![Sample our Economics, Finance,Business & Industry journals, sign in here to start your access, latest two full volumes FREE to you for 14 days]({"type":"image" , "src" : "/sda/5931/TOC-Subject-Sample-2021-Economics-Finance-Business-Industry.jpg"})
Abstract
With the financialization of housing, housing-based profits, asset-based welfare, and affordable housing inherently come into contradiction with each other. This paper examines how, under neoliberal policy, from 1996 to 2010, the financialization of housing drove and legitimated, simultaneously, the unequal accumulation of wealth in Canada. It then demonstrates how, from 2011 to 2017, contradictions stemming from the financialization of housing intensified continually as the Canadian state failed to manage them.
Notes
Acknowledgements
I would like to thank the peer reviewers for their valuable input.
Disclosure statement
No potential conflict of interest was reported by the author.
About the author
Gideon Kalman-Lamb is a PhD candidate in the Department of Politics at York University in Toronto, Ontario, Canada.
Notes
1 For recent studies calling for centring housing in their analyses of capitalism, see Aalbers and Christophers, “Centring Housing in Political Economy”; Schwartz and Seabrooke, “Varieties of Residential Capitalism.”
2 Schwartz and Seabrooke, “Varieties of Residential Capitalism,” 249; Schwartz, Subprime Nation.
3 See Lapavitsas, Profiting without Producing; Lapavitsas, “Financialised Capitalism”; Aalbers, “The Financialization of Home.”
4 See Dymsk et al., “Race, Gender, Power, and the US Subprime Mortgage and Foreclosure Crisis”; Wyly et al., “Cartographies of Race and Class.”
5 See Finlayson, “Financialisation, Financial Literacy and Asset-Based Welfare”; Watson, “Planning for a Future of Asset-based Welfare?”; Montgomerie and Büdenbender, “Round the Houses: Homeownership and Failures of Asset-Based Welfare in the United Kingdom.”
6 “Financialization” is often defined loosely and is used to refer to different phenomena. This paper defines the term based on restructured relations between financial circulation and production and consumption within circuits of capital. Financialization thus refers to the expanded role and volume of financial markets, institutions and agents, and products within global circuits of capital since the decommodification of world money in 1971, as well as the stark increase in profit-bearing relations between financial institutions—particularly banks—and households/workers within different financial markets. The financialization of housing is a particular special and sector subset of this broader transformation. See Epstein, “Introduction: Financialization and the World Economy”; Lapavitsas, Profiting without Producing; Aalbers, “The Financialization of Home and the Mortgage Market Crisis.”
7 See Walks, “Canada’s Housing Bubble Story”; Walks and Clifford, “The Political Economy of Mortgage Securitization and the Neoliberalization of Housing Policy in Canada”; Walks and Simone, “Neoliberalization through Housing Finance, the Displacement of Risk, and Canadian Housing Policy.”
8 Harvey, A Brief History of Neoliberalism, 23–6.
9 Glyn, Capitalism Unleashed, 24–5; Peck and Tickell, “Neoliberalizing Space,” 384–86; Brenner and Theodore, “Cities and the Geographies of ‘Actually Existing Neoliberalism.’”
10 Peck et al., “Neoliberalism Resurgent,” 275.
11 Albo et al., In and Out of Crisis, 28, 33, 34; McNally, Global Slump, 40–41; Dumenil and Levy, Capital Resurgent, 2.
12 Harvey, The Enigma of Capital.
13 Soederberg, “The US Debtfare State and the Credit Card Industry,” 499; Soederberg, “Student Loans, Debtfare and the Commodification of Debt,” 695; Martin, Financialization of Daily Life, 106, 114; Finlayson, “Financialisation, Financial Literacy and Asset-Based Welfare,” 404.
14 See Lapavitsas, Profiting without Producing; Lapavitsas, “Financialised Capitalism”; Bryan and Rafferty, Capitalism with Derivatives; Orhangazi, “‘Financial’ vs. ‘Real’: An Overview of the Contradictory Role of Finance.”
15 Aalbers and Christophers, “Centring Housing in Political Economy,” 376–78.
16 Dymski and Isenberg, “Housing Finance in the Age of Globalization”; Schwartz and Seabrooke, “Varieties of Residential Capitalism in the International Political Economy,” 249.
17 Schwartz, Subprime Nation, 96.
18 Immergluck, Foreclosed, 34–35.
19 Aalbers, “The Financialization of Home,” 154–55.
20 For an account of how expanded access to mortgage financing creates house price pressures, see Aalbers, “The Financialization of Home,” 157–58.
21 Watson, “Planning for a Future of Asset-based Welfare?” 44–45.
22 Lapavitsas, Profiting without Producing, 219, 231.
23 Bryan and Rafferty, “Deriving Capital’s (and Labour’s) Future,” 213.
24 Schwartz, Subprime Nation, 97.
25 Watson, “Financialized Economic Agency and the Housing Market,” 47, 49; Montgomerie and Büdenbender, “Round the Houses,” 390.
26 Sherraden, Assets and the Poor: A New American Welfare Policy. For critical perspectives relating financialization to homeownership asset-based welfare, see Finlayson, “Financialisation, Financial Literacy and Asset-Based Welfare”; Watson, “Planning for a Future of Asset-based Welfare?” For a broader literature review about the topic, see Walks, “Homeownership, Asset-based Welfare and the Neighbourhood Segregation of Wealth.”
27 See Harvey, Limits to Capital, 292–315 for Marxist theory of overaccumulation of fictitious capital. See Lapavitsas, “Financialised Capitalism” for the example of the US subprime mortgage crisis.
28 Dymski, “U.S. Housing as Capital Accumulation.”
29 See Schwartz, Subprime Nation, 175–88, for a detailed account of the subprime housing bubble in the United States; see Lapavitsas, “Financialised Capitalism” for how the housing bubble turned into a generalized financial crisis.
30 On the concept of accumulation by dispossession, see Harvey, The New Imperialism, 145–52; Costas Lapavitsas has called this outcome “financial expropriation,” entailing a form of secondary exploitation outside of the production process in which household wage-incomes are extracted by financial capital in the form of mortgage interest and origination fees, and the value of household labour is further reduced relative to the value of its labour power. Ben Fine has critiqued the concept of financial expropriation as a generalized form of exploitation, arguing that the source of revenue that households use to pay mortgage interest and origination fees often derives from household appropriation of increasing house prices rather than wages, and thus does not further depress the value of labour power. In this author’s estimation, Fine’s critique is valid at the generalized level—whether mortgage payments derive from rent gains or depress the value of labour power depends on historically and geographically specific house-price-mortgage rate movements. During foreclosure crises, however, financial expropriation occurs unambiguously. As household assets are devalued and dispossessed, households experience no asset appreciation and lose their saved wage-incomes on down payments, mortgage interest, and origination fees. See Lapavitsas, “Financialised Capitalism,” 126–33 and Fine, “Locating Financialisation.”
31 Aalbers, “Financialization of Home and the Mortgage Market Crisis,” 161.
32 Watson, “Planning for a Future of Asset-based Welfare,” 50–1.
33 Skaburskis, “Filtering, City Change and the Supply of Low-Priced Housing in Canada,” 553.
34 Montgomerie and Büdenbender, “Round the Houses,” 390.
35 Walks and Clifford, “The Political Economy of Mortgage Securitization,” 1632, 1634.
36 McKinsey & Company, “The Changing Landscape for Canadian Financial Services,” 28, 30.
37 Baragar, “Canada and the Crisis,” 78.
38 KPMG, Canada Mortgage Bonds Program Evaluation, 19.
39 Walks, “Canada’s Housing Bubble Story,” 269.
40 Londerville, Mortgage Insurance in Canada, 11; Walks, “Canada’s Housing Bubble Story,” 262.
41 Walks and Clifford, “The Political Economy of Mortgage Securitization and the Neoliberalization of Housing Policy in Canada,” 1627, 1631; Walks and Simone, “Neoliberalization Through Housing Finance, the Displacement of Risk, and Canadian Housing Policy,” 66–67.
42 Shapcott, “Made-in-Ontario Housing Crisis,” 6–7.
43 Bank of Canada, “Average Residential Mortgage Lending Rate—5 Year.”
44 Canada Mortgage and Housing Corporation, Canadian Housing Observer 2014, 2–10.
45 Canada Mortgage and Housing Corporation, “National Mortgage Market Highlights, Canada, 2001–2013.”
46 Canada Mortgage and Housing Corporation, Canadian Housing Observer 2014, A13.
47 “Index History.”
48 Statistics Canada, Table 378-0123.
49 Canada Mortgage and Housing Corporation, Canadian Housing Observer 2014, A13.
50 Statistics Canada, Table 384-0040.
51 Canada Mortgage and Housing Corporation. “Housing Market Indicators, Canada, 1990–2015.”
52 Statistics Canada, Table 384-0040.
53 Statistics Canada, Table 187-8001.
54 Canada Mortgage and Housing Corporation, Canadian Housing Observer 2011, A22; Canada Mortgage and Housing Corporation, Canadian Housing Observer 2014, A-29.
55 Bank of Canada, Bank of Canada Banking and Financial Statistics.
56 Statistics Canada, Table 282-0151.
57 Walks and Clifford, “The Political Economy of Mortgage Securitization,” 1629; Walks, “Homeownership, Asset-based Welfare and the Neighbourhood Segregation of Wealth.”
58 Hulchanski, “A Tale of Two Canadas,” 83.
59 Statistics Canada, “Survey of Financial Security, 2012.”
60 Statistics Canada, “Survey of Financial Security, 2012.”
61 Cheung, “Deconstructing Canada’s Housing Markets,” 30.
62 “Canadian Rental Housing Index.”
63 Block and Galabuzi, “Canada’s Colour Coded Labour Market,” 16; Canada Mortgage and Housing Corporation, Canadian Housing Observer 2014, 2–23.
64 Walks and Clifford, “The Political Economy of Mortgage Securitization,” 1637; Walks, “Canada’s Housing Bubble Story,” 271.
65 For details, see Walks and Clifford, “The Political Economy of Mortgage Securitization,” 1638; Walks, “Canada’s Housing Bubble Story.”
66 Cheung, “Deconstructing Canada’s Housing Markets,” 24; McMahon, “CMHC Hiking Mortgage Insurance Premiums for Third Time in Four Years”; Walks and Clifford, “The Political Economy of Mortgage Securitization,” 1638.
67 Department of Finance Canada, “Balancing the Distribution of Risk in Canada’s Housing Finance System,” 9.
68 Canada Mortgage and Housing Corporation, “National Housing Act Mortgage-Backed Securities (NHA MBS) Program, 2002–2016Q4.”
69 Walks and Clifford, “The Political Economy of Mortgage Securitization,” 1629, 1638.
70 Canada Mortgage and Housing Corporation, “Covered Bonds Market, 2007–2017Q1.”
71 Walks and Clifford, “The Political Economy of Mortgage Securitization,” 1637.
72 Bank of Canada, “Assessment of Vulnerabilities and Risk,” 9–10.
73 Bank of Canada, “Assessment of Vulnerabilities and Risk,” 9–10.
74 “Foreign Buyers Represent 5% of GTA New Condo Sales.”
75 Coletti, Gosselin, and MacDonald, “The Rise of Mortgage Finance Companies in Canada,” 41.
76 Canada Mortgage and Housing Corporation, “Research Insight.”
77 Canada Mortgage and Housing Corporation, “Research Insight.”
78 Scuffham and Martell, “Bundles of Debt.”
79 Berman, “Home on Shaky Ground.”
80 McMahon, “Home Capital Mortgage Probe Widens”; Castaldo, “What the Home Capital Crisis Reveals.”
81 High loan-to-income mortgages are those exceeding 450 percent of household income. Bank of Canada, “Assessment of Vulnerabilities and Risk,” 5.
82 This excludes the 2009 global recession year. Including the year 2009, 2015 had the second lowest household consumption growth rate since 1993. Statistics Canada, Table 380-0064.
83 Bank of Canada, “Assessment of Vulnerabilities and Risk,” 9–10.
84 Bank of Canada, “Assessment of Vulnerabilities and Risk,” 14–15.
85 Statistics Canada, “Population and Dwelling Count Highlight, Tables 2016 Census”; Statistics Canada, “Population and Dwelling Count Highlight, Tables 2011.”
86 Canada Mortgage and Housing Corporation, “Urban Rental Market Survey Tables”; Canada Mortgage and Housing Corporation, “Rental Market Report: Greater Toronto Area”; City of Toronto, “Profile Toronto: Rental Housing Supply and Demand Indicators.”
87 “Canadian Rental Housing Index.”
88 Canada Mortgage and Housing Corporation, “Rental Market Report: Vancouver CMA”; “Canadian Rental Housing Index.”
89 Housing Connections, “Monthly Statistical Reports: January 2010”; Housing Connections, “Monthly Statistical Reports: December 2016.”
90 “Bill Morneau Tightens Mortgage Rules on Homes over $500k.”
91 Bank of Canada, “Assessment of Vulnerabilities and Risk,” 6–7.
92 McMahon, “CMHC Hiking Mortgage Insurance Premiums for Third Time in Four Years.”
93 Bank of Canada, “Assessment of Vulnerabilities and Risk,” 6–7.
94 Department of Finance Canada, “Balancing the Distribution of Risk in Canada’s Housing Finance System,” 12–14.
95 McNeely, “Banks Push Nonprime Mortgage-Bond Revival With Canadian Deal”; McNeely, “RBC Exploring Sale of Bonds Backed by Uninsured Residential Mortgages”; McMahon, “Home Capital Mortgage Probe Widens.”
96 Department of Finance Canada, “Building a Strong Middle Class: #Budget2017,” 151.
97 Moscovitch, “The Welfare State Since 1975,” 88.
98 Ministry of Finance Ontario, “Ontario’s Fair Housing Plan.”
99 The term “partially decommodify housing” is used to refer to the prioritization of housing’s use-value as socially necessary shelter over its exchange-value such that housing is publicly produced and allocated to people on the basis of need and not according to a market value dictated by the incentive to extract maximum value (in the form of interest, rent, and profit).