Solving the need for affordable housing

1) Most people (including most MPs & MPPs) don't understand the interest-free, government-created money idea.It is never seriously discussed in politics, the universities or the media so how could they understand? Plus when the issue does come up, the people bringing it up are attacked and discredited using misinformation and inuendo, labelled as being idealistic, socialist or even communist, and the fear of being ridiculed (or disciplined more severely by the political party) prevents any serious consideration being given to the idea.

2) All of our 3 main political parties rely on the financial community for a large part of their party funding. No candidate is going to get any serious support from his party (like leadership nominations) if his ideas threaten the interests of the financial community.

New parties like CAP (Canadian Action Party) have tried, but for reason 1) above they get nowhere with the public.

Many have, like Keynes, Hotson, Krehm, Kennedy, etc, but because the subject is taboo in establishment academia and the mainstream media, no one knows about them. In fact since the 1700s, US presidents and even the bankers themselves have been warning people about the dire consequences of not using interest-free, government-created money, but we still do not heed their warnings.

Exactly, and the financial mechanics include profit & interest to the lenders. This is why we need to re-invent the mechanics and introduce a special class of "public investment capital" that is interest free.

Yes, due to the cost (and deductibility) of interest payments.

Yes, as the principal is paid down, interest costs decrease as a percentage of rents, and the profits to the landlord become lucrative. Plus, of course, the landlord gets to own the buildings that the tenents paid for. This is the reason why our current model of "affordable" housing is costing taxpayers so much more than is necessary, and it clearly explains why there is still a shortage of 1.5 million affordable homes.

How on earth can you leap from the explanation you gave above to this conclusion? A program that leaves 1.5 million out of the picture is hardly robust, or even humane. Like KenS, you haven't offered any logical, concrete explanations about why the simple arithmetic in my original post wouldn't work.

In the mid 90s I made quite an effort to get "the progressives" at CCPA, the Council of Canadians, etc. interested in the subject of interest-free government-created money. I did manage to get a few articles published in CCPA Monitor but I was told by Ed Finn that the higher-ups were not interested in pursuing the subject of monetary reform because it might alienate their reader base.

Never underestimate the power of your own common sense. Use it to guide you to the knowledge you seek.

I don't want to get too far off topic from my original post which suggests only a limited use (trial-run, if you like) of government created money. However the points you raise are important and valid. Currency speculators and private capital market funds will definitely not like interest-free money as it cuts them out of the business of government loans which are one of the few secure investments they can make. You are right, most likely they would have a tantrum and start selling their Canadian dollar investments. This is one of the most serious hazards of global finance that needs to be discussed and corrected if the pretense that we now call democracy is to become anything more just than a hollow promise. The non-productive class should not be allowed dominate and exploit the productive class.

Regardless, the global community would still want to purchase our non-financial exports which would retain their value. To get fair market prices, we may temporarily have to tie our export prices to other currencies using prices that simply match the existing world prices of our competitors. This is far too complex a topic to get into in this forum but much of it is discussed in "Take Back Your Life" available for free here: http://www.monetaryreform.com/MR/downloadPage.htm

On Oct 22 JKR wrote:

*Rod Manchee wrote:

*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....
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JKR:
“But in order to make up for the decade-long break wouldn't it make sense to make a one time huge investment in housing and continue on with stable funding afterward?”
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The central problem with housing in Canada is not so much a lack of supply(although there are problem pockets) but tremendous mis-allocation of existing stock because of things like loss of rental stock to condo conversion. There is housing, but a significant number of households just can’t get it because they can’t afford it. The private rental market solution is to give them some money as rent supplement so they can afford the market rent, but the much more efficient solution is to have the Non-Profit sector use those rent supplements because it can provide them at the lowest cost for a specified level of quality. The difference is profit, which the Non-Profit does not take, so its rents for Rent Supplement can be break-even(ie without the profit margin). And in Ontario they were until the Harris government jacked them up to the market level, thus incurring an unnecessary expense to make the Non-Profits appear as expensive as the for-profits. But the non-profits could not just take this profit, so they have been able to invest it in renovating the buildings they have, or new development, reducing or totally replacing cost to the public.

A one-time huge investment would just throw the cycle of gradually aging stock out old kilter, making a lot of existing housing redundant, when simply gradually acquiring it as public stock and renovating it combined with gradually building new non-profit stock  would be a lot cheaper and avoid requiring a large investment at some future date when there might not be sufficient resources. Also this approach would stabilize the sector by making it more self-sufficient over the long term,

Then, on October 22, 2010 DonOld wrote:

*Rod Manchee wrote:

*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.

DO:
Exactly, and the financial mechanics include profit & interest to the lenders. This is why we need to re-invent the mechanics and introduce a special class of "public investment capital" that is interest free.
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That there should be a class of “public investment capital” I totally agree with and, in fact, this is how early programs(50's, 60's, 70's) such as Public Housing and the earliest Non-Profit(NHA S.15.1/ 27) were financed. The break came with the program introduced in 1979(NHA S. 56.1/95) which used financing from “approved lenders”(as have subsequent programs). At the time I did a rough estimate that if the S. 15.1 program had been funded this way the result would have been an additional cost of about $100 million per year for the life of the projects(usually 35 or 50 years). It doesn’t have to be(in fact shouldn’t be) interest free, because the interest is an essential tool in assessing performance in relation to the market and arranging adequate maintenance and renovation over the life of the structure. Anyway, the interest from such “public investment capital” just circulates back to the government, making more public investment possible(I’m not suggesting that a Harper-type government would do this, but a responsible-adult, intelligent one would).
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*Quote(RM):
*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.

DO:
Yes, as the principal is paid down, interest costs decrease as a percentage of rents, and the profits to the landlord become lucrative. Plus, of course, the landlord gets to own the buildings that the tenents paid for. This is the reason why our current model of "affordable" housing is costing taxpayers so much more than is necessary, and it clearly explains why there is still a shortage of 1.5 million affordable homes.
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For most mortgages, being of the Equal Payment variety, the principal portion increases as the interest portion decreases, and the nominal payment stays the same, although it decreases in relation to inflation. But as I noted above, the mechanics for a non-profit are the same, so it too gets ownership of a property that the tenants paid for, except that the non-profit can use those profits to assist tenants who need it, through things like a sudden loss of income, or increased costs due to age or disability. It doesn’t really explain “why there is still a shortage of 1.5 million affordable homes.” but it does illustrate one of the advantages of non-profit as opposed to for profit housing as a instrument of publicly beneficial policy.


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Quote(RM):
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).

DO:
How on earth can you leap from the explanation you gave above to this conclusion? A program that leaves 1.5 million out of the picture is hardly robust, or even humane. Like KenS, you haven't offered any logical, concrete explanations about why the simple arithmetic in my original post wouldn't work.
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In a world where there were no competing demands for government funds, and where we had a government that had some concept of public benefits then it might be worth thinking about for a second or so, but then we come to the idea that this should be a robust, long term mechanism, rather than an impractical, one-off spurt. A few very simple concerns might suffice - where are you going to get the adequately trained manpower, the equipment and the raw materials to make this million and a half units appear - it’s a project of years, so we might as well settle down and do it in a deliberate and reasoned manner rather than in some gasp of reserves, probably saddling us with significant long-term cost(a couple of decades from now a hell of a lot of units would need a lot of expensive maintenance and renewal at the same time). And what about all the other concerns that blowing all our resources on housing will create - what happens to healthcare, or education(to mention just two). The solution is not to blow a lot of resources on a quick fix for a problem, but rather building a mechanism which is self-sustaining and self-replicating.

The need for rent supplements (regardless of who receives or gets to use them) is an ongoing burden to taxpayers. Using interest-free, public investment capital could create affordable housing without an ongoing burden to taxpayers simply by removing the profit & interest compnent of housing costs.

Fine, then we could use the interest-free, public investment capital for that and reduce the amount needed to well below $75 billion.

Profit & interest are speculative financial costs, maintainence costs are real productive investments. Eliminate speculative costs and include only real productive costs in the rental prices to tenants and housing becomes affordable. Why bundle and hide real productive costs inside speculative financial costs? Bring the facts out into the open for all to see.

IF the political will to use it correctly remains intact (which it did not with Harris)

My original post did suggest a 10-year time frame. Is the construction industry currently running at 100% capacity? Could we not train additional apprentices over the next 10 years if necessary? With a 10-15% real unemployment rate (if you include people who have run out of EI benefits and have given up looking for work) I think quite a few would jump at the chance to get decent paying construction work.

A self-sustaining, self-funding program on affordable housing would not "blow" any of our resources, it would utilize productive capacity and human resources that are currently under-utilized now. The whole idea that we can't "afford" to develop and use our human potential to its fullest is the biggest lie in capitalism. A lack of money should never be allowed to stand in the way of human need if the productive resources required to eliminate that need are, or could be, made available.

In fact, mobilizing currently unemployed people would create additional tax revenues and lower other income support costs so that more money would be available to fund healthcare, education, etc.

And it's not a sane government. World class subway system to nudge Toronto into world class city status? Why?

Why would conservatives or their Liberal Party support team want to pursue policies for fuller employment and competitive economies? Why would they want to attract international investment and produce jobs when more than three dozen key sectors of the Canadian economy are already majority foreign-owned and controlled and mostly by rich Americans?

It makes no sense to the sellouts and traitorous ideologues running things for too long in Ottawa. Why would they want Canada to be in a position to pay down massive federal and provincial debts owed to banks and foreign creditors? Canada's federal and provincial debt is premo top quality debt with 33 million co-signers and plenty of energy and raw materials to back it up. The parasites and their hirelings in government want to bleed this Northern Puerto Rico for a long time into the future. It makes no sense if our two old line party toadies are in the pockets of Bay Street bond salesmen and marauding international capital. No sense at all. Whether Tories or Liberals are in power in Ottawa, they are only there to do a job for big business and finance capitalists pulling their strings and financing their election campaigns.

I saw that item too - and right away I was wondering about two potential problems - what will the resale value be on one of those homes after it's been used for a while and probably not maintained well; and if it's made of straw, is it an increased fire risk? Finally, if I have bad allergies including hay fever, would I want to live in one of those houses?

Good to hear. Presumably there's a facility somewhere that dries the straw 100% before it's used. But we have a hell of a lot of strong wind and heavy rain here, and I'd always have that concern.