By John Francis
As our Municipality undertakes a review of Short-Term Accommodation, the subject is making headlines around the world. I wrote last issue about how Venice has gone from more than 200,000 people to less than 50,000 in a single generation. “The big money,” a resident told me, “wants the residents out of Venice” so they can turn it into “Veniceland”, a historical theme park catering exclusively to tourism. Venice is perhaps the worst example, but it is far from the only one.
British newspaper The Guardian did an investigative piece last fall about housing in Dublin, Ireland. The headline was: “30,000 empty homes and nowhere to live: inside Dublin’s housing crisis”. A subhead explained: “Dublin’s landlords would rather put their properties on Airbnb than rent to local families. There are echoes in cities around the world.”
The article elaborates: “…in August 2018, there were reckoned to be 3,165 entire properties listed on Airbnb in Dublin, compared with only 1,329 available for long-term rent.” When families are evicted from their properties (ostensibly for “renovations”) so that the property can be listed on AirBnB, welfare departments often put the families up in hotels. The hotels are having a hard time competing with AirBnB flats and apartments.
The Guardian article includes an interview with Rory Hearne, a Dublin academic, who explains: Homelessness also started to rise. You now see this completely new phenomenon called family homelessness… Rents are rising, benefits are being cut – and they’re being pushed into homelessness.”
Since then, he says, the housing shortage has reached parts of the population who would once have considered themselves relatively affluent. “I had a class last week: a mixture of mature and regular students. I asked them: who thinks they’ll own their home? Out of 80, not one person put up their hand. That’s a shocking, shocking thing.”
The CBC Radio News program “The Current” recently ran an interview with Leilani Farha, United Nations Special Rapporteur on Adequate Housing and filmmaker Fredrik Gerrten, who made a movie “Push” about her work.
The problem can look a lot like “gentrification”, a phenomenon where affluent people buy up downmarket properties and improve them, gradually squeezing out the less affluent long-term residents from the area. But Farha and Gerrten explain that the issue is much deeper than gentrification. It is, they explain, the “financialization of housing”.
“Homes are the most rentable asset on the market,” and are being scooped up by investors. “The money is looking for poor people’s homes” all over the world – pushing the people out… Salaries are not growing but the cost of living is getting more and more expensive.” There are common threads around the world — people are unable to afford to live in the cities where they work.
Hedge funds and Real Estate Investment Trusts are moving in, Gerrten explains: “They have more money than a normal landlord, so it’s kind of almost like a landlord on speed, The result is often an owner who lives very far away from the property. You can’t knock on his door and talk to him about your problems because your landlord is now a hedge fund … somewhere [in a] totally different part of the world, maybe.”
The Hedge Funds’ strategy: “Find undervalued properties, buy them up, force the tenants out, upgrade with a few fixes and renovations, jack the rent up by 50 or 100%.”
An unprecedented amount of wealth is involved; Hedge Funds are buying thousands of units at a time. “This is not about gentrification, this is absolutely about creating financial products out of residential real estate. There is nothing organic about it,” says Farha. “When they find [undervalued properties], they buy them up with their liquid capital — backed by banks — and their model is to then refurbish the units and increase the rents, forcing people out,”
But it’s worse than that; it’s not just renovictions. Many properties are bought by speculators who have no intention of renting them. They just want to flip them to a developer for a huge profit.
In London, England, for example, “80% of those foreign-owned properties are vacant.” There is a similar pattern in Vancouver.
Gerrten and Farha talk about an Ottawa suburb called Herongate. A multi-billion dollar asset firm called Timber Creek bought the development, deemed the homes unfit for habitation and evicted everyone. Those homes sit empty.
Where are the private equity firms getting their money from?” asks Current host Anna Maria Tremonti. The biggest single source, they explain, is pension funds, especially government pension funds. As governments push their pension fund managers for more revenue to fund more pensions, the managers are forced to invest in real estate.
Individual citizens contribute to the commoditization of housing by holding Real Estate Investment Trust (REIT) shares in RRSPs and in investment portfolios.
“Housing is a human right,” Farha states. All levels of government must push back on the commodification of housing.
On the Bruce Peninsula the same pattern applies, but on a smaller scale. The REITs and the international equity firms aren’t here yet, but an increasing number of Bruce Peninsula properties are held by investors. Some of those properties are used to generate income through RentCottage or AirBnB; others are simply held as an investment, to be flipped when the value increases.
This means that there are two classes of landowners in our community — those who live here and want to improve the community’s quality of life and those who want to generate profit and/or increase property values. Residents want their neighbours to be other permanent residents. Businesses want affordable housing for their employees. Property investors prefer to maximize profits with short-term rentals, a constant stream of strangers.
Northern Bruce Peninsula’s Council is going to have to reconcile these two paradigms. Stay tuned.
By John Francis