Jagmeet Singh’s Plan to Give Cash to Renters will Reduce Poverty and Homelessness
In the 2020 provincial election, the B.C. NDP campaigned on providing a renter’s rebate of $400 a year for households earning up to $80,000 a year.
Following in Horgan’s footsteps, NDP Leader Jagmeet Singh announced that he planned to implement a similar cash-assistance program that “would make it easier for families to pay rent by providing help of up to $5,000 a year while we tackle wait lists for affordable housing.”
The announcement was light on details. The NDP has yet to provide information on the structure, eligibility, or cost of the program.
Singh’s announcement has received quite a lot of criticism online (meaning it almost got ratioed on Twitter).
I was surprised by the negative reaction, especially among liberals and leftists who recognize the massive socio-economic harm caused by the housing crisis.
So, I took some time to do some digging and found that government programs providing cash assistance programs to renters have a dramatic impact on alleviating poverty and homelessness.
Will Landlords Raise Rents?
Most of the criticism was based on one thing: giving money to renters would put more money into the housing market, leading landlords to raise the cost of rent, and make housing more expensive rather than more affordable.
For example, in a column for the National Observer, Max Fawcett said the program would “add demand to an already overheated rental market,” and told me that it was a “subsidy for landlords.”
It is easy to imagine landlords across the country raising rents across the country, but a more thorough analysis paints a much more complex picture than this simple narrative.
Canada does not currently have a federal program providing cash assistance to renters, so my analysis will rely on the impact of Section 8 housing vouchers in the US.
A paper by Michael D. Eriksen and Amanda Ross on the effect that housing vouchers have on the price of rent finds that housing voucher expansion did not increase the overall price of rental housing.
Their analysis found that “a 10% increase in vouchers resulted in a 0.39% increase in the price of rental housing for units with a rent within 20% of the local Fair Market Rent in 1997.” They also “estimate a 10% increase in vouchers resulted in a 0.95% decrease in rent for lower-quality units with a 1997 rent less than 80% FMR.”
This provides considerable reason to believe that giving some money to renters will not lead to landlords dramatically raising rent, especially when considering that landlords are aware of whether or not their tenants are using a housing voucher.
There may be drawbacks to giving cash assistance to renters, but the reason the policy is worth pursuing is because the benefits outweigh them.
Rental-Assistance Reduces Poverty and Homelessness
The idea of giving cash assistance to renters is not new and it has proven to be an effective policy tool at addressing poverty and homelessness.
Programs that provide rental assistance in the provinces of BC, Manitoba, Quebec and Saskatchewan assist those who are heavily burdened by the cost of rent. A paper by Marion Steele that provides an overview of the structure and effectiveness of these programs found that they can reduce homelessness.
National housing allowance programs in the UK, the Netherlands, Sweden and South Korea have all contributed to reducing the rate of poverty.
In the US, housing vouchers have their problems, but they also improve the quality of life of the people who receive the benefits.
Data from the Centre on Budget and Policy Priorities shows that housing vouchers reduce
crowding, housing instability, homelessness, and poverty while positively contributing to the health and well-being of children and adults.
In his book, Evicted, Matthew Desmond advocates for a universal housing voucher available to low-income families that would pay for rent above 30% of their income which would “change the face of poverty.”
One estimate of the potential impact of a universal housing voucher found that the poverty rate falls by 22%, while child poverty falls by 34%.
Housing vouchers have proven to be so effective that Joe Biden plans on making Section 8 housing vouchers available to every family who qualifies, expanding the program to give benefits to more than 200,000 additional families, at the cost of an additional $5.4 billion.
The idea of the federal government stepping in to provide assistance to cash-strapped renters has been growing in popularity and is long overdue in Canada.
Renters Need Help Too
The housing platforms of each major party are full of policies designed to help prospective homebuyers achieve their dream of purchasing a home.
Both the NDP and the Liberals plan on doubling the First-time Homebuyers Tax Credit while the Conservatives plan on making it easier to get a mortgage to buy a home.
This continues a decades-long tradition of governments implementing policies that provide subsidies and tax breaks to homeowners.
Policies like the First-Time Homebuyers Incentive, which gives homebuyers an interest-free loan of as much as 10% of a home’s purchase price, and reduces the size of the mortgage and the monthly payments, or the Home Buyers’ Amount, which offers a $5,000 non-refundable income tax credit on a qualifying home acquired during the year.
After years of creating new subsidies and tax breaks, the government has created a vast upper-middle-class welfare program that encourages people to buy bigger and more expensive houses.
Meanwhile, the federal government provides little assistance to people who rent their homes.
A report by Frank Clayton found that “homeowners remain by far the biggest beneficiaries of tax expenditures on housing from the federal government, accounting for nearly 90% of the national total of $18.2 billion in 2017.”
The message of this dichotomy is that Canada is willing and able to subsidize as much debt as possible for someone to purchase a home, but people who choose to rent should be left to fend themselves in the midst of an eviction crisis and are unworthy of being prioritized.
A program providing cash assistance to renters would be an efficient way to bring more balance to this inequality as well as effectively assist those who are unable to fully afford rent.
One Final Note
It’s time to address the elephant in the room.
In the same tweet that Jagmeet Singh announced his idea of giving cash assistance to renters, he also announced that they would “close loopholes that protect and allow rich developers to build unaffordable apartment buildings.”
This is a really bad policy.
The shortage of housing, especially in highly productive cities, is the primary driver of the increasing cost of housing.
Building more housing, even brand new high-rise condos, has been empirically proven to lower the cost of rent in the surrounding neighbourhood. A paper by Xiaodi Li finds that “for every 10% increase in the housing stock, rents decrease 1% and sales prices also decrease within 500 feet.”
None of the major parties has a housing platform that will fully address the impact the housing crisis is having on lower-income renters, and it looks like the problem will continue to get worse before it gets better.
Canadian politics really fucking sucks.
