Previously published in the Winnipeg Free Press January 12, 2023

Government housing policy preferences are based on values, the most fundamental being the extent to which housing is viewed as a right, or as a commodity.

From a rights value base, housing is a social good — a home and place of safety to build one’s life, relationships and connection to the community. It is a key social determinant of health that can strengthen or weaken our physical and mental well-being.

Alternatively, a commodity-oriented value base views housing as an asset for financial investment to generate maximum profit for investors.

Recent developments rooted in a commodity value-based approach, known as the financialization of housing, is accelerating the erosion of affordable rental housing and growing inequity for low-income and marginalized groups.

The financialization of housing refers to a now well-documented process whereby financial actors with large amounts of money, such as private equity firms or Real Estate Investment Trusts (REIT), use housing as a financial instrument for profit.

Total assets of Canadian REITs grew from $80 million in 1993 to $4 billion in 1998, and to $75 billion today — an indication of how they are transforming the rental-housing sector.

Financialization of housing also includes en masse purchasing, by large corporations, of affordable housing they deem “undervalued.” These acquisitions are then repositioned as higher-end rental accommodations, with the motive of achieving a significant return on profit.

Displacing tenants is central to this business model. The biggest revenue gains are made from replacing low-rent-paying tenants with higher-paying ones.

The identity of the Alberta company purchasing the Lions Place non-profit seniors building has not been confirmed, but it’s widely speculated that Calgary-based Mainstreet Equity Corporation is involved. A further look at this firm serves to illustrate financialization of housing in action.

Mainstreet went public on the Toronto Stock Exchange in 2000, growing from 272 units, with a market value of $17 million, to more than 16,000 units in 2022, with a market value exceeding $3 billion.

According to its website, Mainstreet targets buildings that are “often mismanaged and in poor condition, needing substantial renovations to bring them to market standards. The rents in these buildings are generally below market, which tends to attract tenants with weak credit … (that) can create a downward spiral effect” on the buildings.

The website further describes how Mainstreet uses government-insured mortgages to finance its business model:

“After renovation, suites are re-positioned in the market at higher rents. With the increase in rental income and reduction in vacancy and operating costs, cash flow increases significantly. That presents an opportunity for us to refinance the property with higher principal under long-term, Canada Mortgage Housing Corporation (federal government) insured mortgages, typically resulting in the recovery of the entire capital expense and original equity investment. The funds raised through refinancing are used to acquire further under-performing assets, resulting in the continuous cycle of the Mainstreet Value Chain.”

Governments need to protect renters from financialization of housing that results in the displacement of marginalized tenants in our communities and undermines initiatives to increase housing supply for low-income households.

The office of the Federal Housing Advocate recently commissioned a report to address the financialization of housing in Canada. Recommendations include stopping favourable Canada Mortgage Housing Corporation-backed lending to financialized landlords; eliminating federal tax incentives for Real Estate Investment Trusts and regulating public pension fund investments with financial operators.

Also recommended are ensuring loans and grants offered through Canada’s national housing strategy are not accessible to financial firms; and for the federal government to set up a non-profit acquisition fund to assist non-profit and co-op housing organizations to purchase at-risk rental buildings when they come up on the market.

A key role for the provincial government to address the financialization of housing is to strengthen rent-control legislation, especially the growing practices of “renovictions” and above-guideline rent increases. As well, legislation should be enacted in Manitoba, similar to what Quebec has done, to provide the minister responsible for housing with the authority to approve, or in some cases disapprove, the sale of non-profit housing in order to protect renters from the tenant-displacement business models of financialized landlords.

In June 2019, the federal government recognized the right to housing in law in the National Housing Strategy Act. Confronting and regulating the financialization of housing needs to be a critical focus for government action in order to protect this human right.