Two tens for a five?

I haven’t been blogging much for the past year. Things have been happening too fast. By the time I register a reaction to one thing, something new is impressing itself on me. The themes and issues get stacked up in my mind, like airliners circling a runway, waiting for permission to land.

One preoccupation over the past year has been the perpetuation of antisystems in vital areas of public policy, social services, and corporate decisions. Anti-system behaviour produces the reliable and predictable result that diametrically opposes the purpose for which the system of statutes, bylaws, regulations, policies, and practices were first conceived.

Forgive me, but, I can’t help seeing the connections and pointing them out.

Let me illustrate how two seemingly unrelated issues converge, revealing an underlying anti-system. A few months ago the local papers reported two different stories, one on an increase in foreign ownership of Toronto housing stock and the other on absentee landlords.

The first story describes a recent surge of foreign investors in Toronto's condo market, though they find that the impact on the overall housing market is minimal. However, the second story suggests otherwise and illustrates long-term social and economic consequences of the trend in foreign ownership as vividly as Scrooge’s sojourn with the Ghost of Christmas Future. In April 2016, Gregory Vendeville recounted decades of tenant problems at the high-rise slums 103 and 105 West Lodge, in a distressed part of Toronto called Parkdale.

As chance would have it, I visited 105 West Lodge a few days before the story broke. A friend had taken an apartment there to weather out a personal emergency, but couldn’t tolerate the living conditions. There were no appliances when she moved in, no electricity in half of the apartment, and no water for 21 days. The superintendent and custodial staff were unresponsive. The owner, in China, couldn’t be contacted.

When I arrived in pouring rain to help my friend move out, only two of six elevators were working, one of which was on service. Consequently, the lobby filled with weary, sodden tenants, who seemed to regard the breakdown as normal.

A surprising number of them were very young mothers with children in their arms or clinging to their hands, as they tried to haul groceries and laundry baskets up to their apartments or down to the basement washers and dryers.

Later, as I carried boxes and furniture out the back door, the police arrived in two teams, one of which headed off into the apartments while the other remained on the ground to stake out the front entrance. The lobby emptied and a couple of young men, entering from the back, decided to wait and have a cigarette outside in the rain, rather than enter their building and risk an encounter with the police while waiting for the infrequent elevators.

Poverty was a virtual precondition for tenancy in this building. Every form of disadvantage and disenfranchisement was on display.

Mechanical failure, shabby financial dealings, code violations, safety issues, vermin, and violence were all sources of tenant concern. (A February 2016 article overviews the Property Standards complaints at 103 and 105.) One former owner sold the buildings, then repurchased them, then sold them again but continued as the property management company, Wynn Family Properties, on behalf of the new owner. So the intolerable conditions continued, year after year, decade after decade.

Culpability lies somewhere in between the owner and their property management company, both in the fine print of documents outlining the minimum standards required to meet City Health and Safety standards and somewhere in the Province’s Landlord and Tenant Act. What’s different now is that it is much more difficult for local media to target the owner for criticism. That’s because the owner is oceans away, possibly unaware of the misery occurring on his or her property.

It’s a little more difficult to sustain a decaying rental property if you're a landlord or developer living and working in Toronto. In addition to the timid prosecutions and penalties by municipal and provincial authorities, there is the embarrassment of public exposure through the media. This simply has no effect on faceless foreign investors.

But it doesn’t matter. The building is nothing but a capital asset on a balance sheet. The only reason it’s not emptied of tenants is so that it can generate a little income while it appreciates, as all Toronto real estate appreciates, until the moment it’s ready for redevelopment. For the investor, it’s like money in the bank, its after-tax value growing faster than bank interest, GIC’s, or treasury bills. For many foreign investors, it’s also safer than trying to realize the same rate of return in their own country, using other financial instruments.

Another important consideration is that, in Canada, single units within a derelict apartment complex are typically rented to the state, not to private individuals. If the building is in bad enough condition that no one would choose to live in it, the government can be relied on to provide just enough subsidy, direct or through tenant income supplements, to make it affordable to the poor.

A quick sidebar on the endlessly delayed and ineffectual enforcement of tenant rights in Toronto: I had a curious discussion with the Councillor for the West Lodge residents. In the gravest possible tones, he warned me that his ward is one of the last in the City to have a significant amount of affordable housing, and that development pressure will put 10,000 units at risk in the years ahead. At the time, I had yet to visit West Lodge. Now I’m trying to imagine what 10,000 West Lodge apartments would look like, and why anyone would want to preserve this wretched dystopia.

For a private speculator or faceless investment group, Canadian or foreign, what could be more appealing? The poor can’t afford anything better. An infusion of government subsidy is enough to keep a dump like 105 West Lodge afloat until the land has appreciated enough to be sold or redeveloped.

Even the most flinty-eyed free-market capitalist would have to admit that, but for a cock-eyed framework of federal, provincial, and municipal statute and by-laws, properties like this would have failed competitively and the land would have been redeveloped to meet the identified demand for low cost housing of higher quality. Instead, a combination of weak enforcement and retrograde regulations permit the existence of terrible housing and inhibit the process of renewal.

To return to the interconnection between the two stories, 105 West Lodge is what happens when you permit too much foreign ownership of domestic housing stock. Anonymous, unaccountable owners set the living standards for Toronto residents, while profits from the combination of rental income and property appreciation drain out of the local economy, further depleting the resources required to maintain the stock of affordable and liveable housing.

All of this brings me back to antisystems. It’s neither surprising that they sometimes occur, nor that we tolerate their unintended and contrary effects. It is surprising that we, as a society, perpetuate them.

After hearing about the sad state of West Lodge, you have to wonder how it makes sense to set rules that turn Toronto’s housing stock into a global commodity. It seems normal today for Toronto’s housing to be traded like coffee beans or pork bellies, bought low and sold high, though it would surely seem reckless if it were proposed as an economic development strategy.

Those who are complicit in the design and perpetuation of this “system” must realize that external price pressure on local housing supplies drives costs up for residents, which drives up wages, reducing the cost-competitiveness of local businesses, and making Toronto a less attractive place for corporate start-ups and relocations.

From a social development perspective, it’s perfectly obvious what happens when you price local residents, workers, and taxpayers out of home ownership. Renters are more transient than owners. Communities are less cohesive. Households are less secure. Seniors enter retirement without equity in their homes, after a lifetime of renting. It’s massively destructive.

Yet a large proportion of new condos - by some informed estimates, more than half - are now being bought by people who don’t live here. Meanwhile, people who work in Toronto and need a place to live can barely afford one. How does that make any sense?

Housing is, after all, a necessity of life. Although federal governments periodically toy with the idea of free trade in essentials like water and food, saner heads have always prevailed. But shelter, as necessary as food and water, has become a global investment product, to the detriment of our city and its communities.

So who benefits, other than smart investors and slum landlords abroad?

Someone in the federal government imagines that all forms of capital investment and domestic capital retention are equally beneficial. And someone at the City of Toronto must imagine that extrinsic demand for housing in Toronto is beneficial because of the growth in real estate investment and the development fees it stimulates.

But, on balance, can the fees to municipal coffers and the inflows of investment capital offset the net outflows of income and capital appreciation from the local economy to outside real estate speculators? When you add the negative effects on community cohesion and corporate competitiveness resulting from the upward pressure on home prices and wages, I think you have a clear case of a system, comprised of rules intended to achieve one thing: economic advantage. On balance, it clearly achieves the opposite result.

According to my definition of an antisystem, not only does it predictably and reliably produce the opposite of its intended result, but it is also self-perpetuating, buttressed by stakeholders with vested interests, all willing to fight change in defence of their small part of the overall dysfunction.

Lately the pressure for change has grown, and the defence of failure has become more desperate. Vancouver has understood, as Toronto has not, that it’s economically disastrous to unlink local incomes from the cost of housing. They have taken timid measures in the form of an amendment to the property transfer tax to signal a preference for local ownership of local housing, so that local residents can afford a residence near to where they work.

Realtors in the Vancouver market have become hysterical, of course, predicting a collapse of the market and a mass migration of foreign buyers to Toronto, which is the other major city in Canada where housing costs have become unhitched from household incomes by international speculation in residential real estate.

Now the squeals of outrage are starting to echo in Toronto, where the industry’s proposed response is to prosper by outbuilding demand, pressuring the Province to open up more protected green space for tract housing. In response, the federal Liberals can be expected to take their lead from the Province. The provincial Liberals appear to be ethically rudderless and susceptible to public pressure from industry and suburban municipalities to relax restrictions on development, in anticipation of greater extrinsic demand.

That leaves only the City to stand fast against further depredation by non-resident housing speculators, somehow curbing its appetite for development fees, while fighting to protect its policies and plans from developers’ constant resort to the Ontario Municipal Board, and from the promiscuous Wynne government’s seduction by the real estate industry’s public relations and campaign financing efforts.

And this is what happens when, by coincidence, I talk to a Councillor, visit a derelict high rise, read about extrinsic investment pressure on Toronto housing stock, and then witness the outrageous reinforcement of anti-system in response to the correction being attempted in Vancouver.

Again, I’m sorry.   Can’t help myself. The plane has landed. Do what you will with the wreckage.

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