Few would disagree that housing is a fundamental requirement for life and that the production of homes is a key task for any society. With the economic crisis, triggered by the bursting of the housing construction bubble, modern capitalism is failing this task. Across Canada, the effects of this are leaving many homeowners with properties worth much less than what they paid for them. The rapid collapse in value leads to the collapse of employment in construction and spin-off industries. In the US the effects are many times worse. The system creates an ironic contradiction. The crisis, which was fuelled by an overproduction of housing, also leads to a shortage of rental units, just as many former owners are forced into the ranks of renters. On the one side there is too much housing to be sold at a profit; on the other side, nobody can find a place to live. The bursting of the housing bubble merely highlights the extent of the housing problems that capitalism creates, and its inability to offer any solutions.
Canada’s major housing markets have experienced massive increases in condominium production and away from the production of rental units. Low mortgage rates encouraged speculation in condos that people bought and “flipped” for a profit. In Ontario’s major urban centres, 14,155 condominium developments were started in 2007 compared to only 2,994 rental developments. In Alberta, 13,701 condominium starts were reported compared to only 1,123 rentals. In BC’s major cities, a whopping 21,780 condominium developments were started in 2007 compared to only 1,326 rental developments in the same year. As a result of the lack of new rental developments, apartment vacancy rates have plummeted. In October 2008, Montreal’s vacancy rate dropped to 2.4%, Toronto’s to 2% and Winnipeg’s to 1%. In the greater Vancouver area, the apartment vacancy rate is nearing a 20-year low at a mere 0.5%. In Vancouver City proper, the vacancy rate is at an astounding 0.3%. These low vacancy rates reflect the withdrawal of investment from production of rental suites as capital is invested elsewhere for a greater return.
While available rentals have decreased, the demand has not, resulting in increasing rents. The Canadian Mortgage and Housing Corporation (CMHC) reported in Fall 2008 that the average rent for a two-bedroom apartment had increased in Canada by 2.9%. The average rent of a two bedroom apartment in Toronto is $1095, in the greater Vancouver area it’s $1124, and in Calgary, $1148. The CMHC’s benchmark for affordable housing is 30% of one’s gross income. In order to meet this benchmark, the renters of an average-priced apartment in Vancouver would have to bring in approximately $3740 a month. In Calgary, they would have to bring in about $3820.
At the same time, as rents have been going up, wages have remained stagnant over the past 30 years. Now, with the economic crisis, unemployment is rising at a rate not seen for decades. The most vulnerable workers, those earning the minimum wage, agricultural workers doing piece-work, and casual and contract workers with no job protection, are faced with this mounting pressure on an already precarious economic existence. For example, in Vancouver, a single parent, working 40 hours a week, would have to earn upwards of $24 an hour in order to afford an average-priced two-bedroom apartment at 30% of their gross income.
Developers scrambled to get into the condo market, throwing up buildings wherever a razed lot could be found. But the number of condo buyers is finite. As a result, the condo market has been flooded – more have been built, or are being built, than can be sold. Many cities are littered with empty lots, partially completed condominiums, and finished but unoccupied suites. At the same time, homelessness has become an increasingly more visible problem, laying bare a basic contradiction of capitalist “solutions” to the need for housing. Free market solutions have led to a crisis of overproduction in condominiums at the expense of reasonable rental conditions. As developers put their money into condo starts, they withdraw it from rental housing developments. The lucrative market leads to overproduction, the characteristic feature of capitalism that is the root cause of the boom and slump cycle of markets.
This overproduction of condominiums owes itself to the ridiculous rate of profit made by developers. The profitability of condos for developers induced a flight of capital from rental development. Thousands of condos were produced for prospective buyers while those who rent are faced with dwindling rental vacancies. At the same time as existing renters face relentlessly rising rents due to the scarcity of supply, some landlords seek to unload less lucrative rental property in order to get in on the profits made from condo development. In Vancouver this has typically played out in the most vulnerable neighbourhoods, such as the Downtown Eastside, where homelessness, poverty, drug addiction, and violence are daily features of life. As hotels and cheap rentals are sold off, many residents are faced with eviction. Priced out of available rental spaces, let alone the purchase price of a new condominium, options rapidly evaporate and the streets too often become home for these people.
What we need is more social and public housing, not housing privately owned by a handful of companies. Priorities must be set to benefit the broadest majority of the population. To accomplish this, we must look to a different way of doing things, a different political and economic system – socialism. What is important to understand is that there is no lack of housing. The potential exists to house everyone in decent, affordable, environmentally sustainable housing. But in order to do that, the means to produce homes needs to be taken out of the hands of private capitalists. The current deficit of affordable homes affects everyone, from the homeless to working people and the poor. Those who don’t have homes are simply a more visible manifestation of the contradiction between “housing for profit” and “homes for all”. In the advanced West, they are a measure by which we can gauge the barbarous effects of capitalist “planning”.
A massive reorganization of priorities is needed. The issue is the creation of affordable public and social housing. The priorities for development must be set according to social needs. A democratically planned program of social and public housing is required so that housing production is in line with the real needs of the majority of the population. To do this, we must begin by identifying the housing needs. This will not be hard to do. “Homes for all” needs to be the guiding slogan. This can be achieved, but not within the bounds of private property. The bankrupt Olympic Village development that the City of Vancouver is on the hook for over $1 billion, should be converted to 100% social and public housing. Further, unoccupied condominiums must similarly be taken into public ownership. Beyond this, changes must be made to guarantee all workers a living wage, not just a minimum wage. Set at two-thirds the average hourly wage and indexed to the cost of living, this would ensure that all workers can afford to pay rent without winding up in the poor house. A universal and free childcare program would liberate single parents and two parent families who cannot afford daycare and would mean greater economic independence so that all families can better enjoy life.
The contradiction between the abundance of unoccupied housing and abysmally low vacancy rates is inevitable when housing is produced for profit – when homes are thought of as commodities and not necessities. Capitalist economics have proved completely incapable of providing decent housing that is affordable and accessible to all. All capitalism has done is create a massive crisis of overproduction while failing to provide for existing needs. With a socialist economy, based upon the democratic participation and planning of working people and the poor, we can solve the contradictions of capitalist development. People do not have to die in the cold or crowd into festering suites. Through public ownership and democratic planning, the wealth of society would be used to meet societal needs and not private profit. From this beginning we can move to a socialist future in which the slogan “Homes for All” becomes a concrete reality.
