Affordable Housing is an Economic Problem
The challenges we face with respect to building more affordable housing are complex to state the obvious, and resolving them calls for an integrated set of strategies that go far beyond the actual building of more housing. Here are some of the challenges we need to address:
AFFORDABLE HOUSING IS AN ECONOMIC PROBLEM
People cannot afford decent housing when they cannot earn enough money to pay for it. Yeh. Duh, right?
The increasing lack of decent work (low wages, no benefits, erratic hours of work, chaotic employer controlled work schedules, zero job security, and being subjugated by indecent employers who view human beings as commodities) may fuel profits for businesses but at what cost?
In an economy where human beings are commodified and become a cost obstacle to fattening wealth’s already engorged belly, the goal is to rid as many businesses of employees as possible. Greed blinds the minority who rake in the spoils from the tipping point that will eventually show itself. Imagine what the economy will look like when half of workers are cast away into permanent unemployment. Avoiding the prospect of less spending power in an economy of millions and millions is either akin to the Ostrich stuffing his head in a hole or is just ignored by those who will live high now but likely be dead when the collapse comes.
It does not matter how many billion dollar plans governments craft to build affordable housing, the problem will only grow larger as millions more lose their jobs while millions others see their wages stagnate if not decrease, benefits be damned.
More than 115,000 Edmontonians earn less than a living wage today. The tendency of some to suggest people just go out and find a better job is, I suggest, rationalization by those who have better jobs. To suggest that there are plenty of jobs out there because employers can’t find people to work for them is facile – and often pejorative – advice. As AI technologies escalate their overthrow of the workplace, those let go will not have and most will never have the skills or education to land the new jobs created by AI.
The rapid and unbridled advance of AI technologies have created a structural skills gap that could take generations to close, if ever. Think about it. When will the new hi-tech jobs being created become antiquated and render its creators as irrelevant and no longer employable?
It is a significant problem. Workers who hold jobs that are being replaced by AI and automation have experience, education, and training that are irrelevant to the new high-tech jobs being created. A quick example is the impact that self-driving vehicles will have on truck drivers, cabbies, delivery drivers, and the like. When these people are replaced, where will they work? Skip the Dishes? Uber? Maybe, at least until drone deliveries replace those low paying non-jobs.
The structural changes in our economy are happening so quickly that our educational systems cannot keep up, especially grade schools and high schools. The change required has to be led by governments. The old adage about letting the market place rule the day is, well an old adage, that frankly never really panned out for billions of people. I wonder how many chuckled in the closed boardroom when Ronald Reagan’s trickle down lie was shining bright on its Power Point slide.
Our economy is responsible for the structural skills gap and for the inability of more and more people being unable to own or rent decent housing. Ask yourself who is leading the economies in our nation. It is not truck drivers, Skip the Dishes “contractors”, locally owned retailers, teachers, nurses, and the like. Economies are led and controlled by those with wealth and power, which results in the economy not working for the majority. Until we figure out what to do about that, access to affordable housing will not improve; it will decrease.
UNIVERSAL BASIC INCOME
There is a growing minority of thought leaders, well-intentioned business leaders, government officials and community change practitioners advocating for Universal Basic Income (UBI), but governments and the private sector do not seem sufficiently interested in exploring a UBI system that would actually work. The Ontario Government, under the Liberals, instituted a UBI three-year experiment with 4,000 Ontarians to test the concept, but the Ford Government nixed it.
Those against UBI claim receiving “free” income will result in people choosing not work, but UBI experiments have shown this not to be the case. Others claim the cost is too high for governments to bear (i.e. for tax payers to bear). The costs would be substantial, but costs need to be compared to benefits in order to be fully assessed.
Proponents mention that having one UBI program would result in cost savings of administering the dozens, if not more, of current income security programs like welfare, EI benefits, old age income programs, and other programs, but I think the real savings will come from streamlining those costs AND keeping benefits even lower than they are now.
The biggest resistance to UBI is sourced in ideology that values wealth-building more than the economic health of the majority and that purports that poverty and low-income earners are themselves the problem, not the economy they have no influence over. After all, there must be something wrong with those who can only find work trying to upsell you at the drive through at McDonalds.
Governments that see a balanced budget as their primary, if not sole, purpose tend to institute economic reforms that increase benefits to those who do not have an affordable housing challenge or struggle to buy good food or end up in hospital because the tooth ache they couldn’t afford to fix became so unbearable they had to seek emergency assistance.
People who are struggling are impacted the most and intentionally so by austerity measures like cutting school lunch programs, increasing class room size through cutbacks, instituting user pay health care, and that refuse to support non profit groups who work the front lines of the austerity landscape. These cutbacks won’t impact those who can afford private schools, pay to jump the health care que, and who never worry about putting food on the table, much less have to decide to not pay the electric bill in order to do so.
I am all for balanced budgets, but why is it that austerity measures are contraindicated for big business but the cat’s meow for everyday workers?
My concerns about UBI are that political ideology and our current and past practices will result in UBI benefits that, like all other income security benefits, serve to keep people poor. I see no evidence that our current provincial system of providing, for example $600 in income security benefits to a single person and somehow expecting that this is enough to live on, will somehow translate into a UBI program that actually helps stem the tide of poverty and economic vulnerability.
SUBSIDIES ARE A PARTIAL, INCOMPLETE ANSWER
There are not enough subsidies and will never be enough subsidies to fund the development of affordable housing for low income people. By low income, I do not mean the homeless (they have no income). Cheap mortgages from CMHC and increased spending from the City of Edmonton on permanent supportive housing are needed and welcome, but insufficient to resolve the significant housing insecurity in our city, our province, and the nation. There is just not enough money to build housing with subsidies and government grants to tackle the problem.
With the rise of populism and the caustic austerity that populist governments rationalize as necessary to balance the budget, which typically means cutbacks to basic services and income supports and related programs, the availability of such funding will be reduced, not increased.
Programs like the Child Tax Benefit (CTB), which has lifted hundreds of thousands of families out of poverty, can have a negative influence on what a job is worth in terms of wages. It is interesting to note that when the CTB came into effect, Living Wage estimates decreased in many communities.
Subsidies and the wrong-reasoned approach to a UBI system may solve a fraction of the problems we face. The big answer to the housing affordability crisis is an economic answer. If we do not find one and implement it well, our economies will decline, government debt will climb, and poverty and economic vulnerability of works will escalate – all so a handful of billionaires can have more wealth than half the world’s population. Eighty-seven (87) families in Canada have more wealth and assets than Newfoundland and Labrador, New Brunswick and Prince Edward Island. They have wealth equal to the lowest 12 million income earners in Canada.
The economy works for the minority. It should be the other way around.
MAKING THE BUILDING OF AFFORDABLE HOUSING MORE AFFORDABLE
At the Edmonton CDC we want to build housing at the low end of market, if not below market, that do not require subsidies. Land prices, the costs of development and construction are too high to accomplish this in a significant manner. Again, this is because a growing number of people cannot afford what the rents must be in order to have a housing development in the black financially. This is true for conventional developers who are profit oriented but also true for the Edmonton CDC as a non profit developer. While we are not profit driven, we are sustainability driven, which means we need to also avoid building housing that operationally ends up in the red.
While we cannot resolve on our own the structural skills gaps in our economy we can look for innovative ways to decrease the costs of development in order to build more affordable housing. But such innovation cannot be a solitary activity; it requires partnerships with others prepared to think and act differently and frankly in some, if not many, cases accept lower margins to build such housing.
Currently we are partnering with MacEwan University’s Social Innovation Institute (the Round House) and End Poverty Edmonton to develop a year long affordable housing innovation initiative focused on making building affordable housing more affordable. We hope to begin rolling that out soon, seeking others from across various sectors to join us – designers, builders, real-estate agents, financial institutions, universities, operators, renters, low income earners, and on. We will need the City there too and we are currently working to partner with key city representatives on this initiative as well.
The Edmonton CDC is exploring alternative ways to build non-subsidized affordable housing (and other developments for that matter) with a number of builders, looking to create designs that reduce costs. We are looking for alternative materials to use, lessons to be gleaned from third world countries, new and efficient, and often green technologies for heating and powering dwellings, and getting better at designing spaces to the actual square footage needs of people.
We are introducing the strategy of creating Investment Co-ops that residents can invest in and then control how and what gets developed. We are also looking to explore co-housing models, tiny home communities, micro housing, and so on. Some of this is already going on in our community, but these developments are often still unattainable for lower income people.
The development process in our city is an expensive one. It can take a year to get a development permit and if rezoning is required it can take longer. During the time the land remains empty, the owner has to pay property taxes, insurance costs and maintenance costs without any income to offset these expenses. And when construction begins the taxes go up as the site reaches various stages of development. While this challenges conventional developers, it challenges non profit developers like us, not to mention the every day citizen trying to develop new housing.
The City of Edmonton is reviewing its processes and timelines and the bylaws that govern and often restrict development and some improvements have been realized (e.g. Tiny Homes Review), but more are needed, especially with respect to how the City can incentivise development aimed at affordability for tenants.
I am encouraged by the partnerships that are forming and the growing interest of the development sector in tackling this problem, but I suggest we need more than tweaks and reformist change; we need transformational change to remedy the problem of affordable housing. The Edmonton CDC and others we work with can be a part of the resolution required, but without significant government leadership and private sector commitments with respect to creating an economy that works for the majority, our successes will constitute a small drop in the bucket.