Weekly Comment - August 12, 2021

Aug 12, 2021 | Nick Foglietta


If the cause of these increases in rent was the normal buying and selling activities of everyday people, again, I could accept the results.

Time for a Rant about Rent

When investor/speculators buy shares in Amazon, Gamestop or Robinhood, I hope they are using money they can afford to lose and understand the rules of engagement.

If those two criteria are fulfilled, I say, fill your boots!

If investor/speculators want to chase high real estate prices in a low interest rate world, I say giddy-up, it’s your life and money.

But where I start to lose my mind is when rents start to spike higher for the most vulnerable demographic of our society.

I start to lose it when the increases are DUE TO THE SPECULATIVE ACTIVITY of the well-off and the wealth-biased policies of the central banks.

The chart below shows the rental rate of increase.

This is a 14.6% (year-over-year) increase in the average lease/rent at record tying 96.5% occupancy levels.

The chart below breaks down the profile of renting in the US, and I would bet it’s not much different in Canada.

As for income levels of renters: no surprises here.

Add this to the food inflation we see, and it is not hard to imagine how any budget is being stretched, particularly for those with no discretionary income and no savings already.

I was playing golf with a retired RCMP member and asked him if he though higher rent and food prices impacted the amount of crime committed.

“Absolutely, no question about it,” he said. “Hungry and homeless people commit crimes, what do they have to lose?”

A crown counsel friend of mine once told me that some homeless people even ask RCMP members what crime they can commit to go to jail for a four to six month period? They get arrested in October and get out again after winter is over…it makes sense, why wouldn’t they?

If the cause of these increases in rent was the normal buying and selling activities of everyday people, again, I could accept the results.

But when pension funds and institutional money managers are out hoovering up rental real estate to build new private equity trusts and Exchange Traded Funds (ETFs)...wow, that is simply wrong on so many levels.

You have likely heard the statistic that 40% of Americans don’t have $400 in savings for an emergency, but questioning how accurate this statement is, a perusal of the FactCheck.org website was in order.

The last paragraph of the article I found on the topic states:

There is no (clear) evidence to support Rep. Omar’s claim that 40 percent of Americans don’t have $400 in their bank accounts, but her general assumption that most American families do not have the funds to subsist for an extended period of time during an emergency is almost certainly correct.”

Imagine a situation where food costs go up 24% year-over-year, and rents go up 15%. What does the person or family do that was living paycheck to paycheck to counterbalance this increase? I have no idea.

Everything written about above is completely out of our control.

That’s why this is a rant.

It is important to point out how the activities of the wealthier classes have bled down to seriously hurt our most vulnerable.

Stable society requires a functioning social safety net that:

  1. Supports those in need of help to exist,
  2. Contain programs to assess if and how to help people receiving support to move (back) to self-sufficiency,
  3. Balances support levels with the service sector wage scale so there is always an incentive to get back into the workforce if possible.

Our leaders have missed the mark on creating a support system that lives up to the conditions above.

Support has been too much money for too short of term.

It has lacked the checks and balances that help people find a pathway out of the support system or into a longer term solution, if no pathway out exists.

These types of failures do have long term consequences for society as a whole.

To close, I remember an interview with the professional hockey player Marcel Dionne in the twilight of his career. The interviewer asked him if he was stressed about the upcoming playoff game since his play had been sub-par up to that point in the series.

His answer was something like this: Stressed? Hockey isn’t stress, it is fun. Stress is when you have a wife and two kids at home; you lose your job, have no savings and you have to pay your rent…that is stress.

That is the real stress more and more of our neighbours are feeling.

Higher food and housing costs exacerbate the number of families falling into this category. Please keep an eye open for places you can help within your family or in your community.

Please email me if you want to set up a chance to chat, and stay tuned for Megan’s feedback on this post, she’s already told me it’s on its way.

Stay well friends.