Immigration, housing, and the financial politics of housing

Immigration and housing

In late October 2022, the federal government announced plans to welcome 500 000 immigrants a year to Canada over the coming years.

There are many good reasons for doing so: Canada’s population is aging, there is a labour shortage, and people from across the world are facing climate and political disruption partly attributable to wealthy nations’ love affair with oil – Canada is amongst the fossil-fuel five.

And, as commentators point out, immigration will preserve the value of real-estate…

However, although this is presented as an advantage by some commentators, it is in fact a key problem, one that has been patiently and deliberately contrived over the last 40 years.

A brief introduction to the financial politics of housing

It is no secret that Canada – and other wealthy nations – are facing a housing crisis. This crisis has been manufactured over the last few decades, during which time there has been a deliberate move away from social and public housing towards property ownership.

Indeed, Margaret Thatcher, in 1975, famously called for a “property owning democracy“.

This sounds like a good thing. It supports: “a [person]’s right to work as [they] will, to spend what [they earn] to own property, to have the State as servant and not as master”

But it also has a number of consequences:

• more people have mortgages, which subjects them to financial calculations and constraints. This is a key first step towards the financialisation of housing.
• more people have an interest in ensuring that real-estate maintains or increases in value. Another boost to financialisation.
• banks and mortgage lenders want real-estate prices to remain high, since homes act as collateral for mortgages and other loans. If house values decline, then banks are exposed to high risk (well, not really, since tax-payers bail them out).

One way to keep house values high (and rising) is to make sure that alternative tenures, those which can make housing affordable to people of more modest circumstances, or simply to those not interested in financial gymnastics, are not available.

Attrition of social, affordable and public housing can be precisely dated – in England at least, it exactly corresponds with Margaret Thatcher’s accession to power.

More generally, it is the shift towards neo-liberal ideology (which posits less state intervention, rugged individualism and property ownership – whilst at the same time relying on state intervention to shore up markets and too-big-to-fail banks) that signals the rapid erosion of government efforts to keep housing accessible¹. The shift was less abrupt in Canada, and faltered in the early 1990s, but it occured nonetheless.

It is not by accident that in England, Canada, the US and in other global northern countries there are housing shortage and affordability crises.

Housing shortages have been exacerbated by the fact that incomes for most people have stagnated or declined. For people of average or more modest means, and for younger people, the supply of housing has declined at the same time as their earnings have.

The political benefits of the housing crisis

‘Property owning democracy’ is a clever policy: it ensures that more and more voters have a vested interest in low interest rates, low inflation, and high real-estate prices. These voters will tend towards conservative policies, wish for lower taxes (because, in the short-term, their main concern is mortgage payments), and hesitate when any government spending (such as support for social housing) is proposed.

For electoral purposes, it suffices that about 35 to 40% of voters share this vested interest – this is typically sufficient, in first-past-the post jurisdictions, to ensure absolute parliamentary majorities to conservative-leaning parties. In many countries, such as England, Canada and France, the political ‘centre’ has shifted towards conservatism partly because the ‘property owning democracy’ has been an incredibly shrewd and long-term political move.

This stymies governments from taking measures to address the housing crisis. Today, despite keen awareness of the crisis, governments hesitate – do they really want a middle-to-upper-class revolt as taxes are spent on affordable housing? Not only does this transfer money away from mortgage interest payments towards taxes for social housing, it threatens to undermine the value of real-estate nest-eggs.

So why rock the boat? It has so far been simpler for governments to not fund social, public and affordable housing, vaguely hoping for markets and financial services to solve the problem.

For immigration to be realistic, the housing crisis must be addressed

Increased immigration will exacerbate the housing crisis. It will make housing even less affordable for people currently living in Canada, and will make immigrants themselves struggle to find accommodation.

If the Canadian government is serious about increasing immigration and about positioning Canada as a welcoming nation, it first needs to sort out the housing crisis.

This is a major challenge, since it requires deconstructing a 40 year-old shift in how the middle and upper-middle classes relate to housing. Housing has become an investment, no longer just somewhere to live.

To meaningfully address the housing crisis implies an erosion of the (over)value of many Canadians’ homes.

This is not an easy or popular thing to orchestrate.

1. Michael Storper usefully distinguishes neo-liberal rhetoric (pro-market, anti-government, low regulation) from actual policies (support for oligoplies, high levels of intervention to shore up markets in various ways, high levels of regulation especially focussed on certain socio-economic groups). Storper, M, 2016, The Neo-liberal City as Idea and Reality, Territory, Politics and Governance, 4.2