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Leilani Farha is the UN Special Rapporteur on the right to adequate housing.

Toronto's overheated housing market is now being called a crisis, and evidence has been offered to support wildly divergent opinions on its causes. Some suggest it's a problem of unprecedented demand for housing; others say it's all about lack of sufficient supply. I'd like to suggest it's neither.

What's happening in Toronto is not new, it's a phenomenon seen elsewhere – in Vancouver and places across the globe such as Hong Kong, London, New York, Singapore, Sydney, and Stockholm. Vancouverite and urban planner Andy Yan has termed them "hedge cities" – places that offer us insight into the heart of the matter.

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Housing is now predominantly valued as a commodity, traded and sold on markets, promoted and invested in as a secure place to park unprecedented amounts of excess capital. The view of housing as a human dwelling, a place to raise families and thrive within a community, has largely been eroded. Despite its firm place in international human rights law, housing has lost its currency as a human right.

In Toronto, Vancouver and elsewhere, residential and commercial real estate have become the "commodity of choice" for corporate finance, and the uber rich. Global residential real estate is now valued at $163-trillion (U.S.), more than twice the world's total GDP. In Canada in 2016, real estate represented the third-largest segment of our economy but accounted for half the country's GDP growth.

The consequences of placing the interests of investors before human rights are stark.

In hedge cities, housing prices have increased to levels that moderate- and low-income residents can barely afford. In the Greater Toronto Area, for example, in the last 30 years (1986 – 2016) housing prices have increased by 425 per cent, whereas in a similar 30-year period (1985 – 2015), average family income has only grown by 133 per cent. Housing prices have increased at three times the rate of income. No longer commensurate with household income levels, housing prices are driven instead by demand for high-end assets among global investors.

In other countries, the result has been devastating. In the U.S., in the five years after the 2008 mortgage crisis, nine million households were evicted due to foreclosure; in Spain during the same period, 300,000 were evicted. Legendary Wall Street short-seller Marc Cohodes has predicted that this is the direction in which Canada is now headed.

Large-scale foreclosure-related evictions should give rise to outrage about a lack of oversight by governments and mass violations of human rights. Instead, countries responded by favouring the interests of financial institutions while wagging patronizing fingers at those who have lost their homes; the failure to regulate financial markets and prevent predatory lending occurred with relative impunity.

While the recent federal budget would have you think otherwise, financial markets and global housing investments are not, in fact, beyond the control of governments.

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Policy responses to the financialization of housing aimed at curbing its excesses are starting to dot the domestic and international landscape, with all levels of government participating. British Columbia has imposed a 15-per-cent tax on foreign investment in residential real estate, and the City of Vancouver has instituted a 1-per-cent tax on self-reported vacant homes. Both interventions are directing revenues toward affordable-housing options. A number of jurisdictions, including China, have introduced a property speculation tax, and others, such as the City of London, pushed a requirement that developers include a proportion of affordable units in new builds. Barcelona is one of a few governments to affirm the social function of housing, facilitating temporary expropriation of vacant housing and prohibiting foreclosures and evictions that would result in homelessness.

While these types of measures can mitigate the effects of the financialization of housing, the assumption that countries should simply allow markets to work according to their own rules, subject only to the requirement that private actors "do no harm," is simply not sufficient. Human rights set a more robust standard of accountability. States are required to take an active role in ensuring low- and middle-income people can enjoy housing as a home; they must insist that markets meet housing needs, including affordability.

From a policy perspective, this means a profoundly different approach by countries in decision making. Whether it is taxation policy, land-use planning, zoning, or broader housing policy, decisions must be guided by the needs of residents for adequate, affordable and secure housing, as opposed to the financial security and gain of investors. Enjoyment of human rights would be the goal.

And so, what is presented as the private market gone mad is, in fact, something far more deliberate: the failure of governments to govern in a manner that is consistent with human rights. The solution requires a fundamental shift – one that prioritizes human interests over economic ones.

Cherise Burda, executive director of Ryerson City Building Institute, and John Pasalis, president of Realosophy Realty Inc., discuss the merits of a foreign-buyers tax in Ontario
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