Solving the need for affordable housing
In 2006, almost 1.5 million households in Canada spent nearly half of their before-tax income on shelter and were deemed by CMHC to be in core housing need.
Rather than spending $75 billion to bailout Canada's chartered banks, the government could have used the money to completely eliminate the shortage of affordable housing in Canada. Not only would the investment in housing create new tangible assets actually worth $75 billion (rather than the worthless toxic debt that the government purchased from the banks), but it would stimulate the productive economy and create thousands of badly needed higher-paying jobs.
Consider the math.
The government puts out an initial tender to build 5,000 apartment buildings, each containing 100 apartments (that's 500,000 units in total). If each building costs $15 million to build, the total cost would equal $75 billion and the cost per unit would be $150,000.
Now here's the interesting part. The government finances the project interest-free using it's own central bank, the Bank of Canada. The rental cost to tenants is equal to the financing cost per unit ($150,000) divided by the expected depreciation period of the building (in months). If the buildings are designed to last for 50 years, then tenants would pay only $3,000 per year, or $250 per month. According to the CMHC figures, this amount of rent would be inline with what they could comfortably afford.
Since the tenants would pay back the full amount of the financing themselves, the cost of this solution to Canadian taxpayers would be zero. If the project was repeated 3 times, and staggered over perhaps 10 years, the entire 1.5 million shortage of affordable housing could be eliminated and the overall economy would prosper from the increase in real productivity.
I can't see any downside, can you?
(sorry about the double post, I don't know how to delete the first one)
There are plenty of straight up arguments for reviving social housing programs. And among other signs for it, the NDP has never given up on keeping it out there.
But you are hitching that wagon to the much bigger and more controversial question of the role of the Bank of Canada, etc. Which many progressives like me- let alone the public we are trying to reach- just dont buy.
[And related, overlapping the thing about the BofC role, but seperate: thats specious that the $75billion mortgage market bailout was just thrown down a rat hole anyway, so we could have spent it on program spending. The costless financing of the social housing is also specious. Social housing is money well and effectively spent, but requires continuos public investment. Let alone that you will never get political agreement even on the left that the issuing of public debt can ever be costless.]
But leaving aside those bigger overarching questions of 'grand political strategy'.... you just cant so simplistically use the desirability of the tail [social programs] to wag the big dog of challenging the assumptions of capitalism.
Yes, wagging the tail can contribute to question those assumptions... but only indirectly and very incrementally. The hope for the kind of didactic 'lesson' you have proposed here, is the kind of indulgent delusion the left tries to sustain itself with.
The notion that we can have it all by simply reversing the capitalist robbery is a political chimera.
Its not a question of money. To get what we want we have to "pay"- and more to the point, convince our fellow citizens to pay. And the 'coinage' will always cost us. If not the coin of money, then the coinage of constant political struggle.... towards yet we have yet to make the first real dents in our time.
On-rez housing on First Nations should be tackled first. They're in deplorable condition. People who live in cities will always have other housing options; the FNs who live in Kasheshewan have zero options. mouldy houses are it.
Why re-invent the wheel?
The framework already exists for dealing with a large part of the housing "crisis" - mixed income non-equity co-ops (the wikipedia article on Housing Cooperatives has a pretty good summary of the Canadian model, which I am quoting below):
Of course it is difficult to be just a passive renter when one lives in co-operative housing, which may be the down-side (for the goverment of the day at least) in reinvigorating the co-op housing sector. Heaven forbid that members (members, not tenants) have hands on experience in running their own mini-democracy... they might actually start using what they learn from the experience in making decisions in larger arenas. And of course, you have to modify all those bureaucratic forms that ask if one (A) owns or (B) rents...
# Households in Core Housing Need:
1991 - 1,269,980
1996 - 1,567,180
2001 - 1,485,340
2006 - 1,494,395
That didnt answer the question.
Why re-invent the means for addressing the need?
Because the wheel is broken and, obviously, the need remains.
don0ld:
I think you are totally misunderstanding the expression "why re-invent the wheel". My use of the expression is, in no way, an attempt to deny or diminish the urgency in addressing core housing needs, it was addressed to the particular solution you were blue-skying in the OP.
The wheel I was referrring to is not just "broken", it was deliberately broken (under the Chretien and Martin governments) by their refusal to fund any new development (they ended funding for any new development in 1992), withdrawing from cost-sharing in federal/provincial housing programs (1993), instructing CMHC to phase out its remaining role in social housing (federal budget, 1996) and downloading (mostly unfunded) responsibility for housing to the provinces (1996 to the present). The effects of the federal government's abandonment of responsibility was compounded by provincial actions which further threatened the viability of co-operative housing (and made expansion of the sector almost impossible) - Harris' Ontario Social Housing Reform Act (2000) which revoked operating agreements with housing co-ops and non-profit housing providers being a case in point... (again, mostly unfunded) responsibility being pushed even further down the ladder onto municipal governments.
Only a very small percentage of the public have even heard of the BoC, let alone understand its amazing potential to help workers free themselves from the bondage of debt slavery. The public has never even been given a chance to buy into the idea of using the BoC effectively so, of course, they don't understand or support it. I have no idea why you personally "don't buy" into the idea of using the BoC more creatively to help stimulate the productive economy, so I can't comment on that.
It's becoming increasingly clear that the "toxic debt" that we got in return is no better than rat poison.
Most of the money currently spent on social housing goes to pay the interest on the mortgages that were created to build the homes. Feeding the financial markets taxpayer money is the continuous part.
I think I just did.
Excellent explanation of why the left is getting nowhere.
You're obviously not impressed. Do you have a lot of financial investments by chance?
Whether the wheel was deliberately broken or not, it is still broken. It needs to be re-invented so that taxpayers don't have to foot the bill for never ending interest payments to private financial markets. Without the interest payments, the tenants can afford to pay back the cost of the housing themselves. Why is stopping the financial markets from controlling something as essential as having a place to live so "blue-sky"? Should the rights of investors supercede the shelter rights of 1.5 million Canadians?
It would take something like $100 billion to pay for all the social housing to cover all 1.5 million people. That's the federal deficit of the last two years. And once the housing was build money from rents would continue to flow in to maintain the housing stock and help pay for future social housing.
Where there's a will, there's a way. Other countries are way ahead of us on social housing. And that includes the US.
The huge construction boom from building all this housing would also help Canada's economy and create thousands of jobs.
E.T.A: I think social housing is affordable and should be implemented ASAP. $100 billion is worth ending the housing crisis.
donOld- you keep replying as if we are denying the need that exists.
No. The point is that you are re-inventing the wheel.
There is zero new federal funds that goes into social housing. The continued self-financing of existing buildings does not count.
But we still have the infrastructure of social housing. So we apply federal funding to that. As JKR said [but also seems to think we're saying there isnt funding available, its too much, or something].
Instead, you want to re-invent a new way to do it.
And by the way- no social housing of any kind is self-financing to the degree that you put the money out and it all comes back in rents. Starting up projects is on the aggrgate subsidized. So to build all the units we need, there has to be a continuous stream of federal funds that are not returned. [Seperate from the 10 or 20 times more, or however much it is, that is debt on the buildings repaid out of operations.]
Whether it could be financed by BofC is a complete seperate issue. In principle, yes. And in principle we can begin permannetly reducing CO2 emissions next year. But it isnt going to happen next year.
The concrete thing to do is to press the need for social housing, and to reinstate the funding for it. Where it comes from is secondary.
Yes, any civil nation would have affordable housing for citizens. How that comes about is debatable, but it is obvious that our leaders are not even trying. Housing is a basic right, eh?
One thing is the cost of new houses - it is so much greater than the cost of building a house. Materials and labour and the lot and even interest added together comes to less than $100 per square foot... a 1200 sq. ft. house only costs $120,000 with those calculations!! And yet, the selling price is half a million in a lot of places. {When I was a carpenter in the 1980s, we talked about $75 per sq. ft as the cost, so I am just guessing at the $100 price}
Even at $100 per sq ft, the labourers make money, the material suppliers make money, the bank gets it's interest... So it must be DEVELOPERS and their government/municipal pals that conspire to drive house prices up. We don't need that, especially when it means so many people being squeezed out of the housing market.
There was a big push to only build houses bigger than 1200 sq ft. in most cities and towns, which eliminated many working class people from owning their own home.
I may have inadvertently left the impression that I think funding for social housing is unfordable. I think it is very affordable and would be worth $100 billion to end the housing gap. Ongoing funding to would also be affordable.
I edited my post to reflect this.
That's why I'm re-inventing the wheel and suggesting one that would be self-financing. In fact, additional tax revenues would be generated by the housing production, so the program would actually be revenue positive to the government, at least in the short term. The cost of maintaining the buildings could be built into the rents. According to the CHMC figures, in 2006, the average shelter cost for households in core housing need was $756 per month. Even if building maintenance costs add another $50 (20%) to the $250 building costs, the rents remain affordable and well below the $756 needed now.
Wrong. The whole point of my post was to provide a simple example of how the government could use its sovereign right to create the money supply for the common good of the nation. The BoC is the most powerful tool that our government has to build the kind of Canada that most Canadians desire, a compassionate, caring and civil society that offers everyone a real chance to develop and contribute their human potential to the fullest. Yet it is this most powerful tool that the government refuses to use, except when it is needed to support the extortionists and looters in the private financial markets who have taken over the money creation function of governments around the world.
The general public has no idea about the possibilities that could be achieved by using the BoC creatively to finance the productive capacity of the nation. Most people don't even know that private banks and corporations create virtually all of the nation's money supply. And they haven't got a clue about how much our dependence on debt-based private money is really costing us.
Money is the mother of all our other problems, and it is urgent that we recognize this for time is running out. The globalists are accelerating their push for a one-world currency and a North-American currency union (amero) is imminent. If we abandon the opportunity to use the BoC to build our country and protect our sovereignty we will be powerless to change anything in the new world order. Global government will make it totally impossible for "we the people" to have any meaningful influence or control over our rulers. Getting a majority of Canadians to agree on anything is hard enough. Getting them to care enough to unite and act together to challenge the federal government is nearly impossible. But with a global government, even controlling the Canadian government would not be nearly enough, for Canadian interests would only represent 1 vote in the world body. And influencing the policies of the central bank of the world would be totally out of the reach of ordinary citizens ...forever?
There are some excellent videos here http://www.monetaryreform.com/MR/videoPage.htm to help you understand just how much our debt-based money system really works against us.
One aspect of social housing often overlooked is that it helps reduce the cost of housing for everyone in the market, not just for those in social housing. Increasing the supply of social housing increases the supply of housing in general and reduces the cost for everyone in the housing market.
It also decreases the price of buying housing which helps new home buyers but hurts existing owners as the value of their housing is reduced.
In short, it increases equality in the housing market.
I've got a piece of property 250 feet long by 82 wide with a house nearer the street curb. And I must say it's a job all by itslef just keeping it all maintained. It's getting so as I can't afford to live like a gentleman estate owner. Who am I kidding? The old house has been a money pit for me. It's not a top end model that's going to gain value whenever the gentrification effect kicks in on the business strip nearby. It's a mid range value home, and I would gladly give it up to live in something more affordable, a home where I can live life and not worry about a new roof and cutting the freaking grass as all the best and sunniest weather goes by. I want to live life without being chained to this money pit all the time. Apartment life seems inviting. But more affordable housing would be even better for more people like me who are tired of being Jack of all trades fixing and maintaining and just for the privilege of being in our own homes.
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Letter to Rabble re Affordable Housing
Canadians paid $160-million per day in 2009 in interest on federal, provincial and municipal debt. These costs are reflected in taxes, fees, cut-backs in public services such as education, health care and support services and deterioration of infrastructure such as roads, sewers, water lines and affordable housing. This amounts to $4.70 per day for every man, woman and child in the country. Think of what could be done with $160-million to provide affordable housing – and then think of having $160-million every day.
You are probably thinking, this guy must be crazy. Where does it say it cost $160-million per day to pay the interest on public debt? If we have that much debt we must have been spending like drunken sailors (with apologies to sailors). Well, we weren’t spending like sailors – drunk or sober - but our politicians were spending like irresponsible, badly informed guardians of the public purse.
How did we get into such a mess? Not by living beyond our means as some would say. Unemployment insurance, welfare programs, old age pensions and housing programs did not increase as a percentage of GDP. The real culprit in the debt's astronomical rise was not social programs but high interest rates, made more galling because the government (both Liberal and Conservative) could have borrowed from its own bank at near zero cost instead! This is possible because the Bank belongs to government and the interest paid to it reverts to government as part of the bank's profit.
If our government had been using its own Bank, the Bank of Canada, as it should have for the past 35 years we would not be in this situation. From 1867 to 1975 the accumulated federal debt amounted to $19-billion, and during that time we paid for two world wars and other smaller ones, built the trans-Canada highway, contributed to construction of the St. Lawrence Seaway, built housing, provided funds for our veterans to go to school, brought in the Canada Pension Plan and made Medicare a national service.
After 1975 the government, which had been borrowing a part of its debt from the Bank of Canada since 1938 at near zero cost, began to borrow less from its own bank and more from the private sector at market rates of interest. The result was a huge increase in federal debt from $19-billion in 1975 to $588-billion by 1997, with a total debt for all levels of government of over $900-billion – a 3000% increase in just 23 years. By March 31, 2009, federal government interest bearing debt stood at $710-billion, but by 2015 the deficits will bring that up to $868-billion. Federal debt charges, currently at $31-billion, will grow accordingly and based on previous figures the total debt charges for all levels of government will be about double the federal charges.
Some will say that borrowing from our central bank will cause inflation, and point to other countries for proof. My response is look at our own history. For 35 years, 1939 to 1975, Canada used the Bank to finance a significant portion of its debt, and during that time inflation never got out of control. For example, in 1950 the inflation rate was 2.8%, and while it rose and fell over the years it was only 2.9% in 1971. After 1975, Canada’s use of the Bank to finance long term debt for public capital expenditures was reduced, yet inflation increased from 6.8% in 1978 to 11.4% in 1980. Today it is low again, but the simplistic view that using the Bank of Canada to finance government debt will cause inflation does not hold water. There are other factors at work.
Where does all this information come from? It comes from Statistics Canada “Canadian Economic Observer”, the “Canada Year Book”, and the annual financial reports of the government of Canada as well as other sources such as “A Power Unto Itself – The Bank Of Canada”, 1993.
The federal government can reduce the interest paid on public debt by borrowing from its own Bank at near zero cost. This would lead to a reduction in the profits of the commercial banks and less income for holders of government bonds, but most Canadians would benefit. Funds borrowed from the Bank of Canada should be invested in public services and infrastructure such as affordable housing.
The government has made it clear that it wants smaller government and therefore is not interested in using the Bank to finance investment in public services and infrastructure. The Liberals could have used the Bank of Canada to reduce debt in the nineteen nineties, but instead Paul Martin as Finance Minister drastically reduced services by cutting transfer payments to provinces for health care, education and infrastructure. The biggest disappointment for me is the NDP which adopted a resolution in 1995 supporting use of the Bank in this way, but has ignored it ever since it was adopted.
It is essential to get people in Parliament who are committed to using the Bank of Canada to finance public debt, and if none of the party representatives will support it then we must find independent candidates who will.
The only way out of the mess we are in and to get adequate support for public services, job creation and affordable housing is to use our public bank, the Bank of Canada, for financing public debt. To attempt to pay down existing debt from earnings will only impoverish us and our children, our grandchildren and their children’s children.
There is no alternative to having enough politicians in parliament who support using the Bank of Canada for financing public debt to invest in public services and infrastructure. We will not be able to provide enough affordable housing as long as we are spending $160-million a day on public debt interest.
Richard Priestman, President, Kingston Chapter Committee on Monetary and Economic Reform
st1\:*{behavior:url(#ieooui) } /* Style Definitions */ table.MsoNormalTable {mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-parent:""; mso-padding-alt:0cm 5.4pt 0cm 5.4pt; mso-para-margin:0cm; mso-para-margin-bottom:.0001pt; mso-pagination:widow-orphan; font-size:10.0pt; font-family:"Times New Roman"; mso-ansi-language:#0400; mso-fareast-language:#0400; mso-bidi-language:#0400;} References Canadian Economic Observer: Historical Statistical Supplement 2009/2010 Annual Financial Report of the Government of Canada Fiscal Year 2008–2009 Federal Debt and Interest Payments - Canada Year Book 1962 – 2005 Canadian Inflation Rate by Year 1950 – 2003, Canada Year Book, Statistics CanadaWilliam Krehm, “A Power Unto Itself – The Bank Of Canada”, 1993, p.22 “Meltdown – Money, Debt and the Wealth of Nations”, pp.60-61
William Krehm, “A Power Unto Itself – The Bank Of Canada”, 1993, p.22 “Meltdown – Money, Debt and the Wealth of Nations”, pp.60-61
This is the point-- housing is so desperate in these communities that they would not mind being models for the program since nothing else is working. If we can throw billions at fighter jets -- we can put serious money in to the construction of affordable quality housing on reserves. If the model works well then it can be expanded everywhere else. It would be disgusting if we started any housing construction plan anywhere else first given the need there.
Given the principle and objective is affordable housing if the mechanism for delivery is different (and to me that is mostly window dressing) that is not a problem and sometimes that difference can cause re inspiration and new support for an idea.
In any case I have not considered this mechanism much because I want to express support for bringing up this as a topic and showing that there are new and different alternatives to reach it if these are popular and workable. Getting in to detail with this one is less important than what it is raising.
Another related point is we should stop using residential property as a tax base. It is a serious thing that cities use a tax on a basic over-priced necessity (housing) to fund a whole level of government. A tax on luxury would be fine-- even a carbon tax would be better as it would have some purpose but a straight tax on housing is disastrous and that is the real elephant in the room behind the fact that housing is not affordable in our cities.
There is probably no one solution to the housing crisis in Canada. The NDP is proposing to have a national housing strategy that would tackle the problem. That could include, government owned social housing, co-op housing, rent subsidies, mixed housing, etc....
Better Idea perhaps not entirely relevant, but I feel like posting
Alas, I have failed! A pristine example of how powerfully effective interest-free, sovereign-created money could be is reduced to window dressing.
Fair enough, I get it, but do at least consider the mechanism that I am proposing.
I totally agree with you on this very important point.
...but I think the real elephant is the interest cost that we must pay on housing whether we purchase or rent. A financing rate of 6% doubles the total amount that we have to pay on the already speculator-inflated principal. Property taxes just make the extortion even more ridiculous.
Are there any examples of countries in the world that have "interest-free, sovereign created money"?
Yes, Canada! ...and every other country whose central bank is 100% owned by the national government. All that is missing is the political will to use our central bank in the way that I describe.
Why is their a lack of political will?
Why haven't progressive politicians made this a priority?
What haven't progressive economists supported this concept?
Becasue most dont endorse the concept, even if it was achievable. I actually dont know of any- I just presume they exist.
Why wouldn't they endorse it?
I beleive that the old Social Credit- at least the Quebec Credistes- used to advocate printing money for social programs. How this is supposed to work in an economy that is still capitalist, I have no idea.
But if you for all intents and purposes abolish capitalism, then the central banks can do anything they please. [Except for the little detail of international coordination.] How you think you can abolish capitalism through the neat and sanitary sounding fiat of 'monetary reform,' I have no idea.
My guess is that its the politics of "look this is possible".... "a system like this would work" [on paper]... and that people will say "I like that" and go for it. The rest becomes history.
Something like that.
On October 17, 2010, KenS said:
“...
There is zero new federal funds that goes into social housing. The continued self-financing of existing buildings does not count.”
But this is only part of the story - Each year there are $billions on tax expenditures(taxes forgone) benefitting homeowners, by capital gains on the sale of homes being tax-free. On average this is well over $1000 per homeowner per year, but you get more of this benefit the more expensive your house is and only in the year you sell it, so well-off people make the lion’s share and people in depressed markets can even lose a fair amount. Renters(including social housing renters) see no similar benefit.
“...
And by the way- no social housing of any kind is self-financing to the degree that you put the money out and it all comes back in rents. Starting up projects is on the aggrgate subsidized. So to build all the units we need, there has to be a continuous stream of federal funds that are not returned. [Seperate from the 10 or 20 times more, or however much it is, that is debt on the buildings repaid out of operations.]”
No housing is self-financing in the beginning, that’s why sensible lenders want down payments. But the financial mechanics of Non-Profit/Social rental Housing is exactly the same as for profit rental housing. For the first decade someone, either a public authority (Federal/ Provincial/ Municipal) or a private entity(a landlord or homeowner) puts up credit and has a paper loss for the first decade (or so) - government policy often obscures this(with things like tax breaks for the private sector) but new housing is a losing proposition without a lot of make-up at the start. By the second decade the market rents or sale prices have increased enough that early losses can be made up, and by the third decade, hefty real returns come in. This happens for a decade or so more, then the structure needs some serious renovation(or it falls apart), so it needs a new infusion of capital.
In the same way that it takes a couple of decades for a private structure to turn a real profit(net of tax breaks and similar assistance) but there is a kind of profit from day one, Social Housing also has a kind of profit from day one. While the private profit goes to the pockets of investors, the Social Housing profit is used to cross-subsidize low income tenants. By the third decade the profit no longer needs the boost of tax breaks for the private buildings and it is also being generated in Social Housing with a mix of tenants paying market rent or a rent geared to their income(RGI). The market housing component of social housing(often around 50% of it) becomes self-financing at the same time and in the same way that private housing generates a net profit for the private market. Except that the profit goes to helping pay the rents of RGI tenants. And that’s the government return on its investment. This effect can be most clearly seen in the stock funded under NHA S. 15.1/27(30+ years old) and NHA S. 56.1/95(25-30 years old) properties
This is the way to fund a robust program - not to drop many $billions at a shot, but rather to set up a stable mechanism over decades that builds a self-financing base(say investing a couple of $billion per year). Up until Harris stopped the funding in the mid-90's Ontario had a fairly stable stream of Social Housing, from as early as the 50's, but the Harris decade-long break will end up costing the Province $billions over the next few decades.