Thank you very much.
Good afternoon, everyone. Thanks for the opportunity to appear today.
As you know, the term “financialization” is normally raised in the context of behaviour by some market actors who will purchase low-cost, older rental housing and increase the rent to generate more profit. Often they do this by evicting existing tenants. This contributes to a major problem in Canada's housing market. As you know, Canada is losing affordable rental housing at a really alarming rate.
According to housing policy expert Steve Pomeroy, over 550,000 units of housing that rented below $750 a month were lost between 2011 and 2021. This means, obviously, that there are fewer and fewer options for low-income households.
The issue of financialization alone isn't the problem. The bigger issue here is the erosion of affordability in the rental housing market. There are many experts who can give you a better analysis of the rental market and affordability issues that we face—you've heard from some already—but it strikes me that there are really three key factors.
The first is a lack of rental supply. CMHC says that Canada needs to build 5.8 million homes of all types in the next nine years to restore affordability, but Canada has built only 570,000 rental units in the last 30 years. We also have a dire lack of deeply affordable social and community and supportive housing. These supply constraints and the increasing demand drive increased rent and decreased affordability.
The second issue is the cost of new construction. It is three times more expensive to build new rental housing than it is to purchase and convert existing housing, and it's also way faster. There's a clear financial incentive to the market to purchase old housing.
The third is a lack of provincial regulation and tenant protection. Without tenant protections, an investor can buy a cheap property and increase the rent to whatever the market will bear. In provinces where there's rent control, there's often a loophole where there's no control on vacant units, which creates a financial incentive to evict people to increase rent.
If we only attack one element of the problem—actions by some of those market actors who purchase low-cost, older rental units and raise rents to generate more profit—we won't solve the affordability problem. Further, we might make it worse by pushing out desperately needed private investment. To restore affordability of rental housing, we need to create about 1.74 million units of purpose-built rental housing. Building this much rental housing would cost at least $610 billion. Unless governments are prepared to invest that much, we need private investment.
It's critical that we stop the loss of low-cost rental housing and aggressively add supply of market-affordable and deeply affordable housing.
I'd like to propose seven potential solutions.
First is to make purchasing existing rental housing less economically attractive. One option to do that would be to tax the purchases of rental housing by private investors above a certain number of units to target large-scale purchases or to tax the profits from those purchases.
The second solution, as Ray Sullivan mentioned earlier, is to create an acquisition fund to allow NGOs to purchase and renovate rental housing and protect low-cost rental. This has been done in British Columbia and, as soon as it was announced, apartment owners, REITs and others were coming out of the woodwork to sell some of their older buildings. It's a great way to preserve existing affordable housing.
Third is creating economic incentives to build. You've heard some of those ideas, for example, accelerated capital cost allowance and low-income housing tax credits. Other finance and tax tools could be very effective.
Fourth is to push the provinces to put in place tenant protections to prevent renoviction. This could potentially be achieved as part of infrastructure and housing investment negotiations.
Fifth, I'd recommend revamping the national housing strategy to generate at least 350,000 units of deeply affordable rent-geared-to-income housing units, including 50,000 units of supportive housing.
Sixth is to provide urgent rent relief to low-income households. Canada right now is under a wave of new homelessness on the same scale as Canada's largest natural disasters. People are being pushed out of their housing by huge increases in the cost of rent. We have proposed the creation of a homelessness prevention and housing benefit that could stop or at least significantly slow this deadly wave of new homelessness. We can protect low-income Canadians until new housing can be built. It will be far more expensive to solve homelessness after it happens than to prevent it in the first place.
Finally, we need to revamp the Canada housing benefit. Three-quarters of people in core housing need are there only temporarily, and they're all in housing. Housing benefits can be used to provide temporary affordability support and respond to sudden changes in housing need or affordability, leveraging existing private and near-market housing.
Thank you all very much for the opportunity. I look forward to discussing this further.