Financialization of Mortgages: packaging homeowner loans (debt) as items (called ‘securities’) to be traded.

Also known to be the instigator of housing bubbles (Walks 2014).
^{*see graph at the very bottom of this section below.}

Heightening Our Housing Crisis

• Public policy changes in late 2006/early 2007 led to private lenders “securitizing as many mortgages as they could into MBS [mortgage backed securities] and selling them to CMHC/CHT [Canada Mortgage and Housing Corporation / Canadian Housing Trust]” (pgs 264 -265).
• This lowered lending standards as lenders who securitized mortgages were not responsible for these debts – they bundled mortgage debts together and sold them off as a package to CMHC/CHT. Instead of the usual standard of 5% down payment and 25 year amortization period, mortgages were issued without down payments and with 40 year amortization periods (pg 265).
• Many households, who previously did not quality, were drawn into homeownership.
  • In just 2 short years mortgage debt in Canada grew by 30% from $628 billion to $828 billion (pg 265).
  • By 2009 30% of Canadian mortgage debt was securitized.
• Pausing with the onset of the Global Financial Crisis in 2008 (and due to the federal government using public funds to bail out lenders, through CMHC (Walks 2014)), the results of this included inflated housing prices unattached to income and record rates of household debt (a ‘housing bubble’) (Walks 2014, Kalman-Lamb 2017, August 2022).
  
  Edmonton
• Highlighted by the graph below, the impact on Edmonton has been sobering, and is illustrative of why our current housing crisis continues to worsen.
  • In just 3 years the average cost of an absorbed (newly built and sold upon completion) single family dwelling in the City of Edmonton Doubled (between 2005-2008).
• Since 2009, these trends have only worsened:
  • We can see below there was already another housing bubble peaking around 2015.
  • Incomes are even further disconnected from housing costs, not only for homeownership but also for tenants:
    • Rents doubled between 1998 – 2008
    • Rents also increased another 50% between 2012 – 2015.
  • Wealth gaps have also continuously widened, especially between tenant and homeowner households.
  • Since 2015, rates of first time homeownership have been decreasing while housing prices continue to outpace incomes (2022)
  • In 2020 investors purchased between 20-30% of homes (2023),
  • And from 2014 to 2021, 1/5 of every newly issued mortgage was for an investor (2022)

_{Click here for a larger view of the graph below.}

• If we look at the changes in Edmonton over the last 30 years between the average price of a single detached absorbed house (city) and average employment income (cma – disaggregated by sex and age) we see that incomes have not at all kept pace with housing costs (click on graphs below to view):
  ^{Note: absorbed meaning recently built and sold}

Multi-Family Rental: Apartment buildings and/or row house complexes are purchased, or built, by financial firms. These suites become units for investment and strategies are used to maximize returns on investment and profits for investors, shareholders and management. All of which is prioritized above tenant needs.
_{^{Learn more about financialized multi-family rental housing in Canada here.}}

The financialization of multi-family housing has resulted in record increases in shelter costs for tenants with no end in sight – while (tenant) incomes remain largely flat. This trend is especially catastrophic in Alberta because there is no rent control on rental increase amounts, nor caps on regulated utilities.

Many financialized owners such as Boardwalk (REIT) or Mainstreet (REOC) accept payment for shelter costs through credit card. This may allow tenants to temporarily make up for growing shortfalls between income and rent – but in the end tenants end up paying even more for already unaffordable shelter costs and are left saddled with escalating credit card debt.

In just 10 short years, Edmonton has lost over 50,000 ‘more affordable market’ rental suites with rents less than $999/month – both within the city as well as the Census Metropolitan Area (CMA). In 2006, 81% of suites were less than $999/month – which dropped down to only 27% in 2016 (CMA).

The figure below (click here to enlarge) shows these profound shelter cost affordability losses graphed alongside the increasing proportion of primary rental suites that have become financialized over the last 15 years:

Although the impacts of the financialization of multi-family housing have been devastating for many households, neighborhoods and communities, it is important to remember that this is still a relatively new phenomenon.

The table below summarizes the drastic differences in primary rental housing in Edmonton comparing 1992 (with minimal financialization of multi-family rental housing) to 2022:

• In 1992 asset managers held 0.2% of primary rental housing in the city of Edmonton while Real Estate Investment Trusts (REITs) and publicly traded Real Estate Operating Companies (REOCs) owned zero (see 1st row in table above).
• By the end of last year (Dec. 31, 2022), financialized primary housing included 47.7% of all primary rental suites in the city of Edmonton with REITs owning 27.7%, Asset Managers holding 13.2% and REOCs with 6.9% of private market primary rentals.

Reflecting national and international trends, investment sales in Edmonton during Covid surged, multi-family sales being a key driver.

As a result, between 2020 and 2022 in the city of Edmonton:

• Financialized ownership of primary rentals increased 21.9% with the addition of 6700 suites
  • Financialized ownership of primary apartment suites increased from 43.8% to 47.7% (of all primary rental apartments across the city)
  • Financialized ownership of row housing suites increased from 35.5% to 54.0% (of all primary rental row homes across the city)

The Financialization of Senior’s Housing has been driven by the privatization of senior’s long term care facilities (LTCs), and neoliberal agendas pushing to privatize and reform health care (August 2022).
_{^{Learn more about financialized Seniors’ housing in Canada here.}}

The financialized model of Senior’s housing is based on extracting and accumulating profits (including government subsidies). Which means that prioritizing resident care is incomprehensible.

When the underlying goal of maintaining a good and dignified quality of life is usurped by maximizing private profit, quality of care becomes compromised for patients in health care settings and residents in facilities (Brown 2022).

This is reflected by minimal investment which reduces resident health and well-being, while producing poorer labor conditions – often off the backs of staff who are racialized women.

This lower level of care is also more expensive for residents (out of pocket) as well as public funders with increasing costs across the health care sector – including LTCs along with retirement homes, and collective residences with varying levels of resident care (Brown 2022).

In Edmonton, to mitigate the exorbitant amount of monthly fees for private housing, many seniors entered into life leases with Christenson Communities. Following a fire, some were displaced and waited months for their payout, only to find a significant amount deducted (2022).

The effects of the financialization of Senior’s Housing were devastating during Covid with the extreme loss of life of residents in LTCs operated by financialized owners – which could have been largely mitigated.

While non-profit LTCs provided care above and beyond what was even funded (i.e. in British Columbia, an additional 80,000 hours) for-profit homes did not even provide the hours they were funded for (Brown 2022, p.21).

Meanwhile financialized owner executives and shareholders acted accordingly with their model. While mortality rates spiked they took for themselves government funds intended to resource a resident prioritized response to COVID-19 (Wallace et. al. 2020).

It has been estimated that 42% of retirement and 22% of long-term care homes are financialized (August 2022, p.5).

In Edmonton, there are a number of financialized senior’s housing owners. Including Chartwell, Optima Living (& Axium Infrastructure), Christenson Group, Revera, and Atria. Boardwalk also has a mixed apartment complex with seniors retirement apartments.

Edmonton’s senior’s housing has been a longtime target for financialized owners, and the pandemic has not been a deterrent.

This has had a significant impact on costs. By example, seniors living in market rental standard spaces (not requiring high level care) have had significant rental increases over a relatively short amount of time:

• In 2009, 27.1% of standard spaces had rents costing $2500 or more per month.
• In 2021, 71.1%% of standard spaces had rents costing $2500 or more per month.

More details about these step increases in rents are highlighted in the graph below (click here to enlarge):
^{Data: CMHC Housing Information Portal}

Social Housing: social (or non-market) housing exists in perpetuity – it is meant to be protected by remaining outside of the speculative (and unregulated) private market indefinitely.

The stock of non-market housing in Canada is already severely insufficient (demonstrated by waitlists). Commodifying, privatizing and/or selling any social housing when we are already at a deficit, let alone to investors, intensifies housing crises and homelessness. First, by taking away housing that were already a lifeline for too few tenants who have no where else to go. Secondly, as shelter costs in the private rental market will be skewed upwards – by higher rents attached to the volume of suites joining the private rental market.

Over the last few years some ‘affordable’ housing projects have been built through new federal programs and dedicated federal funds. However, it turns out that the majority of this new affordable housing is actually unaffordable for tenants (over half of these funds went to private developers (NHC 2022).

The majority of non-market housing was built in Canada around 50 years ago. Funds for non-market were never set aside for repairs nor maintenance.

In 2021, under the guise of the state of repair of non-market housing, the provincial government in Alberta created bill 78. This bill makes privatizing and selling off roughly half of Alberta’s non-market housing possible – 26,100 homes.

The claim was this will create 25,000 more homes – which at best would result in a further deficit of 1,100 non-market homes. With what can only be best described as magical thinking, details have yet to be provided to demonstrate how this could be done.
_{More background information on this here.}

Student Housing: The financialization of housing has also materialized an an asset class of (off-campus) purpose built rentals for post-secondary students (‘PBSAs’).

Not only has this added to the gentrification of neighborhoods and intensified already increasing debt loads for students, much of this housing is not affordable either (August 2022, Revington & August 2019, Revington & Benhocine 2023).

In Edmonton

• In 2020 Alignvest Student Housing REIT arrived in Edmonton by purchasing a building on 110 Street and Whyte Avenue. Rebranded as 1Ten on Whyte (fully furnished student housing), this building was formerly known as St. John’s Institute – initially developed as a residence for students enrolled at the University of Alberta of Ukrainian descent.

Short-term rentals: the acquisition or development of investment properties as short-term rentals is another key piece that is changing the landscape of rental housing for tenants.

Tenants living in areas with short-term rentals often deal with higher rental costs.

The threat of conversion of a long-term rental to a short-term accommodation because an investor can turn around a higher profit adds additional stressors threatening security of tenure for tenants. Properties used for less than 30 day occupancy are taken off the rental market and are inaccessible to local long-term tenants.

Short term rentals play a part in ‘hollowing-out’ cities from tourism displacing local residents.

Recently 7 people tragically lost their lives in an apartment fire in Old Montréal – 6 of which had organized their accommodation through Airbnb. These short-term rentals were operating illegally without provincial short-term accommodation licenses (along with unaddressed safety issues).

While investigation is still ongoing, what we do know is that the named owner Emile Benamor is a lawyer who has pled guilty to tax evasion, and has been linked to organized crime. It also appears he was in the process of pushing long-term tenants out in order to sign new leases with Airbnb hosts.

An additional layer of complexity with regulating short-term rentals are effective mechanisms to prevent short-term rentals operating illegally. This tragic case highlights regulatory gaps as (undiscerning) short-term rental platforms do not screen unlicensed owners, and municipalities do not have access to intermediary data. In addition, transparency and accountability is even harder to come by as there is a disconnect between owners and hosts – and owners can maintain anonymity by the use of hosts.

In Edmonton

As of April 27, 2023, the number of short-term rentals in Edmonton* includes:

• 921 houses
• 649 apartments
• 412 secondary suites
  ^{*Based on Airbnb, screened for suites with kitchens (suites could otherwise be long-term rentals)}

Owners of short term rentals in Edmonton are meant to register for a business license. It is hard to know how many of the above are registered as the city’s open dataset of businesses licenses omitted short term rental accommodations.

Manufactured or Mobile Home Communities (MHCs) have been identified by financialized entities as ‘recession proof‘ investments (August 2022, p.6). A form of housing associated with lower shelter costs, residents of MHCs with financialized owners may have to deal with:

• Lot rental fees
  • Being introduced or increased
• Rising service costs
• Higher utility fees

There also appears to be a trend of mass evictions of residents from MHCs (Lund 2021). Either as an alternative to doing major repairs for owners, and/or when the land the MHC is located on is going to be redeveloped.

In Alberta residential tenancy law does not extend to residents of MHCs (Lund 2021). As a result residents are even more vulnerable to eviction and displacement.

As of 2018 in East Edmonton, over 860 residents living in Maple Oak Ridge were forced to live with unaddressed and long-standing safety issues as well as maintenance neglect (2018). Reliant on housing with lower shelter costs, residents cannot afford nor are able to do maintenance and repair required by the owner themselves.

^{Note: The owner of Maple Oak Ridge is Parkbridge Investment Group – which was purchased in 2010 by British Columbia Investment Management Corporation (BCI/BCIMc), a provincial pension fund investor.}

^{Parkridge owns 2 additional MHCs in Edmonton – Evergreen and Jubilee Landing – as well as Willow Park Estates in Leduc and Parkland Village in Spruce Grove.}

The National Housing Advocate also has excellent resources.