00:00 Jordan: Every so often, a government somewhere announces a plan to make housing more affordable and more available.
00:08 News Clip: Folks, we need to fix the housing crisis created by the labyrinth of liberal red tape. That’s why I’m proud to be here today to reveal our government’s plan for addressing Ontario’s housing crisis. More homes, more choice, Ontario’s housing supply action plan
00:27 Jordan: and then whether that government is liberal or conservative, whether it has the best of intentions, or is just delivering for lobbyists, the plan fails, and homes and rent get more expensive. This is happening in Canada in almost every major city here, and in basically all the major cities around the world. In fact if you wanted a good trivia question for the next time you’re at a party, try this. What do Toronto, Canada, Barcelona, Spain, and Valparaiso, Chile have in common? The answer is a housing market increasingly controlled by private equity firms. Private equity firms who use dwellings not as homes, but as stock chips treating roofs that could be over people’s heads as investments, investments that are worth just as much and are frankly easier to handle if they’re empty. So if you have ever been house hunting, or apartment hunting in a big city, and it has felt like there is so little on the market and the prices are so far beyond your means, that something bigger must be going on here. Well, you are right. And today we’re going to explain why.
01:39 Jordan: I’m Jordan Heath Rawlings and this is The Big Story. Leilani Farha is the United Nations special rapporteur on the right to housing, and Frederick Garreton is a documentary filmmaker. Together they have produced a new film called Push. It documents the critical situation so many of the world’s cities currently face. Can you start by explaining to me what private equity firms like Blackstone are doing in the housing market and what effect that’s having on the world?
02:05 Leilani: Sure, private equity firms have really introduced a new model in the whole housing sector, and it really started after 2008 in the global financial crisis. What they’re doing is they are buying up what they consider to be cheap or undervalued assets in the form of either foreclosed mortgages, single family homes or multi family dwellings, which are apartment buildings, and they buy them up all mass, we’re not talking, oh you know, five apartments. We’re talking 2,000 apartments. We’re talking 20,000 apartments, as they did recently in Copenhagen. 2,000 summer ago in Berlin. They own, I don’t know, 70,000 single family homes in the United States, right? We’re talking all mass. They developed this model and they do it through algorithms and all sorts of things. And it’s a buy it, fix it and jack up the rents model, it’s that simple. It’s very straightforward. They are investing other people’s money. Those people expect a good return on that money so what does blacks don’t have to do? They have to raise the rents to ensure that their investors are satisfied. Plus, that income stream ends up being leverage for more capital that they can, you know, leverage off of each property that they buy.
03:30 Frederick: This is something else happening, and it’s not the normal market. This is the corporate takeover of our cities. It’s capitalism, it’s landlord’s on speed because they are entering with extreme energy, tons of money and money that is not even their money, because it’s money that; they’re creating this kind of financial products and investors from all over the world are into these products. Could be pension funds, it can also be the same people who are smuggling the cocaine to Toronto. It can also be the migrant smugglers, it can be anyone. So it’s those financial products. There is a lot of money out there you know, so the people with money or the entities with money because it’s not even people sometimes, they have more money than ever. So much money so we can’t even comprehend. And the rest of us have less. Also, the cities, the countries have less. So it’s like, something is broken and, of course, something; I mean, society’s been broken for a very long time, but it’s since the financial crisis 2008, we all thought, wow. Now the banks will shape up. Now we can; Suddenly we need responsible big brothers, you know.
04:45 Jordan: Right. Everybody got scared and now things are going to get better because we realize how close we came to disaster.
04:51 Frederick: Ya, and then the financial crisis has widened the gap even more in the extreme way, in all over the world.
04:59 Leilani: It, in fact, it enabled; the financial crisis enabled what we’re seeing today in what pushes about. It enabled these big financial actors to find cheap assets in the form of originally foreclosed mortgages in particular across the U. S., and Spain, for example, Ireland as well. So they could buy these cheap assets, and then sell them or make profits off of them because they were so cheap in the first place, and that then became this model that they’ve trotted out since await. And really, since 2011. So that’s where we’ve ended up as a result of the global financial crisis is kind of ironic.
05:39 Frederick: These guys, the hedge funds, there are many of them. They have a lot of different names, Blackstone, AKaleUse whatever they’re called. They didn’t own one single apartment before 2011, and now they are the biggest landlord on the planet. So I mean, how many years are we talking about? You know, it’s an extremely short time. It’s time to push back, you know?
06:02 Jordan: Well what I want maybe you do explain Melanie is what it looks like to somebody who is being pushed out of a city. What is the blueprint for this? Anywhere it happens.
06:12 Leilani: Sure, I’ll give you an example from San Francisco. I was there about a year ago, and I met a woman who had been working in a medical clinic. She had a like technician’s job, kind of average job. She was living in an apartment and it was pricey, but she could make ends meet. So it was like 1,000 U. S. a month, 1,200 something like that. Her building got purchased by one of these asset management firms, and they immediately upon purchasing it, raised the rents and her rent went up a huge amount. So I think she was then being asked to pay over $2,000 a month, and she couldn’t make ends meet. She had a good job, but it just wasn’t good enough and her` income didn’t rise in relation to how much the rent had been increased. So she struggles, she then knows she’s not going to be able to afford the place any longer, so she self evicts, right? So no one evicted her, she selfie evicts because she knows she’s going to end up there anyway. So she then avails herself. She can’t find a place that she could afford, of course, because she’s in San Francisco, one of the most expensive rental, ah, situations in the world, and so she shacks up with some friends. Well, after some time, she can no longer do that. Then she looks to her sister, but her sister can’t take her in because the sister has taken in the mother who has also fallen into this situation. And so where did I meet this woman? In a tent encampment under a highway, and our conversation was interrupted every 30 seconds as a train went over where she was living, as we watched rats run around. So that is, playing itself out the world over.
07:50 Frederick: I took a walk this morning. We were in this morning show off the TV and talking about the same thing we’re doing now. We then took a long walk for a few hours, and I saw so many homeless people, and normally you see homeless people are trashy drug addicts or mental disease, the calendar classical thing. But I saw elderly ladies, not one, I saw several. Ah, you know.
08:14 Jordan: Well, that’s what I was going to say. The stereotype that we have of people who are on the streets, tends to be people who who have no job, who you know, have become addicts or have otherwise slipped through the cracks. And what we see when we look at the housing crisis in your film is that these are people with jobs, right? These are people who in other places and other times, would be holding down a small little family home.
08:38 Leilani: Yep. Families, young people, older people, it’s not any longer; homelessness is no longer about psycho-social disability or drug addiction, etc. Absolutely not, and what we need to start understanding is the connection between these big actors coming in buying up buildings, increasing rents and moving people out, pushing people out and the cycle down into homelessness. There’s a direct connection, a direct line you might say.
09:08 Jordan: Explain to me the economics at the base of it. How does a single unit family home become a piece of stock for somebody who’s never seen it or set foot in it?
09:18 Frederick: It’s people with money or entities with money they want asset. You know, they want to buy into something that can grow, but they wanted to be based on some kind of asset. And now family homes are great assets.
09:35 Jordan: What makes them so good?
09:37 Frederick: There’s a need for them, of course.
09:39 Leilani: Yeah, money’s liquid. So you put money in, you can pull it out really quickly, unlike other investments ofte, and the growth rate. I mean, real estate is the hot commodity of the day, and so if I put my money in a bank, my return is going to be what, in a bank account, 1%. 2%. If I put my money in real estate, my return is going to be minimum 10%. It could be 15%, it can be 50% very quickly. So you’re not waiting over time for that asset value to increase. So it is, you know, the commodity of choice, and you also have to understand how these big financial actors are working, what the model is and what they’re thinking, why they’re doing what they’re doing. Imagine that they have their own drones, and the drones air going over all the lands of the world. What they’re looking for is what they call undervalued property. Undervalued residential property is basically where people are paying affordable rents, and the investor sees I can get more money, squeeze more money out of each and every unit and then satisfy my investor clients and give them a good return, and I can use that flow of money from the rents as securitization as a way to leverage more capital off of that piece of property. So it’s actually a brilliant financial instrument.
11:06 Frederick: It’s basically about this asset, if it can grow, and that’s why people are sitting on empty houses. If you look around in Toronto, all this condo explosion of Toronto, if you go out in the evening and have a look up at the condos and look for dark windows. Look for dark windows…. and I mean there’s so many dark windows in condos
11:30 Jordan: and they’re just being held as investments.
11:32 Leilani: Absolutely. The other thing, that’s quite scary that’s happening. It’s happening here in Toronto, but Frederick and I have seen it happening around the world is the gaze of these financial actors is very broad. It’s not just on single family homes with foreclosed mortgages. It’s not just on multi family dwellings like apartment buildings. We’ve now documented it in terms of mobile homes where people are living in mobile homes. That’s where if the investors are moving. Here in Toronto, rooming houses. So what do you think they’re doing? They can just see here’s a crappy rooming house, and we all know what the rooming houses in Toronto or in Parkdale are like and they’re reflected in push. You know, really the most horrible living circumstances, and they’re buying them. They’re upgrading them into cute little bachelorette’s and bachelor apartments. And all of those people are being evicted, and then other people are moving in who can pay more rent. So, I mean, the ambit of this is huge and they’re going after the most; wherever they can see they can reap the most profit.
12:36 Jordan: What was really interesting to me because I didn’t feel it intuitively until I saw it is, you guys travel to so many cities that I would consider very different from Toronto. You know, Valparaiso, Barcelona, London and the exact same thing is happening. What is the global scale of this like, and what does that do to the people who are making these investments?
13:00 Frederick: It is the biggest business on the planet, and people with money, they’re not so amazingly brainy. They just run after what was the best business, and this is where they are right now, and then they might move on to something else. But that’s; one of our experts in the film says it’s like mining, you know. Once they’ve got the value out, they will just leave it. And then what?
13:26 Jordan: That was my next question. What does happen after that?
13:29 Frederick: We don’t know. But it’s a scary thing because, you know you should see the hedge funds. They are basically some kind of middleman in this business. So they are not actually the owners, the owners are the investors, they’re like the ubers, they are like being beasts. They make money off the flow, you know, it’s all coming up. So for them, it’s not a big problem if everything goes bankrupt. They will just sail on into something else.
13:56 Leilani: One thing too that, I mean, we couldn’t pick up everything in push that is happening in this area. But one thing I’ve noticed recently, because obviously I continue to research and monitor all of this stuff; is the incredible political power these actors have. And that seems to be the most recent move if I’m following a trajectory, so they’re now getting heavily involved in politics. So, for example, there was in California there were some votes around this thing that was called Proposition 10 which would have enabled cities to enact bylaws around around rent control on imposed rent control. Well, Blackstone, the largest private equity firm, moved into that debate and flooded the debate with millions of dollars against Proposition 10, and in some cities, Proposition 10 did not pass. Most recently in Spain, there’s an election going on.
14:47 Frederick: It was last Sunday.
14:48 Leilani: Yeah, on Sunday, and Blackstone owns; well, they’re the largest landlord in Spain, and they said that they were going to take their units off the market until they could figure out who was going to be in power, and then they would decide what to do with them depending on what political party came into power. So you see they’re playing political games. They have a huge influence.
15:13 Frederick: And also when you know, when Donald Trump became president, he started up some kind of economic advisory board. Who was the president off that board? It was his neighbor in down in Florida and the CEO of Blackstone, the biggest hedge fund.
15:30 Jordan: So there’s so many incredibly powerful forces at work against affordable housing. What have activists and champions done in various cities to try to fight back against us, are there any strategies that offer them a chance?
15:45 Frederick: I just have to say that it’s not only against affordable housing, it’s against our cities because, even if you do well, I mean your cup of coffee is also more expensive. Your meal is more expensive, your favorite bar can’t survive, and suddenly it’s replaced with a big brand. You know, it’s so it’s ah…
16:07 Jordan: You’re basically describing my neighborhood right now.
16:10 Frederick: So, yeah, I mean, and this is also what we see. I mean, the amount of big brands moving in everywhere that run their business on a totally different model. Which in their model is not only selling coffee, it’s also… they are also part of the same scheme. I mean a Starbucks, they’re also into to real estate. It’s a real estate business.
16:32 Jordan: How do you disrupt that model?
16:34 Frederick: Ya that’s something we need to talk about. I mean we are not the expert. I mean, we are in the films; The ambition of the film is, let’s talk about this. Let’s get ourselves a language to talk about this. We can’t talk about gentrification. It’s a silly, sloppy word, you know. The hipster coffee shop, it’s not somebody who is destroying the neighborhood. It’s not the art gallery. They are not the ones, the little ambitious organic restaurant is not the one who fucks up the neighborhood. It’s something completely different. So I mean, first of all, we need to get the language right.
17:13 Jordan: Well as you went around and talked to people and tried to sort of show them the underlying structure of this business, how did you find…. Were they able to like comprehend the ways in which housing is being manipulated?
17:28 Leilani: Ya it depends on where I would go. I mean, in Spain, for example, in Barcelona, which is where I’ve spent the most time in Spain, they know and they know it very well. In Ireland too, in Dublin they know the beast, they know the monster. But mostly people don’t know.
17:44 Jordan: It seems like an individual thing, and you don’t want to think that you’re caught up in a huge machine.
17:48 Leilani: I think that’s exactly right, and people are very humiliated and embarrassed by their housing conditions, where their housing conditions aren’t great and people put it on themselves. They don’t blame the system, or they don’t blame the big financial actors, or they don’t blame their governments for letting those financial actors do what they do. And so that’s part of the brilliance of Frederick taking on this issue and doing the film Push because we need to start the conversation. Even in the housing advocacy sector around the world generally this is not being talked about, and the human rights sector. You would think in those worlds people would have their brains around this stuff and be really working on it in a serious way. That’s not what I’ve found. There are people pushing back in different places, but my experience of that is that it’s a little bit piecemeal except, I would say, except in Spain, where they really have gone after addressing the causes of this and going after changing legislation and regulating, and especially in Barcelona, but also at the national level. But most elsewhere, it’s like little pieces. Like here in Toronto I’ve seen some pushback. There’s a land trust out in Parkdale trying to buy up properties before the asset management firms like Achilleas and Blackstone swoop in. But I mean these are very… it’s like little tinkering. We need to a better understand the beast, the monster, and then from there we can figure out strategies and governments have to be involved, and really, very few governments are recognizing this and being honest about this as a problem.
19:33 Frederick: Honestly I don’t think they have seen it. I don’t know if they really understand it.
19:38 Leilani: They’ve enabled it, come on.
19:39 Frederick: Yes, absolutely. But I mean, there were so many reasons to enable neo liberalism because it made some kind of sense at one point in history. But it’s really it’s obviously that it now it’s not working. It didn’t never work as they promoted it.
19:55 Leilani: It’s difficult though, too, and I I will grant governments this. It’s difficult in many places to look inward and try to address what’s happening because high finance, construction, development is a huge part of most economies. So if you’re going to do some navel gazing as a national government or a provincial government in Canada, you’re going to have to grapple with the fact that your economy is based in this somehow. And so how to rest it in a way that enables the economy to remain robust but doesn’t hurt cities and the people trying to live in them.
20:36 Jordan: That sounds impossible just off the top of my head.
20:38 Leilani: Na I don’t think it’s impossible. I think people haven’t been creative. I think we haven’t got; My sense is this discussion hasn’t happened, and I think push is going to help make, I think push is going to force this discussion, I really do, because people are really taking to the film. I mean, people are galvanized by it. I’ve been like in Toronto people are running up to me in the street saying, you know, we gotta move on this I want to help, you know. So I think we haven’t set our minds to it yet. We’re very sophisticated societies, you know. We’ve created these sophisticated financial instruments and actors, etc. I’m pretty sure we can dismantle it a bit for the better of people in cities.
21:16 Jordan: Well in terms of what the movie sparks, it is quite something to watch a film and then recognize the bigger forces at work that you had no idea were impacting the way you thought of an entire industry basically. Which was my experience, cause like I said, we’ve talked about housing on this podcast before, but never in terms of equity firms. You know
21:37 Frederick: Housing is a very boring word, you know. It’s like… and housing politics is so boring. It’s very technical. Everybody falls asleep when you talk about it.
21:49 Jordan: Don’t say that, people are listening.
21:52 Leilani: This isn’t about housing though, we’re not talking about housing. We’re talking about finance.
21:55 Frederick: No, no I mean, so it’s, and I think I mentioned it before that this battle over language. I mean they have the best PR people. They have this machine that they pay for the lobbyist politicians. If they sell their way of how to solve things. So the resistance has to be also to create the counter language and to get your politicians on that side and get your neighbors on that side to talk about this from a new way.
22:24 Jordan: Is there a decent blueprint anywhere in the world of a community that has managed to get a handle on it? You mentioned Barcelona. Maybe it’s that, but do we have any idea of what it will take and what our next step should be?
22:35 Leilani: No. There’s no blueprint out there, in my opinion, not that I’ve seen. As I said, there’s piecemeal stuff happening, that’s it’s kind of cool. Some pushback by different city mayors. I started this movement the shift, and mayors are really coming to the fore and starting to get on board and think of ideas but no, there isn’t a single blueprint. I really think that some you know, high level people with what they call them, thought leaders need to come together, and figure this stuff out, and I think they need to use human rights, values and principles to inform that, because those values and principles will make sure that the people at the lowest end of the spectrum, and that modern income people will actually benefit from whatever gets devised, whatever blueprint people come up with. I really think this is the social issue facing cities in the 21st century. It has to happen. We’re not on a sustainable path, cities are not on a sustainable path, and I think people are starting to really recognize that, especially city mayors, who are like woah totally on the front lines like woah what am I going to do here. So we do need to start developing these blueprints. But as we’ve said, we have to understand the issue thoroughly.
23:51 Frederick: I was in this podcast once before about my film bike versus cars. That film describes a system breaking down. You know, in the city there’s too many cars. Nobody moves anywhere, and when you reach that point, you have to do something. Even if you love your car, even if you hate bicycles, you need to put up bike lanes because bike lanes move more people. So when the crisis are really at the bottom, politicians have to do something. That’s happening now with bikes in cities all over the world. I think when we start to meet Mayor’s of big cities, it’s a sign that they now know that they have to do something.
24:31 Jordan: Thanks, guys.
24:32 Leilani: Thank you.
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