Speculators, tenants, and bad loans.

According to an August 14, 2024, CBC article, "B.C. tenancy branch allows 2 landlords to hike rent by 23.5%," "one of the big five banks" issued to two speculators (referred to in the article as "landlords") variable rate mortgages for which the bank accepted as collateral properties on which these two "investors" foolishly assumed – as did the bank – that the tenants to whom these "investors" let them would always pay rents sufficient to meet their mortgage payments.

There are several problems here, none of which are the responsibility of the tenants and all of which illuminate the rapacity and assumed impunity at the heart of the financialization of housing in Canada and across the neoliberal world.

Most glaringly, the bank in question ignored in assessing the creditworthiness of these would-be "landlords" that they were borrowing to speculate. This should be a giant red flag for any loan officer, whose sole purpose in life is to perform due diligence to establish that it will be repaid before approving any loan.

In the case of these loans, the speculators ignored the question, as the did the bank, of how they would repay them when their mortgage payments ballooned. Obviously lacking sufficient reserves or other sources of income and depending entirely on future rents to pay off the loans in question, these hustlers went crying to the RTB when the free money at the heart of Canada's real estate bubble dried up.

These speculators and this bank both knew that the rate of increase in the rents they could demand per the Rental Tenancy Act of 1989 is less than the rate at which their mortgage payments could (or would depending on the terms of the loan) increase.

This is precisely what happened in the U.S. in 2008, when millions of fraudulent loans deliberately underwritten by criminal banks, who knew that the homeowners they aggressively recruited to take out mortgages could not repay them and for which they drafted fraudulent documentation, went bad. The U.S. banks perpetrating this fraud securitized these loans as collateralized debt obligations (CDOs) and other mortgage-backed securities (MBSs) they sold on false pretenses to speculators who wound up holding worthless paper, and they foreclosed on the homeowners they defrauded.

The plan in the scheme reported in the article above, which seems well on its way to succeeding now that the RTB has dumped these bad loans into the laps of tenants who are paying rents everyone knew could not cover them if interest rates increased sufficiently, is to evict them creating more homeless people (or sell the properties to someone else who will), jack the intertenancy rent increase through the roof, and replace them with tenants sufficiently flush to pay those rents.

These are bad loans. The correct solution is for the bank to write them down. "Investments" are not magic money machines that always make a profit. Speculators frequently lose money, as do banks careless enough to loan it to them.

In the case of these particular properties, the Housing Ministry and Courts should reverse the rent increases granted by the RTB and make it clear that covering variable rate mortgages is the responsibility of borrowers and the banks that issue them, not tenants.

If these properties are foreclosed because the borrowers cannot make their payments, it is the responsibility of the RTB, Housing Ministry, and Courts to freeze the rents on these properties to protect the tenants living in them from paying for the recklessness of these speculators and this bank.

This will establish a fair market price for whoever purchases the foreclosed properties and assign the loss to the parties responsible for incurring it.