Author: Peter Cantelon, Executive Director
In the 1980s during the Reagan administration of the United States the theory of trickle-down economics was popularized and widely embraced by many at the top end of the economic pyramid. The theory, which in one form or another has been around for as long as wealth, proposes the following as best described by U.S. Democratic presidential candidate William Jennings Bryan in 1896:
“There are two ideas of government. There are those who believe that if you just legislate to make the well-to-do prosperous, their prosperity will leak through on those below. The Democractic idea has been that if you legislate to make the masses prosperous their prosperity will find its way up through every class that rests upon it.”
Can you guess which part of that statement describes trickle-down economics in a nutshell?
The idea that concentrating wealth amongst a few people so that some form of economic gravity would cause it to leak or trickle down onto the broader community is not only preposterous but wildly patronizing and insulting to the people upon whose head such grace was theoretically falling.
While wildly embraced by the wealthiest in society for obvious reasons it denies the complexity of poverty and the inter-connectedness of countless factors that contribute to it and the nature of wealth wanting to stay where it is and grow rather than be re-distributed.
So why talk about trickle-down economics as it relates to housing?
Well, let’s set the stage first. Jubilee Fund has been involved in numerous housing conversations with both the private and public sectors and has partnered on many financing initiatives designed to create additional affordable housing units throughout Winnipeg.
Not only that, but it has been clear that Canada, and Manitoba, have been spiraling into a serious housing crisis for a long time now.
According to a recent article in the Sept. 28, 2023 issue of the Winnipeg Free Press by Caroline Barghout entitled Housing in Ruins, the waitlist in Manitoba for deeply affordable low-income homes has sat between 5,000 to 10,000 people over the past five years. Currently the waitlist is at 5,300 while more than 2,000 Manitoba Housing units sit vacant. She goes on to report that since 2015 money for improving Manitoba Housing units has dropped from $120 million to just $37 million last year and since 2016 Manitoba has built less than 400 social housing units where rent is geared to income.
This sets the stage for our trickle-down conversation.
In the literally dozens of meetings and conversations Jubilee Fund has been in about the housing crisis I cannot tell the number of times people have bent themselves into contortions to avoid the conversation moving toward deeply affordable, non-market, housing like shelter expansion, transitional housing and rent geared to income units.
Instead, the emphasis has been solidly focused to the higher-end of the affordability crisis – homes, apartments and condos where affordability is defined as more like 15 percent below the market median average rent.
The problem with this measure is that it is market-driven. By that measure a three-bedroom apartment in Winnipeg with an average rent of $2,000 as of Sept. 2023 is affordable at $1,700 per month. I can tell you that for the demographic that Jubilee Fund works with this is not affordable.
The loudest part of the affordable housing conversation across Canada and Manitoba has been about adding inventory. We need to build more houses. By building more houses and apartments and condos the market will naturally shift to become more competitive driving prices down and increasing affordability. As this happens pressure will come off of all segments of the market, and savings will “trickle-down” to even the “low end” and we will return to a market affordable for everyone.
Of course, it is more complex than this but you get the idea. In these conversations the primary focus is not on shelter space and transitional housing or deeply affordable social units, it is focused on this segment of $1,500 and up rental market.
Why? Why is the focus on this part of the market? One word – profitability.
Most of the solutions being pitched and wrangled with, focus on providing some level of profit margin because without the margin developers will not build, owners will not own, and property managers will not manage.
But here is a stark reality – tripling or even quadrupling the number of $1,500 plus housing units in Manitoba will do absolutely nothing to help those in need of shelter space and transitional or deeply affordable housing.
The only way a dent can be made in the housing needs of the homeless and those in poverty is through the provision of deeply affordable social housing units, increased shelter spaces and transitional housing. This type of housing is not profitable in the traditional sense where profit is merely dollars. It absolutely requires deep government and philanthropic subsidies.
Once we understand that there is more to value than extracted profit it becomes easier to make the leap to heavily subsidized housing solutions. The value of stable, affordable housing is expressed in a myriad of ways including but not limited to increased community-wide health and wellbeing, education, safety, and employment.
This is why Jubilee Fund’s initiatives have been focused on the deeply affordable segment of the housing market and not the costly middle or upper tier segments.
The idea of solving the housing crisis by focusing construction efforts at the middle and upper segments of wealthy constituents may quiet those voices but it will continue to keep those in the most desperate need in crisis and this is untenable.