Week 4 Lecture Notes_ Redevelopment & Gentrification

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Toronto Metropolitan University *

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Apr 3, 2024

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Week 4 Lecture Notes: Redevelopment & Gentrification Module 3(A) August & Walks ● The goal of this study is to examine how the financialization of rental housing is: – Reshaping Toronto’s rental housing market – Restructuring the social space of the city Financialization of multi-family rental housing What is “financialization”? ● Productive activities: Determined by financial activities (manufacturing) ● Today our economy does not rely on productive activities; now it relies on the financial market ● Example: 2007-08 financial crisis was originated by a crash in the stock market → not actual productivity ● Financialization: finance sector became dominant and determines the good or bad in countries The financialization of housing markets: when house is no longer considered just a shelter, where housing is considered as a financial asset ● Housing as a financial asset vs housing as shelter ○ Housing as a shelter: source of protection ○ Financial asset: housing is not just a shelter/refuge for people → now is considered as a financial asset → people own houses as a means to make money/make profit ● Multi-family rental housing is increasingly been treated as a financial asset ○ Multi-family rental housing: Refers to apartment buildings that are for rent (not condos) ○ Multi-families: there are multiple units on every single floor, different from townhouse (one unit); apartment tower has number of different families ○ Apartment towers have become a financial asset but… ● Who benefits and who suffers the consequences? ○ Variation in people can have a positive effect on some and negative effect on others ○ So who benefits and who suffers the consequences of the financialization of the housing market?

Toronto as the ideal case study ● Located at the center of Canada’s largest CMA (larger area than city of Toronto but GTA is larger) → most important unit of this larger CMA ● Large rental sector (46% of households are renters) → they do not own their own property, rather they pay rent every month to their landlords ● Canada’s financial center: many financial decisions are made → high percentage of renter and finance decision affecting the country takes place in toronto ● Highly gentrified → Toronto has a lot of areas that used to be low income areas that became totally renovated From Social Housing to Vacancy Decontrol

● 1950s-1970s: apartment construction was massive in the city: lots of apartments and apartment building were being constructed; before it was not like that at all, most were detached or semi-deatched houses; came about after WW2 ○ After WW2: due to increase of population from baby boomers (lots were born) ○ Also because a lot of European immigrants came to canada ○ More people → more homes to accommodate them ○ Massive apartment construction to accommodate all these people ○ Apartment construction was made possible by improvement in construction technology (floors upon floors → vertical building) + economy was doing well so financial source was present ● 1980s-1990s: rental housing construction declined in favour of condominium development ○ What made builders more interested in building condos over rental apartments → construction industry realized that by building condos they could have made a profit immediately ○ If it was rent → profit was dispersed throughout the years ○ If condos are built, builders invest a lot of capital to build → but guarantee that cost is covered and also making profit in a short period of time → because once the condo is build, they can sell and immediately make money ○ If built for rent → every month is a modest rent, in a time span of 20-25 years, it would take time ● 1990s: the decline of social housing construction in the 1990s ○ In conjunction with the proliferation of condos and the decline in rental apartment, social housing was also declining ○ Social housing: public housing owned by government (not private companies) to rent to low-income people for an affordable price ○ Public housing = social housing ○ Why did they stop building public housing: provincial government had a financial deficit, stopped putting money on social housing → they withdraw from social housing ○ In period before 1990s, public housing was built with the financial support of 3 government levels: federal government, provincial government, and city of toronto ○ Federal government: can’t put money anymore → downloaded (transferred responsibility) to provincial government → Provincial passed it to city of Toronto → cities left alone to cover the expenses (cities are the poorest level of government) → public housing came to a standstill ○ 20 years of no public housing in the country and city of Toronto ● 1997: the 1997 tenant protection act and vacancy decontrol ○ Introduced by the provincial government ○ This legislation seems like it would protect tenants/renters by looking at the title

○ BUT… this act introduced vacancy decontrol ○ Vacancy decontrol: if you are renting your place, you are not allowed to double your rent from the next year → only increase certain percentage of rent according to the province (e.g., the province will tell them to increase only by 0.5% each year) → but this legislation states that if your place is vacant, you can rent how much you want ○ Example: someone leaves, the next person will not rent the same as previous renter, they can increase rent as high as they want Financialization of rental housing in Toronto The financialization of rental housing started as a way to capitalize on: ● Deregulation: no limit to how much you can charge (after renter left and new one comes) → financial asset: landlords can make money → charge how much you want once vacant ● Downloading: transfer of responsibilities → city stopped building public housing → landlords take it as an opportunity of scarce housing to have renters pay rent made by landlords ● Lack of affordable housing Private real estate companies’ transformation into Real Estate Investment Trusts (REITs) ● Make money by considering housing owned/rented as financial market → generate shareholders for their companies Strategies of financialized landlords ● Financialized landlords have developed strategies to maximize profits for investors – Treating homes as financial assets: not a shelter/refuge, but means to make money for themselves and their shareholders, engage in practices of cutting costs – Cutting costs: paying a cleaner every two weeks – Increasing revenues: asking residents to pay additional fees for common areas or etc. (example: rent areas for parties) – Gentrifying-by-upgrading: increase rent above provincial guidelines by showing to the provincial government that they improved building → people move out → vacancy control by increasing rent → they get rid of low-income tenants → have wealthy tenants come in Geography of post-crisis intensification and expansion ● Following the 2008-2009 recession, the financialization of rental housing intensified – New and aggressive financialized landlords entered the Toronto market and have adopted 2 major locational strategies

● Suburbs: squeezing profits from existing tenants → “I am going to cut my costs, less services provided to you” increase revenue by reducing expense ○ Example: every month I make 10K each month but I have to pay 5K for services (trash removal) → 5K profit ○ but if I reduce expenses I can make more profit → cut cost, make more profit ● Inner city: gentrifying-by-upgrade (thus displacing existing tenants) ○ Improve building, demonstrate that I improved building, government agrees for my increasing rent → low income tenants leave and wealthier tenants move in Repositioning spatial inequality Investing in multi-family housing has been quite profitable for financialized landlords ● Landlords benefit from financialization of housing market but consequences to tenants ● The price has been paid by tenants in terms of ○ Higher rents and fees ○ Reduced quality of life The city has witnessed ● Increased neighborhood income segregation → separation between rich and poor areas ● Restructuring of the inner city (through gentrification) Conclusion ● The financialization of rental housing has been allowed by neoliberal policies ● The phenomenon is particularly evident in Toronto and this has resulted in – Increasing inequality: between rich and poor – Spatial displacement: displaced because they cannot afford rent Module 3(B) Lehrer Toronto’s socio- spatial transformation and its causes: ● Continued rapid suburban growth: general increase population in the suburbs (outer suburbs, Markham, Richmond hill, Vaughn) ● Decline and disinvestment in the inner suburbs: this was written five years ago but does not apply now → they do not spend the money on inner suburbs ● Inner city reinvestment (gentrification): most investment and most gentrification → inner city space is almost totally gentrified

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