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The Problem of Housing: Home and Profit


The lack of affordable housing is a crisis around the world, from the United States to Canada to China to the United Arab Emirates. Data from Canada Mortgage and Housing Corporation shows that average rents in Toronto have increased roughly 72% from 2001 to 2021 while median family income has gone up by only 33%. This discrepancy between income growth and rent prices is reflected in many cities in North America such as New York City, as well as beyond: Beijing and Abu Dhabi were named the two most expensive global cities for renting in 2016 by Global Cities Business Alliance. The UN has assigned Special Rapporteurs to address this worldwide problem, who have concluded that a large contributing factor to this crisis is the financialization of housing. This aspect of the affordable housing crisis is often missed in policies and strategies aimed at alleviating the problem. Popular understanding of the housing crisis argues that the problem can be addressed by providing more supply: by building more houses and apartments. In reality, the financialization of housing, one of the key drivers of unaffordable housing, is a problem inherently caused by the market. As such, it cannot be solved by market solutions.


Housing can be viewed in one of two main ways: housing as utility, or housing as commodity. Housing as utility is the view commonly held by someone who lives in the house, uses it as shelter, and needs it to survive. On the other hand, housing as commodity is common among people who have invested in housing to make a profit. These two views sometimes overlap, with many homeowners using the house as utility as well as seeing it as a commodity to build and stabilize their wealth. Housing is so attractive as a commodity because it is “one of the few asset classes considered High-Quality Collateral Investments(HQC)”. These assets are perceived as more stable than other types of investments, such as stock market trading, while providing high return on investments compared to items such as guaranteed investment certificates and bonds. Nevertheless, for homeowners who live in their homes, housing as commodity is often secondary to housing as utility, as the house does not transform into material financial assets until they sell and move.


Engaging with housing as solely a commodity, on the other hand, is what is described as the financialization of housing. Individuals and companies who view housing as only an investment are described as financialized landlords. For them, house prices are not tied to their value, supply, or demand, but rather to how much profit they predict they can extract. The separation of housing prices from the house itself and the land on which it is built has allowed house prices to grow exponentially. In 2022, the Local Initiatives Support Corporation and the University Neighborhood Housing Program in New York City published a report that examined the practices and outcomes of financialized housing in NYC. Julia Duranti-Martinez, one of the co-authors, stated that the report showed landlords often opted for “extracting profits from buildings, not for investing in their upkeep.”


The neglect of housing owned for speculative purposes is not limited to cities in the US, but is also backed up by research in Canada into financialized housing (Social Innovation Canada, CHRC, CMHC). One such research article presented two common strategies for extracting profit used by large real estate investment trusts (REITs): squeezing and gentrification by upgrading.


“Squeezing” is when landlords invest in buildings in a way that maximizes profits while cutting costs, which is often associated with reduced services as routine maintenance requests go ignored. In Canada, slumlord TransGlobe’s squeezing strategy allowed their investors to gain 60% return in 2 years while tenants reported removal of services and neglected maintenance. Gentrification by upgrading is the eviction or renoviction (renovation + eviction) of tenants under the guise of needed renovations that leads to a replacement of existing tenants with higher income tenants at higher rents. These needed renovations are often the result of many years of neglect in preparation for this strategy. Gentrification by upgrading is then used to extract more profit from existing rentals with relatively little investment on the landlords’ part.


These strategies are facilitated by the lack of comprehensive tenant protections and rent control in many cities. Gentrification by upgrading is exacerbated by the lack of vacancy control in many cities. Vacancy control occurs when rent control measures are in effect no matter who lives or moves between apartments. When there is rent control in a city but no vacancy control, financialized landlords are incentivized to evict long-term tenants in order to charge vastly higher rents. Although neoliberal capitalist economists would argue here that it is rent control and other state measures that exacerbate the problem of unaffordable housing, that has not come to bear in the cities that have enacted these measures. In fact, the more comprehensive the measures are, the better the outcomes for affordable housing. A Columbia Business School study created a mathematical model of New York metropolitan statistical area that showed that “contrary to conventional wisdom, increasing the scope of rent stabilization and housing voucher systems are also welfare improving.” One such example is the city of Vienna, Austria, where rent control has been implemented for over 100 years and more than half of all housing is public housing. Vienna has repeatedly topped the list of most livable cities in the world, a ranking arguably made possible by their strict rent controls and investment in public housing.


When comprehensive tenant protections and rent control do not exist, financialized landlords have been found to “prefer a regime of supply inelasticity, since no new investment or activity is necessary from their behalf to reap the benefits”. One strategy to create supply inelasticity is warehousing, where landlords let units sit empty instead of renting them out. In 2021, UrbanDigs data showed that NYC landlords held more than 50% of unrented apartments off market. More recently, The City published an article stating that there were 88,830 vacant rentals in NYC in 2021, despite the city’s housing emergency. ProPublic reported in October 2022 that American landlords have been colluding on rental prices using Yieldstar software. Yieldstar, from Texas-based real estate company RealPage, analyzes RealPage clients’ private data to suggest rent prices to landlords. When this algorithm is used by the majority of landlords in an area, the effect stimulates a collective monopoly on affordable housing, which potentially violates US federal antitrust laws. These examples show that financialized landlords will game the system in order to extract as much profit as possible if allowed to function within a free market.


Moreover, in 2022, Vienna’s Chamber of Labour presented research into their growing private market to a New York learning delegation showing that rent did not decrease with increased supply. Unfortunately, this shows the flaws of the “build more supply” solution to the affordable housing crisis. Speculative demand cannot be satiated, and when it is prioritized over use demand, we guarantee that neither will be satisfied, and people remain houseless.

Rent control measures are but one of many possible measures to address the dominance of financialized actors in many housing markets around the world. Real estate companies take advantage of economic downturns to amass greater proportions of the housing market in the US and Canada. With vast pools of capital inaccessible to individual home buyers, these companies can outcompete and outbuy in order to build a greater base with which to profit. Rent control measures do not prevent strategies that push individuals in need of housing out of the ownership market into the rental market, where these companies can take further advantage. As such, rent control measures alone are not enough to combat the financialization of housing and address the affordable housing crisis.


Other necessary measures against the financialization of housing include tenant organizing, community land trusts, and other housing ownership/provider models that do not focus on profit. In Toronto, Parkdale Organize has had success fighting renovictions and rent increases by collective organizing. Tenants themselves came together to form collectives to negotiate with their landlord in support of one another. Strong tenant opposition to renovictions/rent increases coupled with widespread media and local attention on the landlords’ actions have often led to landlords dropping their eviction and rent increase notices. Collective tenant organizing has been one of the few strategies against renovictions that has worked historically. Even so, they do not always work, resulting in evictions and the destruction of close-knit communities.


Against large financialized landlords with bottomless funding who do not care about their tenants or their reputation, it is often nearly impossible for tenants to fight for their rights. Thus, it is also important to invest in housing ownership and provider models that are not profit-oriented. The 2022 report on NYC housing found that affordable housing under community, nonprofit, and tenant ownership models have vastly fewer maintenance concerns than those under private ownership. These models have strict rent control and vacancy control in the form of rent caps, as well as stronger tenant rights and less focus on profit. Owners of such housing are more likely to treat housing as a utility instead of a commodity, making them less likely to engage in strategies such as squeezing, gentrification by upgrading, and warehousing.


Community land trusts (CLTs) have developed as a way to keep control of housing in the hands of those who live in them. Parkdale Neighbourhood Land Trust and Kensington Market Community Land Trust are two recent CLTs in Toronto that own 205 and 12 affordable housing units respectively. In Boston, the Chinatown Community Land Trust acquired their first row house in 2021. Although the community land trust and other non-profit housing ownership models do not guarantee success and are often hobbled by inadequate investments, they provide the possibility of better outcomes for tenants. What these strategies of rent controls, tenant organizing, and community owned housing have in common is their goal to decrease the dominance of financialized actors in the housing market. This is why they work to effectively address the housing crisis in ways that measures using housing speculation to provide more housing do not and can not.


Many officials, planners, city councilors, and others who are meant to address the affordable housing crisis miss the financialization aspect of the problem. These officials often support policies that either fail to address financialization or make the problem worse, such as by further loosening regulations for private developers, exacerbating housing exploitation and extraction, and leaving tenants in a never-ending cycle of poor maintenance, housing deterioration, and evictions. When housing is directed towards increased profits, human lives that live within these buildings are often overlooked and mistreated. By coming together to prioritize need instead of profit instead, we not only recognize the humanity of those in need, but in ourselves as well.


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