One surprising obstacle to housing affordability? Canada’s inadequate public pensions. Too many people must rely on the value of their home going up – worsening affordability for future generations – in order to retire.
Canada has two public pension programs, the Canada Pension Plan and Old Age Security. Together, they do not pay retirees enough money to keep them from falling into poverty. Some workers have a workplace pension plan that adds to their retirement income. But more than 60% of people in Canada do not.
For a long time, the federal government has left that majority to fend for themselves. One way people do that is by buying a house and counting on its value to going up over time. Housing is treated like an investment rather than a basic right. And around 40% of Canadian households are counting on that investment growing to fund their retirements.
This is a risky plan. It leaves people at the mercy of the boom and bust cycle of the housing market. It also means that homeowners can see efforts to bring down house prices as a direct threat to their retirement plan. This misplaced fear of falling house prices can also lead homeowners to fight against things like more affordable housing in their neighbourhoods.
Homeowners are the majority in Canada. Without a guaranteed, universal, and adequate pension, it will be hard to win support from that majority for policies that will bring the price of houses down.
As the price of houses rises out of control, more people than ever are renting in Canada. Because they do not have an investment in the form of a house, renters have to rely on their own personal savings to pay for their retirements. But with rents soaring across the country, it can be difficult for lower wage earners to find rent that is within their price range, let alone set aside savings.
Big investment funds, called real estate investment trusts or REITs, are buying up rental properties in cities, towns, and rural communities right across the country. Often, they are taking affordable homes and raising the rents to increase their profits. Investors own between 20 and 30% of rental units in some provinces.
This, too, is related to the poor public retirement plans. People with a workplace pension plan are counting on it to top up the public pension benefits. Workplace pension funds are required to invest member contributions to grow the value of the fund. More and more, the funds are investing in residential housing. Funds see it as a safe investment that also provides a steady stream of income.
Unfortunately, there are many examples of pension funds investing in companies that violate tenants’ rights. Some raise rents higher than regulations allow or evict tenants. Some unions have members on pensions boards. But laws related to pension investments make it hard to prevent unethical investments if those investments are likely to make money for the plan.
But affordable housing and retirement security need not be at odds. CUPE has made several recommendations to the federal government to address these issues.
Treat housing as a basic human right. Create and enforce laws to protect that right. This could take the form of establishing minimum national standards for tenant protections and refocusing federal money toward social, non-profit, and co-operative housing.
Guarantee good pensions for all. Ensure everyone has pension coverage that will guarantee a dignified retirement. Without it, people will continue to rely on the value of their homes to pay for their retirement and will be less likely to support any plan that will lower house prices.
Limit profit in rental housing. Restrict pension funds from investing in residential real estate. Make this kind of investment less appealing by closing tax loopholes and enforcing higher human rights standards.
You can read about these recommendations and more in CUPE’s submission to the National Housing Council Review Panel on the financialization of purpose-built rental housing and our submission to the Standing Committee on Human Resources, Skills and Social Development and the Status of Persons with Disabilities on Financialization of Housing.