Compensating developers.

A Sept. 18, 2024, CBC News article, "Massive expansion of non-market housing needed in B.C.: report," reports a conclusion by a recent Canadian Centre for Policy Alternatives (CCPA) publication, "Building Equity: Lessons for Affordable Housing in BC," that BC and Ottawa "have recently committed to building on public land and offering low-interest loans to developers building affordable rental units – which could lower the rents that would need to be charged in order for the builder to recoup their costs."

Building on public land with financing provided by low-interest government loans clearly would eliminate two obstacles to the construction of affordable rental housing, namely exorbitant prices for land and high yields financial speculators demand for loans to housing developers.

Whether these cost downs would result in actual affordability on the ground depends on a number of factors:

1. How is affordability defined?

Various formulas exist, but affordability reduces ultimately to the monthly rent on a rental unit equaling the sum of all the costs incurred, including purchasing all materials and fairly compensating every person who performs useful work, to construct and maintain that unit.

2. What is fair compensation for a developer?

Off the bat, it hardly seems reasonable that a particular percentage of a tenant's income minus the total of the costs listed above is fair compensation for a developer. Computations of this sort amount to the logic of a mafia and raise the question: on what basis is a developer entitled to help themselves to a share of a tenant's income? Is this the Middle Ages, when warlords extorted payments from peasants to protect themselves from violence by those self-same warlords?

Other equally predatory schemes include compensation in the amount of a percentage of the developers' costs, which clearly incentivizes developers to build the most expensive housing projects they can, which is precisely what they have been doing since the early 1990s, when social housing construction in Canada ground to halt and the lion's share of what has been built since are upscale condos.

Even in the case where "affordable" housing is being built, paying a developer a profit computed as a percentage of their costs incentivizes the developer to run their costs up because 5% of $10 million is $0.5 million, and 5% of $20 million is $1 million.The same is true if a developer is compensated by the hour. Drag out the project for four years instead of two and a developer's compensation doubles. Paying developers a flat rate solves nothing either because to maximize profit a developer can cut corners, use inferior materials, hire bottom-of-the barrel labour, and deliver an inferior product.

Obviously, developers maximizing profit is the root cause of the failures outlined above. So what is the solution?

Believe it or not, there are people on this planet who are not motivated by stuffing as much money as they can into their pockets. In fact, people who are in the business of making money are the only people, with few exceptions, who are motivated by the number of zeroes in their portfolios. Every day, in countless interactions, people who take pride in the quality of their work and motivated to contribute constructively to their communities and society at large do important things from driving a bus to repairing a sink to delivering meals to bedridden patients in a hospital.

Whether we like it or not, we are a society of people, and preying on one another to amass the biggest pile of money we can for ourselves is not a formula for prosperity. People being ripped off by a small minority of predators will only take it to a point, and history has shown again and again that even an oligarchy that depends on the loyalty of a state's instruments of violence to suppress the aspirations of the many to live without being preyed upon lose the loyalty finally even of its thugs.

If developers are incapable of understanding the concept of "a fair day's work for a fair day's pay" and insist they are not in the business of housing Canada's population but of making money, then the public should take housing development in-house and shut down for-profit housing development once and for all.

Housing is infrastructure. People dwell in it. And it is high time Canadians stop repurposing housing as financial assets. Money for nothing is not free. Someone else pays for every dollar extracted from the productive economy into a financial asset holder's hands. There are unlimited legitimate ways to earn money, all of which contribute important things of real value to society and none of which impoverish society as a whole.

Canada needs to definancialize its economy, develop a realistic and forward-looking industrial policy, and keep its eye firmly fixed on the project of creating real wealth, not extracting it into the hands of a few financial predators.