investment. In September 2010, Mark Carney and the Bank of Canada lowered interest rates to 1 per cent, where they have since stayed. By the summer of 2011, the Canadian housing economy was showing obvious signs of escalation, and by June local prices moved well above their pre-recession peak. Having not only stimulated but “over-stimulated” the housing economy, Carney began issuing strong warnings about the unprecedented risk-exposure of Canadian mortgages. In reality, the central bank actually did everything in its power to continue the growing flow of cheap, low-interest money into the real-estate economy. Out of fear of exacerbating the underlying weakness of the recovery itself, the Bank of Canada took the position of searching out ways to buoy housing finance.

Vision Vancouver’s re:THINK: Obscuring the housing crisis through the spectacle of competition

Vision Vancouver and city planners have recently launched a series of highly branded “ideas competitions” with design-heavy titles like re:THINK and re:CONNECT. While the stated purpose of these competitions has been to generate creative new ideas for the city’s greatest planning challenges, the reality is that these events represent staged spectacles that obscure Vancouver’s housing crisis. The story of re:THINK and re:CONNECT offers a textbook model for how to distract residents away from the the social injustices of extraordinary housing costs and incredible developer profits, displacing politics through the spectacle of competition.

The re:THINK housing competition encourages ordinary residents to submit and vote on ideas for “protecting and creating affordable housing in Vancouver,” while re:CONNECT called on the citizens of Vancouver to “join with local and international designers to ignite discussion and dream new possibilities for the future of the viaducts and the City’s broader Eastern Core.” By launching these flashy spectacles of competition, oriented primarily around designing our way out of the crisis (or ignoring the housing crisis completely in the case of re:CONNECT), Vision Vancouver is embracing the creative neoliberal language of community and citizen participation, while actually sidelining the fundamental socio-economic injustices of our developer-run city.

Present Crisis: The Expiry of Social Housing Funding in B.C.

The already dire housing crisis in Vancouver is about to worsen with the mass expiration of funding and operating agreements for twenty-five thousand social housing units. By 2033, 99% of operating agreements across the country will have expired if current austerity measures are not reversed, amounting to $3.5b of reduced government expenditures annually.[1] Presently there are no federal or provincial plans to initiate new or extend existing operating agreements. The forecasted federal funding for non-profit housing providers in BC for the year 2030 is zero.[2] This process of funding-expiry has already begun, with tenants experiencing the first wave of this unprecedented withdrawal of public housing funds. Unless a popular struggle takes shape, the entire country will move in the direction of a massive loss of public housing.

Neoliberal policy makers and urban think tanks have framed this mass expiry in optimistic terms. The disappearance of funding is presented as an “emerging opportunity,” to quote a recent report by the BC Non-Profit Housing Association. [3] In the report, the Association explores how the opportunities of austerity can be “capitalized” upon, paving the way for the implementation of disaster capitalism. As it has often been proven under neoliberal governments, the deployment of a shock becomes the necessary grounds for the introduction of market reforms, with the ultimate goal of privatizing public assets and services.[4] In the case of affordable and non-market housing, the disaster comes in the form of a funding expiry, for which the recommended strategies of “ensuring future viability” entail the introduction of market reforms. In a drastic change in direction, not-for-profit housing operators are slated to be phased out to make way for pro-market operating bodies.

Housing ‘task force’ plan not strong enough to dent developer-backed affordability crisis

The City’s developer task force released another interim report today — a follow-up to the previous very preliminary interim report (see The Mainlander‘s analysis here).

Although the latest proposal and its ideas remain in draft form, the document contains a couple of substantial policy proposals, including a municipal Housing Authority and a Land Bank. These are two very good ideas, but the question remains: will the proposals actually be implemented? If so, will it be at a scale capable of meeting the demand for real affordable housing? Will it be done in a way that benefits residents and communities instead of private developers?

The Housing Authority proposal is a good idea, but not a new idea. For example, the City of Vancouver Public Housing Corporation has existed since the 1980s. But it has been so inactive that it owns only a dozen buildings, most of them in the Downtown Eastside. For this reason, The Mainlander has been consistently arguing in favour of a reactivated and robust Housing Authority. During the 2011 civic election campaign, Vision and the NPA did not endorse a Housing Authority. COPE was the only party to do so.

It is surely a step in the right direction to start talking about what a reactivated Housing Authority will look like. The trick is to make it powerful enough to make a real difference. For that to happen, the devil is in the details. And today’s interim report is weak on details. It floats the idea of a hypothetical “City-owned entity, such as a Housing Authority, [which] could enable the City to deliver on its objectives for social and affordable rental housing.”