Media narratives shield landlords from a crisis of their own making / by FAIR

The New York Times (9/27/22) asks readers to feel sorry for this man who owns 11 apartments.

Originally Published in Fairness & Accuracy in Reporting (FAIR) on October 21, 2022

As landlords continue their relentless pursuit of profits, and politicians allow pandemic-era eviction moratoriums to expire, the human toll of a fundamentally brutal housing system is arguably more visible than ever—particularly in America’s largest cities.

Much of corporate media’s coverage of the deepening housing crisis, however, focuses on what are presented as three great evils: that landlords of supposedly modest means are being squeezed; that individuals and families living without homes destroy the aesthetics of cities; and that, in line with the most recent manufactured panic over violent crime, people without homes pose a threat to the lives and property of law-abiding citizens.

| Time magazines dire predictions 61120 about the plight of mom and pop landlords failed to come to pass | MR Online

Time magazine’s dire predictions (6/11/20) about the plight of “mom-and-pop landlords” failed to come to pass.

By pushing these narratives, corporate media are engaging in a strategy of misdirection. This shields the propertied class from scrutiny regarding a crisis of its own making—from which it derives immense profits—while blame is assigned to over-burdened renters and people who are unhoused.

The plight of Ma and Pa Landlord

Over the past year, rents around the country have risen at a staggering rate—far outpacing the growth of workers’ incomes. The median asking rent in July 2022 was more than 30% greater than it had been just a year earlier. Over the same period, wages grew just 5%.

While individuals and families are being forced to sink an ever-greater proportion of their income into housing, and as more and more people face the life-altering prospect of dislocation, establishment media outlets have decided that the real profile-worthy victims of this crisis are landlords, faced with rising costs and hindered from raising rents by the strictures of law and public opinion.

Corporate media’s boundless sympathy for “small” and “medium-sized” landlords is well-established. As the pandemic raged and millions of people struggled to pay for basic necessities, establishment outlets consistently chose to focus on how eviction moratoriums were depriving property owners of their right to throw delinquent tenants onto the streets.

CNBC (6/25/21) quoted Dean Hunter, introduced as “CEO of the Small Multifamily Owners Association and a landlord himself”:

This is the most excessively and overly broad taking of private property in my lifetime… The eviction moratorium is killing small landlords, not the pandemic.

During the early days of the pandemic, Time (6/11/20) predicted that eviction moratoriums would result in all kinds of disaster for the small landlord:

The mom-and-pop landlords who are able to draw on their own savings to make it through the eviction moratoriums imposed by their local governments may struggle to recoup their losses when it’s all over… Evicted tenants sometimes get away with not paying their debts by changing bank accounts, ignoring collections agencies, working cash-only jobs, filing for bankruptcy or fleeing the state.

As it turned out, Time’s premonitions of scheming tenants using every available means to victimize their struggling landlords were wrong. A July 2021 study from the Terner Center for Housing Innovation at UC Berkeley found that just 35% of small rental property owners experienced any decline at all in revenue, while around 13% actually reported rising rent revenue in 2020. An October 2021 report from JPMorgan Chase, meanwhile, concluded:

The New York Times (9/27/22) asks readers to feel sorry for this man who owns 11 apartments.

For the median small landlord, rental income did decline, especially in the early months of the pandemic, but recovered quickly. The median landlord ended the year with a modest 3% shortfall in rent… Our data show that landlords were able to cut their expenses by more than their rental revenues fell, which resulted in landlords’ cash balances growing during the pandemic.

‘What about their landlords?’

Even as pandemic-era tenant protections have been allowed to lapse by politicians eager to serve the real estate lobby, corporate media continue to push the narrative that landlords are suffering—this time as a result of rising costs.

Along this line, the New York Times (9/27/22) ran a piece with the headline “Inflation Has Hit Tenants Hard. What About Their Landlords?” The article detailed the hardships faced by Neal Verma, whose company Nova Asset Management—to which the Times provided a link—manages 6,000 apartments in the Houston area. “It’s crushing our margins,” Mr. Verma said:

Our profits from last year have evaporated, and we’re running at break-even at a number of properties. There’s some people who think landlords must be making money. No. We’ve only gone up 12% to 14%, and our expenses have gone up 30%.

The Times, while broadcasting Verma’s consternation at “running at break-even at a number of properties,” failed to ask any of his tenants about how a 12% to 14% rent increase has impacted them. And although the article cited increased maintenance costs as one of the factors contributing to Verma’s plight, Nova’s Google reviews indicate that basic maintenance isn’t exactly high on its list of priorities.

| The park where the New York Post 73022 puts people without housing in the same class as vermin is located at the north end of the Bowery where low income residents have been displaced by wealthy gentrifiers for decades | MR Online

The park where the New York Post (7/30/22) puts people without housing in the same class as vermin is located at the north end of the Bowery, where low-income residents have been displaced by wealthy gentrifiers for decades.

By fixating on the supposed hardships faced by landlords, establishment outlets have pushed the idea that renters should bear the burden of runaway housing costs. To those who cannot afford this extortion, corporate media have been even less charitable.

The language of dehumanization

As wealthy urbanites continue their return to public life, corporate media have been saturated with laments over the increased visibility of homelessness in many of America’s largest cities. This type of coverage tends to characterize the presence of people without housing as an unsightly nuisance, in the same vein as vermin or uncollected garbage.

Indeed, to corporate media, the dispossession and dislocation of masses of people is largely an issue of urban aesthetics, rather than the intended material consequence of a housing system that keeps renters under the heel of landlords through the ever-present threat of eviction.

Tabloids like the New York Post have frequently published articles that dehumanize people experiencing homelessness. One such piece (10/1/22), titled “NYC’s Financial District Now Blighted With Spiking Crime, Vagrants,” included the line:

Unhinged hobos in particular have been terrorizing locals throughout the neighborhood.

In another Post article (7/30/22), headlined “NYC Park Near Cooper Union Turning Into ‘Disgusting’ Area Filled With Rats, Homeless,” a neighborhood resident complains:

It’s disgusting! I feel outraged about the garbage and the rats. Every bench is taken up by the homeless and nobody is doing anything about it.

Putting people who are unhoused in the same category as trash and vermin, the Post uses a kind of dehumanizing language typically peddled by the architects of genocide. Narratives of dehumanization—which portray individuals from targeted communities as dirty, disease-ridden or pest-like—often lay the groundwork for mass brutality.

Such rhetoric has been echoed by politicians aiming to impose further hardships upon those without homes, including former New York Gov. Andrew Cuomo, who referred to people seeking shelter on New York City subways during the height of the pandemic as “disgusting.”

Voice of San Diego (9/16/22), a digital nonprofit outlet, quoted at length the rant of former basketball star Bill Walton, who claimed that,

while peacefully riding my bike early this Sunday morning in Balboa Park, I was threatened, chased and assaulted by the homeless population.

The multi-millionaire and self-professed “hippie” raged against San Diego Mayor Todd Gloria:

You speak of the rights of the homes [sic], what about our rights?… We follow the rules of a functioning society, why are others allowed to disregard those rules?… Your lack of action is unacceptable, as is the conduct of the homeless population.

The New York Times (2/16/22) presents “investments in rental housing” as “a key way to offset the pressure of inflation”—because landlords have been raising rents “at two to three times the rate of inflation.”

Like the Post, the Voice of San Diego piece stripped people experiencing homelessness of their individuality, treating them as one indistinguishable mass in phrases like “the conduct of the homeless population” and “assaulted by the homeless population.” The article concluded with a final lament from Walton:

You have given our bike paths and Balboa Park in our neighborhood to homeless encampments, and we can no longer use them, and they’re ours, this is unacceptable.

In publishing Walton’s diatribe, Voice of San Diego voiced the perspective of city dwellers made to feel uncomfortable by visual reminders of poverty in public spaces, the enjoyment of which they claim as their exclusive right.

Following the money

Corporate media’s eagerness to peddle narratives favorable to the propertied class is to be expected, since many establishment outlets have a vested interest in the continued growth of housing prices.

BlackRock—the world’s largest asset manager—owns 8.3% of the New York Times Company, making it the Times’ second-biggest institutional investor. BlackRock also holds around $68 billion in real estate assets, including an 8.5% share in Invitation Homes—a $24 billion publicly traded company that owns around 80,000 single-family rental units around the United States.

Invitation was created by another private equity firm, Blackstone, the largest corporate landlord in history, with real estate assets amounting to $320 billion. Shortly after Invitation launched in 2012, it proceeded to buy nearly 90% of the homes for sale in one Atlanta zip code. Such buying sprees are facilitated by the fact that institutional investors can secure loans at much lower interest rates than those offered to individual borrowers.

In a business section piece (2/16/22) covering Blackstone’s gargantuan real estate footprint, the Times did not mention the people that the asset manager—armed with massive stores of capital and low-interest loans—pushes out of the housing market by consistently buying up properties at well-above market rates. Instead, the article concluded:

Blackstone’s shares have been on a run lately. Its stock is up roughly 80% over the past 12 months.

Another Times article, headlined “The New Financial Supermarkets” (3/10/22), did reference Blackstone’s predatory buying strategy, but presented it in a favorable light. Blackstone president Jonathan Gray was given ample space to extol his company’s prospects:

As the real estate industry teetered after the mortgage crisis, Blackstone used its capital to buy up and rent housing and other real estate, amassing $280 billion in assets, which produce nearly half of the firm’s profits. As interest rates rise, Mr. Gray predicted, real estate will continue to help its performance. Rents in the United States, he noted, have recently risen at two to three times the rate of inflation.

| Vox 61121 tells us not to blame institutional investors for housing woeslike BlackRock and Vanguard which together own nearly 16 of Vox parent company Comcast | MR Online

Vox (6/11/21) tells us not to blame institutional investors for housing woes—like BlackRock and Vanguard, which together own nearly 16% of Vox parent company Comcast.

The Times presented rents rising at “two to three times the rate of inflation” as a precious opportunity, rather than a source of misery for millions of people. It’s not too different from the viewpoint of a “paid post”—that is, an ad designed to deceptively resemble Times copy—lauding Blackstone’s role in “shaping the future.”

‘Wall Street isn’t to blame’

Meanwhile, after a Twitter thread (6/8/21) that outlined the predatory home-buying practices of institutional investors went viral, corporate media were eager to defend their sources of capital. Vox(6/11/21) assured the public that “Wall Street Isn’t to Blame for the Chaotic Housing Market.” The article’s subheading chided readers that “the boogeyman isn’t who you want it to be.”

The Atlantic (6/17/21), using strikingly similar language, published an article headlined “BlackRock Is Not Ruining the U.S. Housing Market,” along with a subhead that read: “The real villain isn’t a faceless Wall Street Goliath; it’s your neighbors and local governments stopping the construction of new units.” Like Vox, the Atlantic admonished the masses:

If we have any chance of fixing the completely messed-up, unaffordable U.S. housing market, we should direct our ire toward real culprits rather than boogeymen.

According to this narrative, the true architects of the housing crisis are those standing in the way of private developers from building more units—all of whom are tarred as NIMBYs. While NIMBYism is oftentimes motivated by racist and classist interests, many communities have also opposed new development out of legitimate concerns over gentrification and displacement.

More than enough vacancies

This defense of developers and institutional landlords mounted by corporate media is undergirded by the false assumption that there is an acute shortage of housing units. In fact, in many U.S. cities, there are more than enough vacant units to provide homes for every individual and family currently living without permanent housing.

One recent report found that, “With more than 36,000 unhoused residents, Los Angeles simultaneously has over 93,000 units sitting vacant, nearly half of which are withheld from the housing market.” In New York, the quantity of vacant rent-stabilized units alone—estimated at around 70,000—is larger than the total population of individuals that currently reside within the city’s network of shelters.

These apartments remain unoccupied because many landlords have calculated that it is more profitable to keep rent-regulated units off the market than to refurbish or maintain—even to a minimum standard—homes rented out to tenants at below market rates.

At least 100,000 more New York apartments sit empty because their owners hold them for “seasonal, recreational or occasional use,” or simply use them as long-term investment chips that they never intend to occupy. This dynamic also exists in other cities around the country, particularly in the most expensive housing markets.

Corporate media’s sympathetic treatment of landlords, combined with its reflexive defense of developers and institutional real estate investors, is indicative of the fact that many establishment outlets have a financial stake in the real estate business.

The Atlantic, which like Vox jumped to defend the honor of institutional landlords, is majority owned by Emerson Collective—a venture capital firm whose founder and president is Laurene Powell Jobs, the widow of Apple co-founder Steve Jobs. Powell Jobs, who possesses a fortune of over $16 billion, has invested large sums in real estate over the past five years.

Vox’s largest shareholder is Comcast, which owns nearly a third of Vox Media, Inc. The top two institutional investors in Comcast are, in turn, the aforementioned BlackRock (at 6.9%) and the Vanguard Group (at 8.7%). Vanguard has over $38 billion invested in real estate assets, and is also the largest institutional investor in the New York Times Company, owning 9.5% of its shares.

MR Online, October 24, 2022,

We Don’t Need More Homeowners. We Need Public Housing / by Dan Darrah

We shouldn’t conflate the right to housing with the right to ownership, which would make affordability a permanent issue. (Jordan Vonderhaar / Bloomberg via Getty Images)

Originally published in Jacobin, July 16, 2022

Free-market champions conflate homeownership and the human right to adequate shelter. To actually solve the housing crisis, we must challenge this mistaken idea.

The front-runner for Canada’s Conservative Party leadership, Pierre Poilievre, has made a hobbyhorse out of sounding off about the country’s soaring housing crisis. For a decade, rents and home prices across the country have shot into the stratosphere, siphoning off ever more money from the working class into the pockets of banks and landlords.

Channeling anger at the market’s obscenities, Poilievre blames the Bank of Canada for inflating asset values and “big city gatekeepers” for blocking the building of new housing. Homeownership, he rails in a recent campaign video, “used to be a right. And it should be again.”

Poilievre may not have any serious policy proposals for actually fixing the crisis, but his jeremiads represent an important example of how housing is often discussed. Of all Poilievre’s messaging, the idea that homeownership should be a right — an inalienable entitlement extended to everyone, at least theoretically — resonates deeply with voters. After all, over the course of the twentieth century, homeownership has become central to the North American ideal of a decent, middle-class living.

In fact, the contemporary crisis is often understood, in news media and beyond, primarily as a crisis of ownership. The line of thinking goes like this: huge swaths of the middle class — those would-be homeowners in another, fairer generation — can’t reach the rungs on the property ladder because of NIMBYs and foreign investors. Poilievre simply personifies a broad frustration that spans the spectrum of political thought.

Deploying the language of rights therefore seems to be an appropriate response to these housing-market failures. It sounds good. It sounds fair. It harkens back to the left-wing idea that housing is a human right — an intoxicatingly attractive idea gathering momentum across the world.

But we shouldn’t conflate the right to housing with the right to ownership. While the former could serve as a basis for helping Canada escape its housing woes and secure an affordable life for everyone, the latter won’t. On the contrary, thinking of housing primarily in terms of ownership makes the crisis only more impossible to solve.

We need to think outside the market — not expand it.

The Ownership Trap

Homeownership has long been a much-vaunted ideal in both Canada and the United States, particularly since its rapid postwar expansion. While renting has historically been more prominent in Canada — owing in part to better social welfare and fewer economic inducements for ownership — both countries, especially in the last thirty years, have demonstrated a broad-based bias toward owning.

For the average Canadian or American, home ownership is a sensible and obvious move — not solely in an aesthetic or philosophical sense but an economic one. Sure, owning a house brings with it a sense of autonomy and pride. But its most valuable aspect is that it is an asset. When people buy houses, they are buying equity.

Few investments for working people are, or could be, as practical as the home: rising property values help fund a whole suite for goods, like retirement, postsecondary education for kids, renovations, and consumer spending. As collateral via debt, or through its outright sale, the home can generate a windfall of wealth to fund the components of a decent life. And in retirement, owning one’s home helps people hang on to more of their wealth — instead of it going to landlords or banks. And crucially, it’s possible to turn what would be rent payments into mortgage payments, thereby enabling investment for working people who otherwise would be unable to make monthly investment contributions.

For much of the twentieth century — and even up until the 2008 financial crisis — a large mass of Canadians and Americans could benefit from the housing market’s continual expansion. Of course, there were occasional setbacks and crashes. And the benefits were not a universal phenomenon: much of the working poor, especially those reliant on income supports, were left out and relegated to often underfunded public housing projects or slumlord-provided rental living. The growth of a decent public housing alternative was hobbled by the real estate lobby, austerity-inclined politicians, and property value–obsessed homeowners themselves.

Even so, from after World War II until the crash, a large proportion of the population ascended into the ownership class. High wages and decent jobs throughout capitalism’s postwar “golden age” helped facilitate the trend, while cultural biases toward ownership — a kind of “middle-class birthright,” as Rick Perlstein once noted — emboldened it.

And while these biases might persist, the context has shifted. Since the 1990s, housing has become much more of an investment commodity, a sector which generates billions of dollars in profit for real estate investment trusts (REITs), corporate landlords, small-scale real estate investors, and massive investment-fund portfolios. It’s become a tradable good, bought and sold globally and gambled on in financial markets.

With lax regulations, low interest rates, and meager public housing, the real estate sector has ballooned in size for two decades. House prices have soared, and rents along with them. One perverse outcome is that, because of our weak social safety nets in Canada and the United States, homeowners find themselves allied with the investors inflating the sector, hoping home values steadily grow in order to secure retirement or fund postsecondary education for their children. For many, it creates a stunning but little-discussed contradiction: they want housing to be affordable for their neighbors, but they want housing values to increase, too.

Due to state retrenchment, we ask housing to do a lot for us — far beyond the primary goal of housing people. A popular response to the problems caused by the housing market is the notion that investors can simply be kicked out of the market in order to make housing more affordable, thereby extending ownership to more people. This idea seems very attractive, even intuitive. It is the reason why calls for taxes on the foreign investor bogeyman are so common. But even at its most inclusive, a country’s housing market confers its ersatz social safety net only on parts of the population. And unlike universal benefits that would be of advantage to everyone, that social safety net could also easily disappear in a market crash — a likely eventuality after decades of investors treating housing like a casino.

Fixing the Crisis

Areal exit from the housing crisis — one that would enable the construction of a fairer and more prosperous world for everyone — requires disentangling housing from these other concerns and returning it to its original function: to house people. But doubling down on ownership won’t serve that goal. Policies that aim to induce more ownership in Canada — a country where two-thirds of the population already own homes — will only inflate the market further, creating more dependency on its continued growth.

Investors, too, will continue taking advantage of the seemingly never-ending demand for homes. Higher interest rates, better regulation, and an increase in housing stock supply will not stop housing-market investment and speculation. The fight to bring down housing costs requires much more aggressive and interventionist measures than economic inducements for workers or simply building more homes.

Throwing cold water on the idea of mass ownership might sound tantamount to recommending that workers should have lower expectations. But it is only through breaking out of the ownership straitjacket that a fairer, more affordable world might be secured.

Fixing the housing crisis requires working outside the market. A wholesale overhaul of our social safety net would be a great start: a massive expansion of public retirement benefits, free postsecondary education, and beautiful, far-under-market public housing projects. Look no further than some Scandinavian countries where long-term renting — especially in high-quality public housing — is a viable and decent option for families, especially those for whom buying might never be an option.

Well-funded nonmarket housing in particular can be an effective escape valve from the two choices that face most people: buying in a red-hot market — something that is impossible for many workers — or renting from unscrupulous and greedy landlords. Solid public housing paired with generous universal benefits would much more effectively deliver affordability to the working class, as well as peace of mind in retirement. For half a century, ownership has been a key ticket to prosperity — a scenario that’s created a slew of new problems.

A significant shift in the balance of power is necessary for these suggestions to be realized. It requires a total break from the logic of neoliberalism that has shaped housing policies in Canada and the United States for a century. But organized socialists, tenants, and activists can push that project forward.

Housing as a Human Right

Making the claim that housing is a human right — housing that is high-quality, secure, affordable, and safe — can help build support for a significant build-out of public housing. But when discussing housing as a right, we have to be specific: housing, not ownership.

For socialists, a central task in the fight to solve the housing crisis will be rejecting the idea that broad-based home ownership is a form of housing justice. We must broadcast the failure of imagination in play when housing rights and mass-market ownership are conflated as the same desirable thing.

Obscuring the difference between housing provision (as a social good) and ownership (as part of a zero-sum game) allows right-wing politicians like Poilievre — a landlord himself, who no doubt wants to see home values increase ever upward — to deploy the language of housing rights. Most nefariously, treating rights and ownership as the same thing ensures that the housing crisis will be an interminable problem, thereby preventing us from directing our energies into effective and real solutions.

Dan Darrah is a writer of nonfiction and poetry from Toronto. He has written about work, culture, money, and debt for Jacobin, Canadian Dimension, Briarpatch Magazine, and more. 

A Massive Expansion in Public Rental Homes Could Literally Pay for Itself / by Alex Hemingway

British Columbia could massively increase public investment in below-market rental housing. (Nathan Shurr / Unsplash)

Public investment in below-market rental housing could leverage private-sector development to secure housing for all. This idea is being floated to address British Columbia’s housing crisis — and should be taken up everywhere.

In the face of a mounting housing crisis, British Columbia should massively increase public investment in below-market rental housing. This up-front investment could literally pay for itself, with no increase to taxpayer-supported debt.

While this might sound too good to be true, it simply follows from the basic logic of rental housing development. When building new rental housing, the up-front costs of construction are offset by the stream of rental income the project generates over time. This is, of course, the premise on which private-sector rental housing developers base their business models. For them, building new housing is not a cost but rather a way to generate substantial profits.

Similarly, when the government — or the nonprofit sector — builds rental housing, the investment can also be self-sustaining. But there’s a key difference: instead of generating profits, housing projects can operate on a break-even basis, with rents set at below-market rates. Marc Lee, from the Canadian Centre for Policy Alternatives, did the math on break-even rental housing development in a recent report on affordable housing options in the Metro Vancouver market. The following is an analysis of what a similarly ambitious, publicly led build-out of self-sustaining rental housing would mean for government finances and debt.

When the government or the nonprofit sector builds rental housing, the investment can be self-sustaining. If we want to address the chronic housing shortage, rapidly build as many affordable homes as possible, and expand the stock of valuable public land assets, this option is at our fingertips.

To be clear, this approach of developing rental housing isn’t a complete solution to the housing crisis. For example, given how quickly land and construction costs have escalated in recent years, self-financing housing may still require rents that are higher than many people can afford, even if they are below-market. Further measures are needed to achieve deeper levels of affordability. The housing crisis is a multiheaded beast, and tackling it requires policy action in a range of areas, including property tax reform and ending the exclusionary low-density zoning that dominates our cities.

How Self-Financing Housing Works

Let’s consider the basic model for private rental development a little more closely. Different projects unfold in different ways, but the key sets of costs are the same from the perspective of the developer.

First, land needs to be acquired on which municipal zoning policy allows multifamily housing like rental apartments to be built (or on which the developer believes a rezoning for this purpose is very likely to be granted). Acquiring the land is often the most challenging and expensive of these steps, because exclusionary zoning policies often prohibit multifamily apartments, which drives up land prices for these scarce sites.

Once land is acquired, the developer must contract out the design and construction of the project. There are the ongoing operating and maintenance costs for the building and its amenities. A developer may sell off a project after completion to a long-term investor such as a pension fund, but for simplicity we’ll assume here that the developer holds on to the property as an owner-operator. Lastly, there is the cost of interest owed on the capital borrowed to finance the up-front investments.

A private-sector rental developer will only undertake a project if the anticipated income from rents will cover all these costs — land, construction, operating, and financing — plus a healthy profit margin. Public or nonprofit housing projects can also cover their up-front costs with ongoing rental income. However, eliminating the developer profit margin can achieve lower break-even (or self-financing) rents. In addition, the government can borrow at cheaper interest rates than the private sector and can amortize those costs over a longer period of time (fifty or more years, if desired), both of which can further reduce break-even rents.

In short, not unlike a private developer, the government can borrow money to develop new housing and use the rental income generated to fully cover the cost of servicing that debt over time, with no effect on the cash flow or tax revenue needs of the public sector overall.

Public or nonprofit housing projects can cover their up-front costs with ongoing rental income. There’s no real dispute about the basic logic of this. In fact, a recent report prepared by Coriolis Consulting for Metro Vancouver notes that government investment could be used to create “all the rental housing needed in this region” on a cost-recovery basis “depending on how rents are set.” The report points to jurisdictions like Vienna that have built public and nonprofit housing on a massive scale. But like much of the housing policy discussion, the report assumes there isn’t the political will to go this route, noting that the idea would run up against the “willingness of government to pay” up front.

Housing developer profits are often estimated to be about 15 percent of development costs. In the case of public development, the benefit of lower interest costs for government will further lower rental costs. We can reasonably assume rents that could be set at least 15 to 20 percent below market rates. As discussed below, there are other ways rents could be reduced to deeper levels of affordability. Marc Lee’s analysis found that a new wood-frame rental building with moderate land costs could achieve break-even rents of $1520 for a one-bedroom home. These homes would also be protected from the whims of rising market prices — a key feature of housing markets facing shortage problems. 

Government Finances

What pressure would this type of massive, self-financing housing investment put on government finances and taxes? The short answer is very little. Investing in public housing need not affect the annual provincial budget balance or redirect tax dollars from other public-policy priorities.

Several existing BC Crown corporations, the largest of which is BC Hydro, already cover their own capital and operating costs in much the same way proposed above. Taking the example of BC Hydro, its borrowing is considered to be self-supported debt, since the servicing costs are covered by its own dedicated income stream (i.e., payments from its electricity customers).

Accounting rules and credit-rating agencies consider self-supported debt to be distinct from taxpayer-supported debt, which is serviced using tax dollars. From the perspective of credit-rating agencies, taxpayer-supported debt levels are one of the main debt metrics determining the province’s cost of borrowing. This metric is unaffected by BC Hydro borrowing as long as it has a credible plan to cover its costs.

A housing investment program could be structured the same way under a Crown corporation — either a new one created for this specific purpose or an existing agency like BC Housing. If it has a credible plan to cover the up-front costs of investment through rental income, the housing investment won’t affect taxpayer-supported debt levels.

To be clear, this is not some sort of accounting trick — it is simply the recognition that certain Crown corporations have dedicated income streams that cover their own costs. This is why credit-rating agencies, typically very conservative institutions, don’t balk at the practice.

When the up-front costs of new housing are eventually paid off, the public sector is left with highly valuable long-term assets: the buildings themselves and the land acquired. When these rental buildings reach their end of life, future rounds of public housing can be undertaken with free land. Land wealth is a massive source of inequality in BC, and increasing its public ownership would help ensure these assets are harnessed for the public good, rather than serving as a huge source of passively accumulated private profit. In addition to these direct benefits, ensuring access to affordable housing for British Columbians would strengthen the province’s economic and fiscal health in a variety of other ways for years to come.

Imagine if BC undertook the mission to build this type of public housing at a rate of ten thousand — or even twenty thousand — new below-market rental homes per year. If we peg the up-front land and construction costs at roughly $500,000 per unit, the hypothetical Crown corporation would be undertaking $5 billion to $10 billion per year in borrowing in self-supported debt, backed by the rental income streams created.

This is a feasible level of investment. To put it in perspective, BC Hydro is projected to spend about $4.1 billion this year on capital investment booked as self-supported debt, backed by expected returns in the form of payments from electricity customers. 

Truly Affordable Rents

Break-even rents that are 15 to 20 percent below market levels for new buildings are still out of reach for many British Columbians with lower incomes. The good news is there are a whole slew of ways to achieve more deeply affordable rents.

If the cooperation of the municipality can be secured — or required by the province or state — one way to achieve cheaper rents is to build rental apartments on lower-priced land that is currently zoned for low-density detached housing. This land can be acquired more cheaply than sites already zoned for multifamily housing, where stiff competition from private developers for scarce multifamily parcels drives up costs. In most municipalities, the large majority of residential land is zoned exclusively for the most expensive form of housing: detached houses. Acquisition of land zoned as low-density would therefore help address unequal access to the city.

Costs could be lowered even further if municipalities were willing to waive the onerous parking requirements usually put on apartment buildings. Parking adds hugely to the cost of new apartments — tens of thousands of dollars per parking stall.

Different levels of government could further lower costs by contributing land they already own. However, we shouldn’t think of existing public land as free but rather as a scarce and valuable resource to be replenished and available for a whole range of public amenities — housing, childcare, parks, and so on. If we want to expand public housing for the long term, we need to steadily acquire new public land (preferably financed by taxing windfall gains to private landowners).

Yet another option is to structure housing projects to cross-subsidize between units in a building. If half of the homes were rented at market rates, the other half could be rented at lower amounts while still achieving a break-even average. Ideally, this would mean adding units to a given project and thereby increasing the total amount of new rental homes created on a land parcel of a fixed cost. As Marc Lee has shown, through a combination of these measures, public or nonprofit housing could be built and run at break-even rents about a third lower than those of private rental housing.

Finally, another important way to achieve more deeply affordable rents is to create a separate stream of operating subsidies or up-front grants for some public housing developments. The self-financing portion of the housing investment would remain separate under the Crown corporation structure — it would continue to be designated as self-supported debt. At the same time, the grants or subsidies would represent a separate contribution supported by tax revenues to help lower rents. Indeed, there is a strong case for supporting this type of housing investment by creating a dedicated new stream of revenue from taxing the enormous land wealth windfalls this province has seen in recent years.

Affordable Rental Homes for All

Provinces and states have the ability to undertake game-changing investments in public, nonmarket housing. The scenario presented here has shown how BC’s provincial government could invest in creating new rental homes at a scale that would fundamentally transform our broken housing system. But there’s no reason in principle that this type of self-financed public housing couldn’t be built by any willing level of government. The federal government could certainly do it and so could large municipalities — with the caveat that borrowing for capital investment is a slightly more complicated process for municipal governments. Governments can undertake this type of initiative on their own, in partnership with existing nonprofit housing developers or by some combination thereof.

There is simply no way out of the housing crisis without addressing the chronic shortage of homes overall and the shortage of dedicated, nonmarket rental housing in particular. A swath of recent research clearly shows that adding new housing “loosens the housing market in middle and low-income areas even in the short run” and “is likely to improve affordability outside the submarkets where the new construction occurs and to benefit low-income people.” This is true of new market rental housing, but public housing has the crucial added benefit of creating new units that are themselves immediately more affordable. If we are willing to make these investments at the levels needed to address the scale of the crisis, public and nonmarket housing delivers the most affordability bang for the buck.

The housing crisis sometimes feels beyond our control, but a massive effort to build below-market-priced, publicly owned rental homes is a policy option that’s achievable, affordable, and at our fingertips.

Adapted from Policy Note.

Alex Hemingway is a senior economist and public finance policy analyst at the Canadian Centre for Policy Alternatives B.C. office.

Originally published in Jacobin, May 15, 2022,