PUSHBACK Talks

Keep Your Coins We Want Change: The Shift Directives Part 4

• Wg Film • Season 8 • Episode 6

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In the finale of our series on The Shift Directives, our experts examine the staggering scale and far-reaching impact of institutional investment on housing. 

What could we gain if housing investment and housing redevelopment complied with human rights standards? Leilani and Sam tackle thorny issues like tax advantages for REITs and the alarming trend of financializing vulnerable housing sectors such as student accommodations and long-term care homes.

Leilani and Sam also preview an exciting new resource - the Investor Guidelines. Developed over the last year, these guidelines demonstrate that smart investment and housing as a human right can coexist. We offer a glimpse into this groundbreaking new tool (which is out today!) and the possibility of transforming the role of investors in the housing sector.

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Fredrik Gertten:

I'm Fredrik Gertten, and I'm the filmmaker,

Leilani Farha:

and I'm Leilani Farha, and I'm the advocate.

Fredrik Gertten:

You are the advocate of everything, no but mainly of housing and and you are now giving all advocates out there, a tool, a human right, directives for housing. And I think this is, I'm so proud of knowing you, because arguments are gold out there. You know, it's, it's so easy to to say something. And I mean, we're also up against an industry of of message. So the more money you have, the more message you buy. So what you are doing is actually giving all of us great legal arguments on why we have to change and how it should be changed. Because normally the big guys are are saying, There is only one way to solve the crisis, and that's our

Leilani Farha:

way. Yeah, no, that's exactly and that was the intention with the shift directives, and with this little mini series on pushback, talks about them to show people that there is another way. There's a whole other way to think about housing, and when you start thinking about it as a fundamental human right. It changes how you do housing. It changes how governments would enact legislation, and the kind of legislation and policies. It would change which actors engage in housing and which are excluded. So we're trying to offer an alternative vision at a very bleak time when housing is just so expensive every where around the world, every single city. So we offer the shift directives as a different vision and and a practical one as well.

Fredrik Gertten:

It's a tool to fight back, to push back, which is what we need. So friends, I wish I had a bell. This is episode four of the mini series of pushback. Talks about the human rights directives on housing. And it's again, Leilani Farah and Sam Freeman interview by Kix McRae. And they talk about how we can put the finger in the eye of the industry, the financial industry, the people who have found out that they can make money also out of poor people's homes, the ones who are behind renovictions, where people are kicked out so they can renovate and put up the rent, double the rent, all those kind of things that We talked a lot about in push to film so and now we're going to listen to you talking about those directives. Enjoy.

Kirsten McRae:

Welcome back, listeners. We're diving into the final episode of our special series on the shift directives, which is the groundbreaking framework that's reimagining housing as a human right rather than a commodity. If you're just joining us, I highly recommend listening to the previous three episodes to get up to speed on this transformative approach to housing policy. Today, we're going to be tackling a crucial aspect of housing and the housing crisis, the existing real estate investment landscape, and it's often incredibly detrimental effects on society. So we're going to be exploring directives two, three and six, which provide essential guidance on reshaping housing as a social good and challenging the dominance of financial interests in the sector. So we're going to be looking at the current landscape of institutional investment in housing, looking at capital flows and how they've reshaped our cities and neighborhoods, often at the expense of long term residents and vulnerable populations, the contentious issue of renovations and redevelopment, which they're necessary parts of housing and maintaining housing stock, but are often weaponized to displace residents and to drive up housing costs, and Also the alarming trend of financialization creeping into new sectors, particularly student housing and long term care homes, and making these essential services into something that is entirely profit driven. Joining us once again are the brilliant minds behind the shift directives, Lila Farha and Sam Freeman. They'll be sharing our insights on how these directives can guide governments and investors into transforming the housing sector and industry to prioritize human rights over profit. Hello,

Leilani Farha:

I'm getting really used to that. Introduction The brilliant mind,

Sam Freeman:

not to get too used to it. Get

Kirsten McRae:

used to get used to it. Brilliant. Like you said, we were having when we were having conversations about everything, and you two were explaining how the directors are all meant to work together. I was like, wow, this is so great. So great. So yes, embrace it.

Leilani Farha:

The brilliance, I have to say, it's been fun revisiting them and trying to explain them to a broad audience. And I do think. They are a really good set of directives, like we really did cover all the issues. They're a primer on the issues in a certain way, and they also provide a way forward, which is cool, because it's never good to just name a problem you want to be able to solve that problem. So yeah, I'm enjoying this series. So thanks for pulling it together. Kirsten,

Sam Freeman:

yeah, thank you so much. Yeah,

Kirsten McRae:

awesome. No problem. So, I mean, we'll jump right in. So directive two, which is regulate institutional investment in housing to comply with human rights. That's something that term institutional investment is something we see thrown around a lot. People might be familiar with companies like Blackstone, but what exactly is institutional investment, as opposed to, just like the phrase investment on its own?

Sam Freeman:

I think institutional investment is investment done as a business. I mean, it's investment done by organizations and companies that are set up in order to be that entity, to have that function, to own, in our case, in the case that we're interested in, to own and to utilize property to make profit for shareholders, for people to buy into the income streams of those properties, as they like, always like to say, own a little bit of real estate. You know, own your own little bit of real estate, but it's done at that institutional, at that organizational level, yeah. And

Leilani Farha:

I just want us to pause because, I mean, I don't know if it's just because I'm a human rights lawyer and I come at housing from the idea that, you know, housing is home. Housing is this safe place. Hopefully, it's a place that protects you from inclement weather. It's a place to go back to after a shitty day, right when I hear Sam describe like companies set up to purchase homes solely so they can make money to line their pockets and their shareholders pockets, like it's kind of phenomenal, actually, companies set up just to do that. That's to squeeze out of every square meter, every square centimeter, dollars, euros, pounds, right?

Kirsten McRae:

Yeah. When Sam mentioned last week, we referenced the most popular board game being about that, I suddenly was like, Oh, that's right. It's a group of people who are essentially playing Monopoly, but with the real world, which is really striking when, when you put it that way. I was like, Oh, God, that really illustrated it very well. For me, it is

Leilani Farha:

and to remember, too that the institutions we're talking about have so much money, so much money. So we're talking about massive private equity firms with billions of dollars at their disposal. We're talking about asset management firms. These are companies that receive big dollars from other big dollar entities, like pension funds, sovereign wealth funds. I mean, you know, we're not talking about my neighbor who has $50,000 to invest. Maybe we are in terms of buying shares, but we are talking about really big players, pension funds that buy into these companies, wealth funds, sovereign wealth funds, et cetera. So you know, we're not, this is big scale. This is big big scale,

Kirsten McRae:

big scale. And just to bring you back a little bit to the monopoly analogy, if you have played a monopoly, anyone has lost a game of Monopoly, then you've likely seen, you know, the game board kicked over. Their emotions are running high, even when we're just talking about it as a silly little game. So we can only imagine the extent of the impact and how people feel about it when we're actually talking about our lives and our livelihoods. So

Leilani Farha:

that's right. And, I mean, I don't think we've said in the series of this podcast, yet, the global value of residential real estate, right? It is the biggest business in the world. It's bigger than pharma, like, bigger than pharma, it's bigger than tobacco. It is valued at something like, what, $220 trillion residential real estate. 200 is more than that. Now I'd be more than that. Yeah, 250 or something. I mean, whatever to 258

Sam Freeman:

the end of 2022 58 two $50

Leilani Farha:

point five. 250 8.5 and what's that? Three times the GDP of the entire world, yeah, and more

Kirsten McRae:

than 20 times all the gold ever mined. Yeah,

Sam Freeman:

exactly. And what's, I think, fascinating and really indicative of what we're dealing with here is that. So we talk about that being the value at the end of 2020 but between 2016 and the end of 2020 increased by 90 trillion US dollars. So it's snowballing the level of investment that's going into residential real estate. It's becoming this unstoppable force that is just grabbing homes all around the world at a faster and faster pace, and it needs to be stopped. Yeah,

Leilani Farha:

right. And so that's why we have directive two. We got to regulate these guys. And I keep saying guys, and it really is my. Mostly guys. There's a few women there too, mostly guys. So when I think about the heart and soul of the shift directives, while tenants are the heart and soul of human rights, yeah, I mean, it's their rights that we're really desperate to protect. It is these financial actors that are the heart and soul of the industry that is undermining human rights and non compliant with human rights. So that's why we came up with directive two, which I consider to be a kind of heart and soul of the directives as well. And you know, the measures wasn't difficult, right? Sam, when we were thinking of the recommendations in this section, it wasn't too difficult, because governments have rolled out the frickin red carpet for these actors all orders of government, not just national governments. National governments have given them a pass on income tax, for example. So there's an entity called a real estate investment trust. People may have heard this an r, e, i, t, we call them REITs. They exist in about 43 different countries around the world, states around the world, and they virtual in every state, they basically have the same legislative provisions around governing REITs. And one of them is that REITs as an entity, as a corporate entity do not pay income tax. So they'll say to us, well, shareholders pay, and most REITs are public, so there are shareholders, but a pension fund, which would be a major shareholder, doesn't pay income tax on shares. So it's not totally true, and so the government is foregoing all that tax revenue, all that tax revenue exactly, just to make these guys richer. So I actually,

Kirsten McRae:

I have a little excerpt from the shift directives that kind of leads into what you're saying already. It says institutional investors may also contravene human rights when they use their political power to expand the financialization of housing or undermine government policy that would protect the human rights of tenants. And this is something that we discussed very recently on the podcast. Dr Joanna kuciak was here, and she's in the midst of fighting for a referendum that passed democratically and was then promptly disregarded. And then Peter S Goodman, who was the you know, the season premiere episode, said that what we have is actually a sort of welfare state for billionaires, where they're able to use that outsized wealth to purchase political power, and that then keeps the rules set in their favor. And I guess I'm curious. It's a challenging question, but given that that political power is often wielded by the wealthy, how can we bring these necessary regulations about because, like you said, these actors are so big and they're given these breaks by government. But how can we kind of interrupt that loop of political power and wealth that keeps us stuck in this in this holding pattern of housing getting increasingly more expensive? Yeah,

Sam Freeman:

well, I think part of it is understanding priority. I mean, one of the reasons that these directive two recommendations were so easy is because the kind of theory behind them is so simple. Under international human rights thought, governments have a duty to protect they have a duty to protect rights holders from human rights breaches that are committed by private actors. In doing that, they have to regulate private actors in line with human rights it's super simple. I mean, these are things that governments have signed up to almost universally. They've accepted this as legally binding on them under international human rights law. Private detector actors have a responsibility to not engage in any action which contravenes international human rights law, which contributes the rights of their tenants or others. Super simple. It's all set out in black and white. So I think, yeah, first of all, it's helping, well, helping governments, helping investors understand those responsibilities that they have and those obligations that they they have, but then also working to push them forward on action. Because a lot of governments, a lot of investors are all talk, no action. When it comes to this, they are living a completely charmed life with what they've got, particularly investors, you know, they have no incentive to change. They have no incentive to do what's right in terms of human rights or social responsibility, because they're currently earning billions and billions of dollars a year. I mean, and not just us as human rights advocates, but kind of everybody around the world, we need to make this a really uncomfortable space for them to operate in, force them to recognize that this just a, this is not sustainable, and B, it's not right. The way they treat their tenants is not right. That's

Leilani Farha:

right, and tenants will be key to this, which we're seeing around the world. Tenants are rising up and they're saying, This isn't cool, and we don't want an unknown financial entity to own our homes, and we want to be treated as human beings and not as wealth producers on behalf of these mega, mega financial institutions, we probably should. Say these actors have a seat at the political table, so we don't underestimate how hard it is to change what's going on. They are baked into our neoliberal economic systems. Around the world, there are very few countries that don't have neoliberalism as the dominant ideology governing economic systems. Some places may have more robust social policies to try to counter the effects of neoliberal economics, but they don't shed themselves of the neoliberal economics. In other words, they try to balance things out more but very few states have rejected neoliberal economics at this stage, so we're really up against it. I mean, I don't know if people will remember, but when the pandemic struck in 2020 Well, everyone will remember that, but what they won't remember is what governments did. They were like scrambling. What are we going to do? Like people can't go to work. And, you know, are we going to how are we going to keep our economies running? What did they do? They pivoted and brought in Blackrock, one of the largest private equity firms in the world, and BlackRock told them what to do. Well, blackrock's interests are not the interests of tenants and low income people. Let's be real here, right? So what we did in the directives, if you look at the recommendations, and I, I love these recommendations, just so straightforward, but we kind of broke them up into two, what governments should do and what the investors themselves should do. And I mean, some of the government asks, if you will, are, you know, really straightforward. The very last one we say, you know, transparent beneficial ownership. That means that a person living in an apartment building, for example, should be able to know who their landlord is. And in a lot of places, you could try to go to the land registry, and that information would not be available to you. And so that's like a really basic ask, not just in residential real estate. There are other movements saying, hey, we need to know who owns what in this world. We say there should be antitrust laws, super important, because sometimes these actors are buying up entire communities. So imagine if you're evicted from your unit, from your apartment, and your whole community is owned by that landlord, you are now displaced from your community, and people might go, Oh, is that really true? Well, yes, we know. For example, the three of us on this podcast know of a jurisdiction in Canada where I think, what is it? 90% 80%

Sam Freeman:

of multi family residential housing in a callaways and Yellowknife owned by one single or as of 2021, owned by a single land or North view, wow,

Leilani Farha:

yeah, so, so that's a kind of non competitive market situation for housing in that area, right? And so the anti trust laws should apply. Anti trust laws should apply with the algorithms that are being used by these big landlords to set rents. That's the real page litigation going on in the United States at the moment. I don't know, Sam, if you want to say some of the recommendations that we attribute to the investor landlords themselves,

Sam Freeman:

yeah, I mean, some of them are kind of cross cutting, I think. But you know, they could be for governments to use a stick approach, where you're forcing landlords to do this, or a carrot approach, where landlords should just do it because it would be better for them, better for their businesses, and better for their tenants. But things like ensuring a portion of rental units are affordable. That's like, really, really critical. We've also got just, quite simply, investors aligning their business practices with human rights standards, with things like the United Nations guiding principles and undertaking human rights due diligence in all of their work. It's so critical for them to understand when they're engaging in any policy or practice what the human rights implications of that policy or practice are, and to take immediate action to avoid breaching human rights where they find that there could be human rights implications to their policies or practices, also establishing things like accountability mechanisms so that they can be held accountable tenants can hold them accountable when they breach their human rights obligations. So that's huge. And I think kind of, to come back to the your initial point, Kirsten, about, you know, kind of like, why is regulation important? I mean, I often think about this. We've had housing investors, big institutional investors, working in global housing markets for decades now, and for decades, they've been afforded advantages, tax advantages, many other advantages. And is housing better now? Housing's got worse. There have been huge increases in people living in homelessness, evictions, unaffordability all around the world. It's not working. So why would we not take a different course? Why would we not try a different approach? Why are we just continuing on with this inadequate status quo that is just making people's lives worse? Absolutely,

Kirsten McRae:

I actually. So. I spoke with raspus norgard of home dot Earth. Home dot Earth is a real estate company founded in Copenhagen, Denmark, with a triple bottom line of people, planet and profit, and with the goal of creating inclusive and sustainable homes, and it's structured as a company with a stakeholder model, where they share value creation with the stakeholders, and they share part of the profits with tenants, because the idea is that they are a key part of creating that value. And I actually have a little bit of something that Rasmus had to say about their business model.

Unknown:

Yes, we want to be a company that drives innovation and research. This is severely lacking. Construction is the second largest industry globally, and very little money is being spent on innovation and research. And hence we see very little productivity growth, which, in the end, translates to to also lower affordability. So we feel this is important. Maybe the best example of some of the work we're doing is that, together with donut economics Action Lab and Stockholm resilience and others, we've developed the donut for urban development. It is for free download. So if you Google Home, dot, earth and donut, then it'll come up. But it's a manual that takes a stab at describing how we can effectively operationalize a triple bottom line. I operate within the planetary boundaries, as well as above a social foundation in urban development. So I think this is a project that we've done and that we are proud of, and we can see that others are slowly taking notice and adopting it. We recently learned about a London based, or UK based developer that had planned a new development according to the donut. So hopefully this can be a piece of work that can have a positive impact in our industry.

Kirsten McRae:

So I wanted to play that clip because he was talking about models that are different from the one that we currently work with. And I suppose I don't necessarily know that you would have an answer for this, but when we hear about these models that are more sustainable, more inclusive, they consider the well being of people and of planet, as well as the need for profit to put money back into the residents. What are the reasons that these models are not being taken up more often? Do you think that's something that regulation could further along? Well, I

Leilani Farha:

think they're not being taken up by the actors that we're interested in, because they are interested in Mega and Uber profitability and making the most with the least. I mean, the model or motto, I should say, for most of these actors is buy low, sell high, buy cheap and sell at a premium. And you know, the model that home dot Earth has developed generates different kinds of profitability over a longer period of time and for a broader array of people, tenants who live in the home dot earth building actually are shareholders, and so they pay market rent, so they don't pay like cheap rent, but they get a dividend, and the dividend technically, notionally, could offset the cost of rent. So it's viewed that way. But what they wanted to do, what they're playing with is the private equity model. I mean, Rasmus comes from a private equity background, as I understand it, and home dot Earth is run by two rasmusses. So it's confusing, which, but maybe they both, maybe they both come from private equity. But, you know, he was really interested in figuring out, well, how can we make private equity for good, for social value that exists within the planetary boundaries, rather than the way in which investor driven housing has actually contributed to climate change and climate related events and disasters, right by building building, building, Not for need, building luxury mega mansions, all of that, all of that creates, obviously contributes to greenhouse gas emissions. I mean, the built environment is a huge contributor, and at the same time, it's squeezed people socially because there's no affordable, available. Housing and so making them more vulnerable to climate related events and disasters. I mean, it's actually quite phenomenal that governments have allowed this to unfold, and so I do see the possibility for governments to weigh in and regulate around this, and to say that if you're going to build new you have to build, certainly in a way that respects planetary boundaries, but also you have to build for need, because the planet cannot afford more buildings. And yet, we know there are people in need and people needing social housing and public housing, and you know, subsidized housing and new types of tenancies like community land trusts and cooperatives. So I do think governments have a big role to play in this, to push how things are built and for whom.

Sam Freeman:

Yeah, and I think one of the kind of slightly scarier developments that I've been wrapping my head around in the last few months is that slowly, the bigger players will be getting involved with the kind of social side of things. But from what we can see at the moment, it's almost always a sideline business to their ongoing business, which is destroying, in many cases, tenants lives. It's almost like you often hear about big oil and gas companies that heavily promote this, like green energy drive they're going on, and then you dig down into the figures, and it's a teeny, tiny proportion of their overall spending is spent on green energy projects. It's the same with housing providers investors. Sometimes they'll have an impact investing wing, which they'll use for, like, you know, affordable housing projects. But then you dig down and it's a teeny, teeny, tiny percentage, and kind of inevitably, what's happening is that people are getting squeezed out of their homes in the main investment products, and then they're having to go over to the affordable investment products, where those are available, so they're kind of picking the people up who are falling and that's something that regulation, I think, would very much need to come in to set the boundaries as to where investment should be happening and the proportions as to, you know, what investors should be owning in terms of kind of affordable and non affordable homes. Yeah,

Kirsten McRae:

and as you were saying that, so I'm just looking ahead and keeping in mind time I was looking at directive six, which is about regulating emerging forms of financialization, which, you know, student housing, long term care homes, it's such that this existing investment model is constantly seeking new ground, constantly seeking ways to further that profit. Do you think that the regulation of those specific markets, like student housing, like long term care homes, need to be handled separately from, you know, traditional forms of housing, or is it something that you feel could be regulated as a whole, like all of these things could be addressed under the same regulations?

Sam Freeman:

I think that all these forms of housing need to be recognized for what they are. They're people's homes because somebody is in a care home because they may be older or unwell, it's still the place that they live. It's still the place where they hope to ensure they have dignity, it's still the place where they maybe have their livelihood. It's where they meet their friends, it's where they you know, live their lives on a daily basis. Yeah, it's their home. Same with student housing. When students are at university, their student housing is their home. When prisoners are in prison, prisons are their home, right? We need to understand that there's no difference, really, for those people with the bricks and mortar, they're surrounded by the function of that property. That real estate, as these people like to call it, is home. So my perspective, I think that government should be regulating all these forms of housing, all these emerging forms of real estate, as if they are human rights holding entities with human rights holders living within them, and should be regulated as such.

Leilani Farha:

Yeah, I think that's absolutely right. I think you nailed it, Sam and and it's these investors that call them asset classes, the newest asset class, and that's a separate asset class than this. And I mean, you know, their bottom line is money, and they go to student housing, because behind students are parents who are getting second mortgages on their homes to be able to pay for their students, education and housing, and they are gouging, because that's where there is some money and students are not going away during crises. It's often the case so the pandemic right, where jobs are scarce, people go back to school. People get more credentials, etc. Students are going nowhere. There will always be students. It's a safe investment, and that's why they create a separate asset class out of it, you know. But at the end of the day for a student, they need a decent place to live that will provide them. A great foundation for doing well at school, and, you know, being able to study. I mean, imagine living in a shelter or in a car and trying to get your studies done. I mean, it's just, it's absolutely impossible. And we know that there are racial implications to the cost of housing for students, where racialized students tend to be lower on the economic spectrum, and therefore can't afford these fancy I mean, for anyone who knows this asset class of student housing is ridiculous. I mean, swimming pools, cafes, billiard tables, arcades, stuff that students actually don't need, or stuff that students are paying for through their student fees that they can get through the Student Center at the University, right? I mean, it's so it's ludicrous, but as a result, you get racialized students living further away from university, often having to work jobs as well just to pay for university. So doubly disadvantaged, right? And, you know, there was a study that came out of the state showing that there were differential outcomes as a result. So it's super serious, this stuff. And I mean long term care homes. We all know the race to the bottom and what happened during the pandemic, right? The death rates of people living in long term care homes was very, very high. We saw not just in North America, Sweden, for example, and the privatization of long term hair combs. Well, that's next. Surely, Blackrock owns hair combs, but care homes too. You know, minimizing staff, minimizing all of the services, etc, and then creating a real hotbed for disease to take over, etc. So not having PPE and all

Kirsten McRae:

that done in the name of profit, right? It's exactly the costs. And therefore, so it really comes down to, you know, he like we were, like we've been discussing so far, investors and the bottom line being about profit and how to drive that profit, and it often comes at the expense of a better human experience, which is why you two are currently working on something directly for investors, specifically for investors. Do you want to talk a little bit about that?

Sam Freeman:

Sure, sure. Yeah. So we've been working for some time now, some months now, on a set of guidelines for investors to direct their action so that rather than breaching the right to housing, they're contributing to the realization of the right to housing. It's shortage documents. It's designed to be extremely practical. It's designed to allow investors to pick it up and say, you know, right, we can work within this. And these are clear, concise guidelines, clear, concise directives, directions for us to go in in our investment work,

Kirsten McRae:

I like that you say short ish,

Leilani Farha:

there's only

Kirsten McRae:

so short that you can make something that is meant to address such a vast issue, which is something that I think is integral to our work. It's if we're dealing with lots of business texts, legal texts. The reason that these actors have been able to maintain power for as long as they have is that they have an understanding of these complex rules, and they have often the ability to adjust those rules as they see fit, using that money that they have. So I just thought it was funny. They said short ish. I think that, given what it is, it's meant to cover it's fully short.

Sam Freeman:

Well, I'm glad to hear that that's right. Makes me feel better about the work. But

Leilani Farha:

you raise a really important point, Kirsten, these financial actors have created their own language, their own world, their own rules. And I think the work of the shift through the directives and now through the investor guidelines is to say, You know what, we actually understand your world, and we have language we can apply to your world, and our language says that you're not meeting human rights responsibilities and commitments, and you could, and you could actually contribute in a meaningful way to ensuring a lot of people have access to a decent, affordable, secure home. And so we're trying to break down the silos between worlds with our work. It's not always comfortable. When we were writing the investor guidelines, maybe we'll do a podcast about them. You know, it's hard to strike the right tone where you want. We want to talk with investors, but no, we don't care to water down human rights standards. They are human right. They're not to be watered down. They're not negotiable. They adhere to Every human being, just simply because the person is a human being. And so they aren't earned. You don't earn human rights. You're born with a full set of human rights. And so, so anyway, we're trying to, as I said, bridge worlds. And. Invite investors in. And maybe the investors that will be most interested are those that are already on the, you know, path of meaningfully engaging with ESG, for example, social impact investors. Maybe that's where we start, the home dot Earths of the world, for example. And then maybe either the big, big, big, not so amenable actors will go away, or they'll start seeing the light too, and change their business models. Hard to believe, hard to believe, because their profitability is completely based on a business model that is undermining of the right to housing,

Sam Freeman:

yeah. Sorry, just, I

Kirsten McRae:

guess I guess I was just saying that. I have hope that that is the trajectory that things will take, that when it comes to social issues or issues of this sort, that you can't necessarily wait for those big actors to be on board, but you have to instead push the needle by making it clear when something is unacceptable, right? And that happens little by little. It's someone that you know saying, Oh, I don't like that at all. And now that, you know, these actors are then forced to confront the social implications of what they're doing, because they're not surrounded by people who are like, Yeah, it's fine. It's your right to protect your profit or whatever. You know, you have people saying, No, that's not okay. And now you have an entire business model that's, you know, flying in the face of what you say you can't do, oh, we can't build affordable housing. Well, they're doing it. These people are doing it, and so now you've got all this money, we're expecting you to do it as well.

Sam Freeman:

Exactly, yeah. No, that's Yeah. I think that's exactly it. And I think we are, what I think I've seen in the time that I've been working on this issue in the last few years, is that I think we are at least approaching critical mass in terms of what people are willing to put up with the, you know, I talk with tenants and dwellers and residents every day, and the anger and the level of awareness of what's happening to them, what's being imposed on them by investors is, you know, they're so clear about what this is and What it means, and who's gaining from it, right? Leilani, you raised a, I think, a really brilliant point with me the other day when you were talking about fiduciary duty, and you were saying that, you know, investors always talk about having this fiduciary duty to their shareholders in order to generate as much profit as possible, but actually, if they do genuinely care about that fiduciary duty, take a look at the landscape and realize that if you don't start thinking in human rights terms, if you don't start respecting and fulfilling people's human rights, that's going to lose your shareholders a lot more money than if you carry on. You know that people are aware. People will just people will stop paying. They will get they're tired of it. So if you want to retain a profitable business, maybe not as profitable as you have been in the past, but if you want to retain a profitable business into the future and protect those shareholders, start thinking in human rights terms. Okay,

Kirsten McRae:

so just quickly, before we wrap up, I wanted to ask about directive three, which is ensure renovations and redevelopment are consistent with human rights. Are there existing regulations on the renovation, redevelopment of housing. Can you just quickly comment on the directive and how it plays into the rest of the piece of the document?

Sam Freeman:

For sure, I mean directive three, when we were thinking about the directives, directive three really gets at the model, the business model. When I've been working with tenants, you know, around the world, I get emails into my to my inbox very frequently from tenants living in financialized housing, and almost before I open those emails, I could, I could tell you what they're going to say. They're going to say, I've been living in this house for many, many years. I've just recently found out wasn't taught beforehand, but have found out that investor has purchased my home and they are going to start renovating my home very soon, and they'll usually start with communal areas. And then the idea, or they feel the idea, is that the renovations, the works, are kind of so disruptive that people start to leave the building. They cannot physically live there anymore. We call that self eviction, right? Like this idea that you're making a living environment so hostile to me that I can't live there anymore. And once those units then become vacant, the investors can take them over. They can renovate them, they modernize them. And the entire purpose of that is to allow the investor to charge greater rents on those units. They can, they can suddenly market these modern, beautiful units that you know, are often beautiful on the face of it, they often still have many, many problems. Modern, beautiful units that are, you know, however much more rent, twice the rent, you know, and it's such a mainstay of this model, you know, it was critical that we we covered it. There are governments we talked in another episode, there are governments who have recognized that this model is a part of the investment landscape, and they've recognized how destructive it is to tenants the Denmark law, Lex Blackstone we talked about in a previous episode. Code, the idea that in Danish law now a landlord can't raise the rent due to renovations for five years after they've purchased the property. You know, the whole purpose of that, of that law is to undercut this tactic that is used, so I'll say, effectively, brutalize tenants into paying more rent or leaving their home so someone else can come in and pay more rent.

Leilani Farha:

Yeah, and a real, live concern right now is the drive for retrofitting. Across Europe, for example, there's a lot of old housing stock that is, you know, seeping air, basically making those units too hot in summer and and too cold in winter, they need to be refurbished or retrofitted to be more energy efficient. And the concern is that that will be used, and we're already seeing it being used by some landlords as a vehicle for eviction, a vehicle for increasing rents astronomically, and that's obviously a matter of human rights, and is just not allowable. It just cannot happen. Retrofits should lead to zero evictions where someone has to leave a unit in order for that unit to be retrofitted, they must be guaranteed the right to return at the same rent level, and so that's a big fight we have going forward. As I said, we've seen landlords moving in this direction already in Europe and in North America, and so using it as an excuse right to get tenants out. And I'll say one other thing as just anecdotally, my father lives in a building that has been recently purchased by, I think it's an asset management firm, and one of the things I've noticed that they do is there every time a unit is vacant, for sure, they will renovate it and raise the rent. But what they do with my father's unit, and he's been there for more than 15 years now, is to rental unit. They won't, don't do any modifications, and they won't do any upgrades practically. And they're not making it at all nice, even though they could, while he's still living there, make it a little bit nicer. It's a pretty old unit. It could use an upgrade, and they won't do that. And I, my sense, is for two reasons. One, because they don't, they can't raise the rent just because they did that to his one unit, and so they can't get anything back. But also, it enables them to say, look, we've got these crappy units, but we're offering you this really nice unit. And so the potential renter will be like, oh, yeah, okay, I can see why I would pay more for this and not for this, right? So it's quite awful how renovations and modifications are used again detrimentally, rather than to actually, genuinely benefit the tenant. So there it is.

Sam Freeman:

Exactly, yeah, renovations, they work for investors in many ways, right? I was thinking on this the other day. You know, you can think renovation costs can be offset against profits. They can be used to bring tax bills down, right? Renovation costs can be passed on to tenants in the form of higher rents, so they get more money back then, so they're kind of earning the money back, but renovation costs are also passed on on the sale of a building, right? So in many ways, investors are earning on these renovations three times. They're benefiting from these renovations financially three times, at least three times, three times that I can think of. And you know, and how are tenants benefiting? Okay, maybe in the terms of green renovations. There's some evidence that certain green renovations might bring down things like energy costs, to an extent. I think that's quite highly disputed in a lot of cases. But they're not benefiting, you know, three times the value of a renovation. They're not benefiting to that extent. You know, this is when anyone else buys a house, you know, if I've bought a house last year, and it's a complete wreck and it needs a lot of work, and you know, when you think about that, you think, all right, well, I'm gonna have to invest a little bit of money into this house. But, you know, hopefully when I sell it, I will get that money back because I've made it nicer, and someone else will want to buy a nicer house, right? Like, you know, how does that not work in the investment field as well, right? Why is it not the case that investors just that's the cost of doing business. You're buying a nicer building, so you pay more money as the investor with your billions and billions of dollars of dry powder, as they call it, sitting in the bank. You know? Why do tenants have to pay for them to make greater profit on the side of a building? Yeah, I've

Leilani Farha:

thought. I've thought of that too. My mom owns a beautiful Victorian building here in Ottawa, where I live, where her manufacturing business is located, and because it's an old Victorian home, it's had to undergo a lot of upgrades and retrofitting. As a matter of fact, there was, you know, bad. And all of that stuff, knob and tube wiring, and, you know, all of that had to be replaced. She absorbed that as and now my sister runs a business. They've absorbed that as the cost of doing business. They didn't pass that cost onto the employees who are working in the building, right? And to me, that's a parallel like, why is this cost passed on to tenants? I've always queried that, or at least, why isn't it more shared in a different way? Should tenants pay a little bit? Maybe it should just be a really a modicum, right? Just a teeny little bit. It's I'd never thought about that. Sam, the triple benefits of renovations for landlords. So that's a I like that framing. You should probably write an op ed on that. But I'll just say one final thing, which I only learned fairly late in my research on the business model, and that is that there is a mathematical equation used by these property owners, these big financial property owners. It's an equation that says that, and it's literally a mathematical equation that if you increase rents by a certain percentage, you will gain exponential profits. And it's a known formula that they apply, and that's where renovations fit in, because they know if, even if they do renovations and they there's an outlay of cash or capital, they will get that in their return tenfold or whatever, yeah, when they sell the building, basically, so it changes the valuation of the property exponentially by increasing rents. And so renovations is a vehicle for changing the valuation of property. How much property is valued? Yeah,

Kirsten McRae:

yeah. That speaks to what we were saying about creating the rules, these complex rules that not everyone understands, but then also being able to exploit them. Yeah, that's that's, I didn't know that either, Sam, thank you for sharing that. That my my temper immediately went through the roof. And he said, Yeah, exactly, yeah, yeah.

Leilani Farha:

And, I mean, they're, they're able to say, well, we only increased unit 705, rent by 20 bucks a month. But for them, that 20 bucks a month that's actually applied to 100 units, let's say, really does have an exponential benefit financially for the owner of the property,

Sam Freeman:

yeah, exactly, especially when you take into account of the firing of the superintendent, the cutting back of services, you know, it's just more profit. Yeah, I

Kirsten McRae:

think that's a perfect place to leave it. To sum everything up, we've only scratched the surface on these I had, if you could see the list of questions that I had, I would encourage everyone I've been doing this the whole series, definitely read the directives. There's so much valuable information in there, useful information. And I know that was the first time that I read through it. I was really encouraged by it, because it was easy to understand. It was something that I felt I could share with the people around me. And it also one of the things that I get questions that I get from people is, you know, what is it that I can do? How can we do this? And I felt like this was the first document that I'd read where I had a clear understanding of what actions needed to be taken and even in just the way that I speak and I move through my own life, how I can, how I can have an impact on how these particular topics are seen. So I'm really excited for people to read them more. The investor guidelines that we talked about are going to be available very soon. We're very excited for everyone to look at them and to read them and to, you know, encourage others to read them and apply them. So definitely keep an eye out for those. And thank you so much to the listeners for tuning in for this long and to Leilani and Sam for making the time to speak to us about them. I'm very excited to talk about many other things in the future, and hopefully we can bring the listeners in on some other really cool conversations,

Sam Freeman:

amazing. And thank you so much to you, Kirsten, who have done an incredible job over those last few episodes.

Leilani Farha:

Yeah, thanks, Kirsten for getting us through the directives.

Kirsten McRae:

It's only the beginning, it's only the beginning.

Sam Freeman:

It's only the beginning.

Fredrik Gertten:

So this was the fourth part of our mini series. Leilani, what a great work. I'm proud of being your friend.

Leilani Farha:

Thanks. Fredrik, yeah, it you know, reviewing the directors for this mini series made me like them even more. I'd forgotten all the work that went into them and how practical and useful they are exposing the housing system for what it is right now and offering a different way forward. And I got so excited, I decided to carry on with this kind of work, and Sam and I have now developed investor guidelines. So similar to the directives, but really focused on investors and what they must do to comply with human rights. So that's coming out.

Fredrik Gertten:

Maybe we'll do have to make a new series. Yeah, maybe, I

Leilani Farha:

don't know about a whole series, but maybe we'll do one episode on I

Fredrik Gertten:

think you should tour the world and and present your your I mean, I would like big editorians Listening to you and and they should all sit there, all the guys in suits and tie and listen to you. Probably they should be in chains also, because some of them are behaving like criminals. But I guess that's a different episode. But maybe anyway, I'm just joking, just so you know, I'm, you know, whatever. But thank you for your great work, and please, friends, use the directives and use the podcast, because we will continue to publish this podcast. There are now four episodes of the mini series out, but we also have 100 plus episodes from from these four years with a lot of very inspiring material and people who are pushing back. And I think inspiration is key, because it's dark times for many people, so we need to kind of also give each other light and courage to fight back, because we need to fight back absolutely

Leilani Farha:

and as you're listening to them, as you've listened to the mini series, there may be one topic or another that really catches your attention. And if you scroll back through push back talks and our various seasons, you'll find we've covered many of these issues in different ways, from different angles, with amazing guests. So whether you're interested in student housing or Airbnb or private equity, we've covered it all so

Fredrik Gertten:

and please share these episodes on social media and to your friends and keep it flying, because we don't have money for promotion. So we if you have mighty enemies, you need a lot of friends, so please be our friend. Yeah,

Leilani Farha:

and if you have a little spare cash that you want to send our way, go to patreon.com, forward slash, pushbacktalks, and you can give us a little love and money. It'll help love

Fredrik Gertten:

and money. That's all we need, and maybe a glass of wine after these four episodes, don't we deserve a glass of wine?

Leilani Farha:

Oh, you know what, Fredrik, I don't drink these days. Sad truth. Oh, yeah, but

Fredrik Gertten:

you're also sparkling water that's so far away anyway, so it doesn't matter. We never meet.

Leilani Farha:

We never meet.

Fredrik Gertten:

It's so sad

Leilani Farha:

someday, someday,

Fredrik Gertten:

the pandemic, yeah, made the continents further away. Yeah, something happens, true, yeah. Okay. So thank you very much for this mini series. See you soon for the for a new episode of pushback talks. It's, it's an honor and a pleasure to work with you. So likewise. Thank you, my friend,

Leilani Farha:

likewise, thanks Fredrik,

Fredrik Gertten:

bye.

Kirsten McRae:

Pushback Talks is produced by WG film. To support the podcast, become a patron by going to patreon.com/pushbacktalks. Follow us on social media at make underscore the shift and push underscore the film, or check out our websites, maketheshift.org, pushthefilm.com, or breakingsocialfilm.com