“I had like $500 left in my account,” my friend Jordan excitedly tells me. “I was seriously fucked for rent.” Like millions of others, Jordan had entered his final few weeks of eligibility for the Canada Emergency Response Benefit (CERB), the government’s $2,000 per month unemployment program. He first applied after a wave of 927,000 layoffs in March, when the limit was 16 weeks: it is now eight weeks longer, stretching through until the end of summer. Jordan is covered for now, but when he goes back to work is anybody’s guess. And he’s worried about the long-term.
As of mid-June, the economy is still leering toward straight-up catastrophe. Pessimistic projectionspaint a picture worse than that of 2008/9, characterized by sharp contractions and rampant unemployment, which may be long-term in the travel sector and sectors connected to travel like hospitality, live music, and the arts (Jordan’s a bartender and musician).
As provinces gradually reopen their economies, the possibility rises of second or third outbreaks and second or third lockdowns, while the unknowns of the “pandemic economy” may leave more people than expected laid off or permanently unemployed altogether. Spending has flatlined. In the nick of time, CERB was extended, temporarily stopping unemployed folks from moving en masse to (laughably inadequate) provincial employment insurance. But pending divine intervention, a quick recovery is impossible. Things look grisly.
If you’ve spent any time on the Left in Canada in the last, say, 30 years, you’ve seen neoliberalism pare down the social safety net to a couple bespectacled social workers and meagre employment insurance—and so CERB probably feels like a welcome change. Since the 1990s, when the federal Liberal Party slashed transfers to the provinces, and then the provinces followed suit, the welfare state has been eviscerated by cuts. If you’ve spent time on the Left, austerity has been the rule, with few exceptions, for quite a long time.
The Open Window
COVID-19, though, could flip the script. Given the pandemic’s present impact and the unpredictable future ahead, the question may no longer be about whether social spending is defensible, but rather about where it’s going (unless, of course, governments choose to let people starve and the economy tank, which they could). And if demand and political wherewithal align, we might see more spending programs in the near future, perhaps even something long-term.
A form of stimulus is a likely contender. In fact, for some, the CERB program represents a universal basic income (UBI) trial balloon. Though the Trudeau government has dispelled the idea (and has even opened a snitch line on “abuse” of the CERB program), articles in Maclean’s, the Toronto Star, and the Globe and Mail have recently connected CERB to other post-crisis policies—employment insurance in the 1930s, for example—arguing that some manner of universal payments would be an appropriate measure for keeping Canadians afloat during unsure times and onward. In Parliament, the idea has some currency among members, and popularity among the population and pundits alike appears to be growing in light of pandemic-shaped insecurities. With spending flat, and people in financial trouble, a UBI-type policy seems generally sensible. And as governments focus on immediate economic recovery and keeping people alive, stimulus is necessary. But what about instituting it as a permanent program? Is a UBI worth demanding?
If one peruses the takes, the Left in Canada remains largely divided on the issue. As a universally-distributed form of social assistance, the appeal seems clear enough. But its embrace by conservatives and the private sector causes many to take pause. Right-wing support is often (partly) premised on ideas of fiscal responsibility and individualism, which some on the Left may be willing to stomach. But something less stomachable is UBI’s function as a capitalist’s pocket-padder—making no real intervention into the unequal ways Canadian society distributes resources. Take rent, for example: if one is entitled to $2,000 a month, irrespective of the income they already earn, paying $2,000 for rent might not seem that bad.
Rent’s a Racket, But Why?
And looking at rent, where a lot of CERB money actually goes, lays bare UBI’s problems. For unemployed folks living in high cost of living (HCOL) areas like Toronto and Vancouver, where average rent for one-bedroom apartments hovers above $2,000 per month, CERB might keep a roof over your head and leave you enough for a granola bar. Scrolling through Padmapper in Toronto is less like apartment hunting and more like staring directly into a jet engine. In Ontario, the Ford government has suspended evictions, but this won’t last forever—and the pressure to pay is still on. The government’s approach has been confusing, like a toddler curiously feeling around an adult’s face: occasionally they cutely grab your nose, then stick their hand in your eye. Ontarians hear lip-service about the need for landlords to be good to their tenants, for example, while the government pursues policies that ease eviction.
Many tenants are thus on a powerful and unrelenting rent strike. Others have been able to broker deals with landlords to temporarily reduce rents. But this apparent goodwill of the landlord class has left many renters only temporarily relieved and indebted in the future, while also obfuscating fundamentally grim elements of landlording: if a property owner has paid off their mortgage, they make money off renters hand-over-fist. If they temporarily reduce rent in light of COVID complications, they still make money hand-over-fist. And in HCOLs, the money they make each month is staggering. So CERB has been a fantastic landlord bailout.
On the other hand, however, there’s a more complex picture. Many property owners are nowhere near paying off their mortgages, because they have lots of them. Over the last 20 years, monetary policy has kept interest rates historically low, making borrowing money extremely easy. The idea of taking out multiple mortgages on rental properties—whose value in turn began skyrocketing over that time period—became a no-brainer for investors. And because the Canadian housing market barely crashed in 2008/9, the skyrocketing never stopped.
This then led to outrageous housing speculation, characterized by a frantic and debt-fuelled (known in financial circles as “leveraged”) purchasing of properties to be rented out long-term to tenants, or short-term to Airbnb guests. In cities like Toronto, Vancouver, and even smaller communities beyond, speculation has pushed market demand far higher than what’s typical of already-popular areas, and in the megacities specifically, rent has doubled or tripled since the 1990s.
Meanwhile, average wage growth for non-management workers has been mostly flat, and completely out of pace with rising rents and home values. Paired with a shortage of available housing stock, of which a large percentage is owned by both domestic and (hard-to-measure) foreign capital, speculation has made Canadian markets some of the most overvalued in the world. And because housing hasn’t crashed in 20 years, it’s also a huge, precarious bubble. But investors have heretofore been able to count on a dependable stream of rental income and Airbnb bookings, combined with very supportive monetary policy. That is to say: as long as enough people could pay the price (and interest rates stayed low), the market beared it.
An affordable housing rally in Toronto in 2018. Photo by Justin Greaves/Metroland.
Falling Dominoes
Then, suddenly, many people could not pay the price. COVID-19 burst through the door, threatened people’s income, and revealed the precarious web of behaviours on which the housing market is premised. Headlines read:
“‘We’re losing as much as $11,000 in rent per month’: How these Airbnb hosts are adjusting to the new normal.” “‘Starting to panic’: Landlords fear they won’t be helped if tenants don’t pay rent amid COVID-19.”
Without steady, dependable dough from rental tenants or Airbnb bookings, many leveraged investors are now finding themselves overleveraged and facing the possibility of huge losses. They may start missing mortgage payments as the mortgage deferral window closes, or consider selling if things do not improve in the long-run. Larger investors and property companies like Blackstone, Starlight, and Akelius can probably handle losses for a longer time, weathering the storm and waiting for a return to normalcy. But losses haven’t really arrived just yet: most investors have been largely saved by programs like CERB and mortgage deferrals. Had nation-wide rent relief been put in place, or had investors lost money, the story might have been different. But everyone narrowly avoided a gargantuan pie to their faces.
There’s still a chance, too, that things will hold generally stable in the near-future, that a downturn will be modest, that in 2021 things will go back to normal. A lot of people are betting on this outcome: Canadian real estate is in “too big to fail” territory, having accounted for 15 percent of Canada’s gross domestic product in 2019: four percent more than energy. A housing crash would be disastrous, not least for the government which will have to eat many of the losses vis-a-vis mortgage insurance, but also for many honest people who trudged through the market’s weeds and still managed to buy homes. But if housing doesn’t collapse, can we simply retour à la normale? For many of us, a “normal” distinguished by outrageous rent and a greed-driven housing bubble is simply untenable.
And herein lies the problem with UBI. Without directly addressing the commodified housing market, UBI works like a never-ending capital-bailout-carousel that simply reroutes public money into the pockets of property owners by way of its recipients, simultaneously propping up an outrageous housing crisis. If a basic income program is in motion when the economy eventually kicks back into gear, this is exactly what it’ll do. It won’t intervene in the market in any meaningful way; it’ll sustain it. In fact, UBI will make it worse: since everyone’s receiving money each month, what’s stopping the system from accommodating that mass influx of cash by inflating housing values and raising rents accordingly? What’s stopping investors from continuing to gamble, to speculate, to rip you off? If we’re to bring about a fairer society, social spending can’t be seen as good in and of itself—we need to follow it to find its function in the overall economy, right to whose pocket it goes. And following the money brings you to multi-propertied landowners, to domestic and international capital, to people whose main contribution to society was securitizing it.
The market gave us these problems. Why should we use the market to solve them?
A Path Forward
To better address inequality, we might first consider the comparatively unsexy, un-new idea of pursuing public housing and housing decommodification on a massive scale—call it a public housing revolution. Building tens of thousands of new social housing units every year, thus addressing backlogs and waitlists in the major megacities, is an obvious way forward. In this scenario, we free people from the greed-driven housing market, not further entrench them in it. And why not also consider public takeovers of allegedly abandoned condos and homes, empty hotels, second/third/fourth mortgages in default territory, and unoccupied Airbnbs?
Quick action will be necessary, ensuring wealthier private firms don’t buy up the housing stock while it’s cheap. Buoy these moves with strengthened tenant protections at the provincial level (like rent moratoriums, rent control, and anti-eviction and -renoviction legislation), and you can help level a playing field that’s been uneven for a long time. As the risk of being left homeless, evicted, hungry, or saddled with debt to landlords becomes more real for tenants, these policies cannot come sooner: they need to come now. Demanding them is where the work lies.
Home ownership and fair market rent, in the long term, will remain an elusive dream unless governments intervene by increasing housing stock, liberalizing zoning in cities like Toronto, and regulating intensely against speculators to cool everything off. In turn, these moves make landlording and real estate investing much less lucrative. One often reads in comment sections that we can’t threaten the propertied class, that “landlords have mortgages to pay too,” a sentiment that never seems to extend to out-of-work General Motors employees in Oshawa and Windsor (perhaps they should learn to code).
To be clear, CERB should most definitely be extended further than eight weeks to ensure people can meet their needs. Pulling out the rug now to make a case for public housing is of course the wrong approach. But CERB, and a universal income program that could follow it, need to be understood in the context of an historic housing crisis and record landlord profits.
Though they’ve denounced the idea publicly, it’s actually not too hard to imagine the Trudeau government, often touted as forward-thinking, pursuing something like UBI. They’d be trotting out a trendy policy and could bill it as “modern” and “progressive”—a perfect pillar for the new normal. But old problems, like rich landlords and an unforgiving housing market, continue to haunt the working class. And those are questions for which UBI alone has no answer.
Dan Darrah is a writer and editor living in Toronto.