The Financialization of Housing
Canada is currently in the middle of a housing affordability crisis. Since the pandemic, the cost of housing has increased sharply, while wages (as they have for decades) lag behind. Despite nine months of decline, the average asking rent for an apartment in Canada ($2,129) is 22% higher than it was in May 2020¹, while the average weekly wage ($1,293.52) has increased only a paltry 14%². Compounding this issue, housing construction lags population growth, and the types of housing being built do not meet peoples’ needs or wants. Developers have prioritized the construction of small (investor-friendly) condominium units in large cities like Vancouver and Toronto that have gotten increasingly unaffordable and undesirable for the average Canadian³. Governments across the West, and particularly here in Canada, insist that remedying this problem is a priority for them. During the latest federal election, the Liberal Party’s housing platform promised to waive the sales tax for first-time home buyers, “incentivize” municipalities to waive developer fees, and create a new crown corporation called Build Canada Homes. According to the Liberals, this crown corporation is supposed to get the government “back into the business of building homes,” which sounds a lot like a national home builder. Notably, however, this new promised crown corporation will not be building homes, but instead provide financing to real estate developers with a particular emphasis on modular homes, an experimental and unproven mode of housing construction that pre-builds homes in factories instead of building them on sight. This new initiative is no different from every other federal housing policy over the last 80 years. Apart from a brief moment during World War II, when a crown corporation titled Wartime Housing Limited built 45,930 housing units to aid the war effort⁴⁻⁵, the Canadian government has had little interest in building housing. The main goal of federal housing policy has been, in effect, to merely stabilize housing markets and provide loans during times of crisis. The main crown corporation tasked with housing policy, the Canada Mortgage Housing Corporation, is content with being a loan provider and a provider of mortgage insurance, hoping that the market will meet housing needs and acting indifferent when it doesn’t. This passivity and mismatch of priorities between citizens and government is downstream from a mentality that sees housing not as an essential service, but as an investment vehicle. This is an ideological issue that has permeated our entire economy and is chiefly responsible for homes and rents becoming unaffordable.
Homes are not like most consumer goods, where corporations can (and do) rush into mass production to meet demand whenever it’s high. In our economy, housing is not treated like a product or service, but as an asset to be used to generate income or borrow against. This means that it does not follow the same market rules as products. Whether it’s the working senior relying on home equity for retirement, or the Bay Street firm trading mortgage-backed securities, large swathes of our economy rely on housing, not as a place to live, but as an investment asset. This process of turning a real asset into a financial product is called financialization. “Financial product” sounds ambiguous, but it's nothing more than a contract you can buy or sell without selling the thing itself. To understand why the financialization of housing is so appealing for capitalists, we can look at the process of selling a home. The home seller will typically start by getting a real estate agent who will list the home, show it to prospective buyers, manage multiple bids on the home, ensure the final buyers have the finances to close the deal, handle pre-purchase inspections, and deal with legal title transfers and other final elements before the sale is closed. This is a time-consuming and expensive process. Now imagine if you could make money from a house without having to sell it. What if banks could take the agreement they have with homeowners (mortgages) and use that to generate income instead? While selling a house is laborious, selling the rights to receive these mortgage payments is as easy as selling a piece of paper (or PDF) with “IOU” written on it. Actually giving out mortgages is a slow and low-profit endeavour compared to trading on them. The speed and ease of selling these products is called liquidity, and banks’ desire for liquidity is secondary to their desire for profit, which is the main reason why their interests diverge from the people desiring homes that fund it all. While mortgages are the biggest debt that middle and working-class people take on, most will never generate income from their home unless they become landlords. They may see their home prices increase, and in many cases they rely on this, but these price increases on their own are not substantially profitable. It is only when you receive rental income or capital gains through some financial product that housing becomes a high-profit investment⁶. The financial industry extolls this as a virtue of the system when it is actually its major flaw. Working people don’t need their house to make them money; it’s the investment banks that do. People’s demand for housing is predictable and modest, but financialization creates risk where there doesn’t have to be, just so people who don’t need housing can make a profit. When housing is financialized, it makes it easier to buy and resell units to parties who care very little for the quality and maintenance of the housing and see it merely as a vehicle for value extraction. A recent study in Toronto found that financial landlords (landlords who take on outside investors through those financial products we mentioned) charged more rent and increased rents faster for the same house compared to any other type of owner, even more than private residential property chains⁷. This is no real surprise, considering that in addition to incurring the same costs as any other landlord, they have more overhead for traders and analysts, on top of the shareholders they have to provide returns for. This structure could only result in more aggressive rent extraction at the expense of everyone else. This investor demand that financialization has brought on has also allowed for the creation of software such as YieldStar, a platform that was being investigated for helping landlords collude together to raise rents⁸. Despite the creation of sophisticated financial instruments and software platforms, this dynamic of financial capital owned housing leading to increased rents is not a new quirk of our contemporary housing system. The only way that we could have stable (or even falling) rents over a prolonged period of time is if we had a large (and increasing) high-quality housing supply; a supremely undesirable prospect for investment firms.
Mandatory public notice sign indicating development permit or land use change to municipal by laws.
As concerning as rapidly rising rents and housing costs are, this is not the worst effect of the financialization of housing. The worst is seen when workers en masse start having problems paying these inflated rents. This occurred most infamously during the Great Recession of 2008, where people defaulting on their mortgage payments led to the collapse of a banking system constructed to exploit them. The predominant narrative is that prudent financial regulation spared Canada the same fate as the American and European banking systems, but today we have a housing affordability crisis that is one of the worst in the world, precisely because our system is in effect no different. While we have (for now) avoided real estate collapses, we are incredibly vulnerable to one. The way that our economy currently funds housing development relies on pre-build financing, meaning that (mainly) investors purchase homes before they are built in hopes of renting them out for profit upon completion. These investors put up a down payment before the homes are built, and as the developer completes them, they pay the developer the rest. However, when these investors lose faith that they’ll be able to rent these homes out for a profit, many choose to abandon their down payment and refuse to pay for the rest of construction. After losing this funding, developers choose to abandon the project, sometimes leaving it half-built and unusable. The uncertainty over the health of the condominium markets in Vancouver and Toronto is already forcing regulators into financial engineering tricks to prevent this from happening at scale. The market for home financing in Canada is riddled with distortions that, in good times, lead to overpriced landlord-friendly units, and in bad times, lead to projects going unfinished completely.
All levels of government in Canada want to believe that they can fix the housing crisis without addressing the financialization of housing. Our federal leadership chooses policies that amount to little more than encouraging working people to take on increasingly larger loans; loans that the federal government will then “insure” and sell on to financial firms. Locally, provincial and municipal governments, reliant on property taxes and developer fees, hesitate to densify housing for fear of falling prices and refuse to build public housing for people priced out of the current market for similar reasons. We thus find ourselves in the middle of this crisis, with no one in our political leadership willing to whisper its cause. The financialization of housing has led us to our current predicament, but it is not an unstoppable force. Our housing crisis can be fixed only if there is the political will to confront its causes at all levels.
The first and most immediate of these levels is your local municipality. We began this article by speaking about federal housing policy, but as many of you know, it’s your city that dictates most of your housing policy. In the immediate term, our local municipalities need to shift their priorities from protecting land/home values to building housing and services people actually need. Our cities currently have several obstacles to the construction of any kind of housing: zoning laws that limit the types of housing that can be built in certain neighborhoods, superfluous assessments on traffic/environmental impacts, and an obligation to hold multiple public hearings. These obstacles to development exist ostensibly to protect current residents from bad new developments, but in reality, they exist to keep property values stable out of fear that changes to a neighborhood through densifying housing could risk this. It is easy to view this kind of attitude as nefarious, but remember that most working peoples’ single largest purchase is their home, with many relying on it to provide security (and even income) in retirement. It is mainly this economic precarity that leads to opposition to new developments. Additionally, municipal governments themselves are in a similarly precarious position. Most municipal governments hesitate to levy large property taxes against these existing residents. As a result, many are funded in large part by developer fees (taxes charged to new housing developments). Developer fees, while necessary in part to fund the services (water, electricity, garbage collection, etc.) that new developments require, are out-sized compared to the cost of providing these services. What we end up with then is a situation where new residents are “subsidizing” established ones, putting up another roadblock on housing where there need not be one. A fairer municipal tax system through more progressive land/property taxes could help fix this one part of the issue, but, however necessary it may be to rebalance city revenues and encourage development, it would be an incredibly unpopular policy change, one with financial impacts that cities cannot and should not have to manage alone.
The difficulty for any single municipality to implement these changes goes to show how much provincial and federal involvement is necessary in fixing housing policy. Because cities are not a constitutionally recognized form of government in Canada, all of their powers are granted and managed by their provincial governments who have the authority to change these powers at will. Given this, provinces should be taking on more of the burden of implementing housing policy. Much of housing policy already falls within provinces’ realm of responsibility, with health and social spending chief among them. Many of our health and social issues are more linked to our housing crisis than any other variable. With housing being the single largest expense in working people’s budget, it is one of the main sources of financial precarity. This is particularly true for the disabled and the unemployed. A look through the total social assistance and disability payments for those eligible shows that there is not a single province in this country where these payments will afford you a one-bedroom apartment, leaving the overwhelming majority of these households in perpetual poverty, barely able to meet their basic survival needs⁹. The easiest policy change our provincial governments could pursue is an immediate increase to these payments such that they ensure no household is living below the poverty line and that no person, no matter their situation, ends up in a place where they cannot afford to house themselves properly.
One of our biggest areas of concern for health and social policy is the people who end up unable to house themselves. Estimates of homelessness in Canada are difficult to pin down, the latest point-in-time estimates (interviews conducted on a single night of the year) suggest around 40,000 people are living without shelter, in homeless shelters, or in transitional housing, a 20% increase compared to the last time this study was conducted in 2018¹⁰. This number is most likely a severe undercount, not only because it relies on the interviewers happening upon every homeless person in their area, but also because it omits people who have managed to find someone to stay with temporarily. While some of the 40,000 people without shelter are also temporarily homeless, many are chronically homeless, i.e., without permanent shelter for the past 12 months or more. Most provinces and municipalities have dealt with the chronically homeless through either meager increases in the number of homeless shelter beds or, more often, sweeping police enforcement through fines, encampment sweeps, and anti-loitering enforcement. These policies have been cruel, costly, and unmitigated failures, leading some to support even more draconian policies such as forced treatment and making homelessness a jailable offence. Calls for these kinds of policies can be found in the comment section of almost any social media post mentioning homelessness, and while absolutely horrifying, they represent a frustration with the status quo rather than a desire for more cruelty. The only deviation from the status quo that would actually solve homelessness would be providing homes first and social/medical help second (i.e., Housing First). Finland, virtually the only large nation to have dramatically reduced long-term homelessness¹¹, has employed this model since 2008 to great effect, with the number of homeless people having more than halved since then, decreasing the need for emergency shelters and other half-measures. But despite this success, cuts to social assistance and renter protection services have seen the number of homeless people in Finland increase this year, showing how precarious people’s living situations are and how complacent our leaders can be. The Finnish experience shows that it is possible for our governments to eliminate homelessness. This is more a question of political will than capability. In Canada, health and social spending at the provincial and federal levels (through transfers) can and must be used to fund housing first programs that include accommodations for different populations in need.
Towards a National Home Developer
The only permanent and sustainable solution to the problems caused by our financialized housing system is publicly owned housing. While such housing currently exists, it is both woefully underfunded and, in many cases, not completely public. Most “public housing” consists of rent subsidies, mortgage assistance, or the provision of loans to private developers to build below-market housing. None of this housing is ever truly owned by the public, and all the steps of development are outsourced to the private sector who charge substantial mark-ups at every turn. We opened this article by mentioning how the only time Canada’s political leadership took responsibility for housing construction was during wartime. Outside the war effort, our leaders have been content to do nothing but allow developers and bankers to extract massive amounts of wealth through rents and other financial products. What would it look like if our governments actually treated the provision of housing as part of their mandates? If instead of providing loans (or issuing fines) to private developers, begging them to solve the problem, they set out to solve it themselves by financing, planning, building, and managing a true public housing supply? This is, in effect, the only thing that can solve the problem. One refreshingly honest developer has admitted as much. In an interview with CBC, a developer admitted that, according to him, "If people can't afford it, they should not live in the city. The city is made for the privileged," and that he was uninterested in providing affordable (read unprofitable) housing, insisting instead that "the city would have to buy land, hire contractors and do it themselves and take on the responsibility to manage the building. Why would it be up to me?"¹². This latter admission summarizes the only course forward: a vertically integrated national home developer with municipal branches that can identify housing needs, finance construction, get approvals quickly, design and build housing, and manage the property or lease the property to local non-profit groups. While most of this discussion has been in the context of providing housing for the general population, it is even more true for those who are disabled, sick, and/or homeless. Anyone requiring a housing arrangement with significant support has never, and will never, find that housing in the private sector. The costs of providing these services are high, the demographic it serves would have little means to pay, and the benefits would go to society at large rather than private interests. So, like most health and social programs, the most effective way to provide services like these is through public programs. A national home developer, with funding from health/social transfers and in coordination with provincial health authorities, would be able to more effectively and rapidly build supportive housing units as part of a broad-ranging and holistic housing first model.
Such an institution would be met with objections from this country’s large and influential real estate and banking industries, but as Padulo put it so clearly, these objections stem solely from the fact that they would not make as much profit. Their objections will even be shared by many who will never share in these profits. Many of our countryfolk are instinctively opposed to the idea of communal ownership of our resources. Whether this stems from anti-socialist ideology or their own petty bourgeois dreams of becoming a landlord, they represent a significant opposing block. While the industry opposition is unmovable, the common opposition is not. People do not particularly enjoy their landlords and financialized housing; they have no affinity for corporations that charge ever-increasing rents for unimproved housing, and no love for a financial system that seeks profit at their expense. If there were a way to create a large number of decent, affordable, and communally owned housing units in their area, most people would prefer this to their current landlord.
If we allow housing to follow market rules and cycles, working families will continue to experience decreased access to decent, predictable, and affordable housing. Furthermore, those people who cannot be housed at a profit will be left temporarily or chronically homeless. We have the resources and labor we need to avoid this, but it will require us to fundamentally reorient what we allow housing to be used for. Non-market housing is the key to providing shelter to all and ensuring that our housing stock is not determined by what is profitable for a small group of developers and financial firms. The promise of financialization is flexibility and stability; by re-packaging housing into liquid financial investments, more money will be available to fund the construction of diverse types of housing. This promise has never come true, and instead has repeatedly and reliably led to housing price increases, unavailability of housing, and economic collapse. The leading political parties, in theory and in practice, choose to believe in this false promise.
References
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Statistics Canada. “Employee wages by industry, monthly unadjusted for seasonality” Table 14-10-0063-01. Statistics Canada, August 2025, https://www150.statcan.gc.ca/t1/tbl1/en/cv.action?pid=1410006301.
Hudes, Sammy. “Canada’s weak condo market leaves potential house buyers ‘kind of stuck’” Global News, July 2025, https://globalnews.ca/news/11282810/canada-weak-condo-market-move-up-buyers-stuck/.
Begin, Patricia. “Housing and Parliamentary Action”, Parliamentary Research Branch, January 1999. https://publications.gc.ca/Pilot/LoPBdP/modules/prb99-1-homelessness/housing-e.htm.
McInnes, Graham. “Wartime Housing”. National Film Board of Canada. 1943, https://www.nfb.ca/film/wartime_housing/.
Jordà, Òscar, Katharina Knoll, Dmitry Kuvshinov, Moritz Schularick, and Alan M. Taylor. “The Rate of Return on Everything, 1870–2015”. Institute for New Economic Thinking, 2019. https://www.ineteconomics.org/uploads/papers/Jorda-Knoll-Kuvshinov-Schularick-Taylor-The-Rate-of-Return-on-Everything.pdf.
Note: This paper shows residential real estate has historically provided stable, high returns with lower volatility than stocks. Crucially, however, their definition of housing returns combines house price appreciation with rental yields, with rents making up the bulk of this return .
August, Martine and St-Hilaire, Cloé. “Financialization, housing rents and affordability in Toronto.” Environment and Planning A: Economy and Space, April 2025. https://journals.sagepub.com/doi/10.1177/0308518X251328129.
Yelland, Tannara and Lukacs, Martin. “Competition Bureau investigating high tech price-fixing by Canadian landlords.” The Breach, July 2023. https://breachmedia.ca/competition-bureau-investigating-price-fixing-canadian-landlords/.
Maytree Foundation. “Overview: Welfare incomes across Canada.” Maytree, 2025, https://maytree.com/changing-systems/data-measuring/welfare-in-canada/all-canada/.
Marc-Antoine Dionne, Christine Laporte, Jonathan Loeppky and Alexander Miller. “A review of Canadian homelessness data, 2023” Insights on Canadian Society. Statistics Canada, June 2023, https://www150.statcan.gc.ca/n1/pub/75f0002m/75f0002m2023004-eng.htm
Centre for State-subsidised Housing Construction, Ministry of the Environment of Finland. “Homeless People 2024.” Varke.fi, 2024. https://www.varke.fi/en/statistics/homelessness/homeless-people-2024.
Morris, Erika. “Every developer has opted to pay Montreal instead of building affordable housing, under new bylaw” CBC News, 2023. https://www.cbc.ca/news/canada/montreal/developers-pay-out-montreal-bylaw-diverse-metropolis-1.6941008.