Fredrik
Gertten called his documentary Push — as in pushed out, you can’t live here. It’s a
feeling familiar to many Vancouver residents.
The
movie, shown as part of Kwantlen Polytechnic’s KDocsFF this
week, follows the experiences of Leilani Farha, UN Special Rapporteur on the
Right to Adequate Housing, in her quest to understand why more and
more people around the world were being pushed out of homes they had long
inhabited, and pushed out of cities where they’d long resided.
If the movie had a central message
for Vancouverites, it is this: our problems are not unique, they are global.
The “financialization” of housing is an out-of-control global pandemic, driven
by the hunger of the financial management industry to find things to buy that
will increase in value in a world where too much money is chasing too few
assets — and where those assets are returning less and less profit as a result.
With bank interest rates
approaching zero around the globe, and stocks already overvalued, the lonely
eyes of money managers turn towards real estate and — voila! — they discover
your apartment building.
Real estate investment trusts, for
example, have been around in Canada since 1993. But the film explains that
following the 2008 global financial crash, when real estate values plummeted,
they swept in like vultures to feed on the wreckage.
These real estate
investment trusts — and other similar investment vehicles — will take your
savings and promise you an annual rate of return much higher than you could get
in a term deposit or stocks. And the best part is you don’t have to know that
your money was responsible for bouncing grandma out of her West End rental.
The business model for REITs and
their counterparts is often to buy up “undervalued” rental properties. By
undervalued, they mean buildings where existing rents are lower than the market
will bear. Delivering higher returns for investors relies on getting
rent-controlled tenants out of those apartments and offering them at much
higher rates. Renovictions — evicting tenants based on the claim significant
renovations are needed — is a favoured method. Once the rents have been raised,
the owners can sell the asset at a hefty profit or manage it for steady
financial returns.
What is most disturbing about this
sort of vulture capitalism, the film makes clear, is that the machinery of
financializing the asset, in this case housing, is not governed by what was
once the connection of rents to local wages (typically 30 per cent of average
wage) but rather to the “financialized” profit models of global asset managers.
Thus, the local cohort of renters, inordinately the young just starting
careers, are forced to give over a higher and higher proportion of their pay to
the asset holders, the REITs.
This all hearkens back to a problem first identified by Henry George in the late 19th century, a topic I’ve written about before.
In an economic view long suppressed
by so-called classical economists, but now being revived in the housing
platforms of Bernie Sanders and Elizabeth Warren, George railed against the
ways the rising value of land took a huge toll on society. Workers and business
owners alike saw more and more of their incomes going to those who happened to
control land (and passively reaped rewards as property values rose), he said.
His premise, now being borne out in
Vancouver, was that unless something was done, more and more of the value of
both labour (wages) and capital (factories, stores, machinery) would get
absorbed into the value of urban land. There can be no surer proof of his
hypothesis than Vancouver, where wages continue to stagnate as the price of land,
and thus rents, skyrockets.
The film’s presentation was
followed by a panel discussion with Vancouver Councillor Jean Swanson, former
city councillor Ellen Woodsworth, Kari Michaels, executive vice-president of
the BC Government and Service Employees Union, and Tom Davidoff, director of
the UBC Centre for Urban Economics and Real Estate.
Swanson correctly maintained that a
vacancy control law would constitute a crucial response to this crisis, because
only through dampening the speculative method of asset valuations used by REITS
could you slow the carnage. I agree. A vacancy control law ties rent increases
to the unit rather than to the tenant, eliminating the incentive for eviction
as a means to jack up rents beyond legal limits.
Davidoff faulted the film for
intellectual laziness in ignoring the influence of restricted housing supply on
this problem. He cited the extensive lands in Vancouver zoned “RS” — formerly
single-family, but now allowed to have up to four units per parcel (with as-yet
no apparent benefit on rents or housing cost, sadly).
I was pleased by Michaels’
immediate and forceful pushback. Namely, that “the film could not have been more
clear” that the problem was the financialization of the land asset divorced
from local wages.
And there you have it, in a
nutshell. The intractable debate without resolution for Vancouver.
Love the market. Hate the market.Fire, ready, aim.
