New study reveals growing housing inequalities in Canada from 1981 to 2016

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Author: Yushu Zhu, Assistant Professor, Faculty of Urban Studies and Public Policy, Simon Fraser University

Driven by the neoliberal belief in the superiority of the free market, housing policy in Canada has shifted from welfare-oriented policy to market-oriented policy over the past four decades, encouraging home ownership. property, deregulation and private consumption.

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The financialization of housing, the transformation of housing from a human right into an investment opportunity, has been driven by the federal government primarily through the deregulation of financial markets and a financial practice called mortgage securitization.

Much of the debate over the housing crisis has focused on the market imbalance between supply and demand, citing factors such as foreign investment and lack of market supply. However, many housing problems today need to be seen against the historical background of the restructuring of the housing system, which keeps housing and wealth inequalities alive.

Using historical census data from five metropolitan areas – Toronto, Vancouver, Montreal, Edmonton and Calgary – from 1981 to 2016, our study reveals housing inequalities deeply rooted in access to affordable housing in the era. neoliberal post-1990. Neoliberal housing policies and the financialization of housing greatly contribute to this intensification of housing inequalities.

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Canada’s Housing System: From Social Assistance to the Neoliberal System

Until the mid-1980s, Canada had a social housing system with strong state intervention in the supply of social housing – first in the form of public housing financed and managed by the government, then in the form of public housing. community housing developed by a mix of community groups with government funding and finance.

This welfare-oriented scheme was transformed into a neoliberal scheme in the 1990s, when the federal government moved away from social housing and began to rely primarily on the private sector for the supply of housing.

Federal spending on housing programs increased from nearly 1.5% in 1981 to just over 0.6% of total federal spending in 2016. Since then, the social housing sector has become more focused on “ essential needs ”, supporting people with special needs and leaving those in need of independent social housing to the private market.

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The 2000s marked the beginning of the financialization of housing in Canada. In 1999, responding to consumer and financial industry demands, the federal government introduced Bill C-66, which sought to transform the Canada Mortgage and Housing Corporation (CMHC) from a home builder to a mortgage insurer. With easier access to credit and lower interest rates, household savings have been funneled into increasingly expensive housing markets, stimulating demand for housing and attracting financial capital to the housing market. profitable.

More Canadian households face affordability challenges over time

The neoliberalization of housing policy has been accompanied by an increase in housing inequalities. One of the consequences of the financialization of housing is the increase in residential mortgage debt to finance housing. The ratio of residential mortgage debt to GDP increased from 26% to 68% between 1981 and 2016.

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Our study uses the housing cost-to-income ratio (CIR) to assess housing affordability. Overall, the average ROIs in these five census metropolitan areas fluctuated slightly between 25% and 33% over the census years. Yet more Canadian households have experienced housing affordability issues over time. The share of renter households spending more than 30 percent of their income on shelter increased from 35 percent to 42 percent between 1986 and 2016. These figures for homeowners fell from 14 percent to 22 percent over the past year. the same period.

Greater inequality in access to affordable housing in the neoliberal era

The more commodified a housing sector, the more access to housing is expected, based on an individual’s economic status rather than citizenship. Indeed, the gap in access to affordable housing between income groups has widened in Canada.

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After taking into account factors such as household type and size and socio-demographic characteristics, we estimated that the average TCI for high-income households fell from 46% for low- to middle-income households to 40%. after 2001. This suggests a wider gap in access to affordable housing determined by income, and a more commercial housing sector in the neoliberal era.

The reduction in federal spending on social housing and the increase in the ratio of residential debt to GDP, induced by the financialization of housing, have significant effects on the growing inaccessibility of housing, among other macroeconomic factors such as GDP growth. and unemployment rates.

While the withdrawal of federal funding has increased housing costs for both income groups, the financialization of housing has exacerbated the unaffordability of housing only for low- to middle-income households, while benefiting high-income households by improving the affordability of housing for them. This reflects the inclusion of the private market to meet the housing demand of people with higher purchasing power, leading to a reduction in the housing supply for people at the bottom of the income ladder and reinforcing inequalities in income. housing between the two income groups.

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The vulnerability of low-income tenants and young landlords

The commodification and financialization of housing in the neoliberal era had uneven effects on Canadian households. Low to middle income renters of all ages appear to face housing affordability stress, although their TCI remains relatively stable over time.

In contrast, the CIR for low- and middle-income homeowners has increased significantly over time. Young homeowners are the worst off due to easier access to mortgages and a slow improvement in income, representing a new form of housing vulnerability. Although high-income homeowners have also experienced an increase in CIR over time, their CIR remains well below 30%. High income renters have seen their affordability improve over the years.

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The largest housing gaps among women and immigrants

There are large gaps in housing affordability between different gender and immigrant groups. These disparities exist regardless of housing tenure, but they were only present among low- to middle-income households. While established immigrants tend to catch up with native-born Canadians, the gender gap persists among low-income households, regardless of immigrant status. This implies the existence of systemic barriers in low-income female-headed households, such as male biases in the design and planning of residential spaces in social housing.

Overall, the housing section in Canada is very marketable, with income playing a major role in access to affordable housing. To date, housing policies have mainly focused on market solutions, such as discouraging foreign investment or encouraging the supply of affordable housing in the market. However, the intensified market mechanism resulting from neoliberal housing policies has widened the housing disparity gap between the haves and have-nots.

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State institutions have been used and transformed to facilitate, rather than limit, the commodification and financialization of housing. It is vital for public policies to recognize the state as part of the housing problem and to shift political rhetoric about housing affordability from a simple problem of market imbalance to a failure of state institutions. .

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Yushu Zhu receives funding from the Social Sciences and Humanities Research Council.

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