Introduction

Renter households across Canada are facing increasing costs: the average rent increase in 2022 for a two-bedroom apartment was 5.6%, double the average annual increase from 1990 to 2022.^[1] Renters entering into a new lease experienced the largest increase in rent, with the average rent growth for two-bedroom apartments that turned over to a new tenant in 2022 at 18.3%, significantly higher than the growth for units without tenant turnover (2.9%).^[2]

Increasing rental costs for tenants are resulting in more households in Canada living in unaffordable housing—that is, spending 30% or more of their gross income on shelter costs—with 33.2% of tenant households living in unaffordable housing in 2021.^[3] This ranged across the country, with renters in Ontario (38.4%) and British Columbia (37.8%) having proportionately the most tenant households living in unaffordable housing (see Figure 1 for the rate of rental housing unaffordability across the country). Rents relative to income also vary depending on where one lives in a province; renters living in a downtown core are more likely to be spending more than 30% of their income on housing costs when compared to all renters.^[4] For example, about half of renters in the downtowns of Kingston, Barrie and Peterborough (all Ontario) and Halifax, Nova Scotia, lived in unaffordable housing in 2021.^[5] Finally, Indigenous households also face unaffordable housing; in 2016, almost 40% of Non‑Status and Status First Nations renter households living off reserve lived in unaffordable housing,^[6] as did about 35% of Métis renters and 20% of Inuit renters.^[7]

Figure 1 — Percentage of tenant households spending 30% or more of their income on shelter costs, 2021

Source:  Prepared with data from: Statistics Canada, “Census Profile, 2021 Census of Population,” Database, accessed 4 July 2023.

Note:      While the percentage of households living in unaffordable housing in the territories is lower than the rest of the country, due in part to subsidies, other housing challenges persist. These include core housing needs, such as households living in unsuitable (does not have enough bedrooms for the number of people), or inadequate (in need of major repairs) housing. For additional information on housing challenges in the North, see House of Commons, Standing Committee on Human Resources, Skills and Social Development and the Status of Persons with Disabilities, Indigenous Housing: The Direction Home, Fifth report, May 2021.

On 17 October 2022, the House of Commons Standing Committee on Human Resources, Skills and Social Development and the Status of Persons with Disabilities (HUMA or the committee) adopted the following motion:

That pursuant to Standing Order 108(2), the committee undertake a study to examine the research reports on the financialization of housing released by the Office of the Federal Housing Advocate on September 8, 2022; that the committee examine the issue of financialization in the housing market, including corporate ownership of single family homes, rent gouging, and renovictions, and the impact of ‘real estate investment trusts’ on the rental housing market, including but not limited to increased rental rates and the loss of affordable housing units, as well as the tax treatment of real estate investment trusts; that the committee hold no less than three meetings with witnesses for this study; that witnesses include, but not be limited to, researchers from the reports released through the Office of the Federal Housing Advocate and a dedicated panel to hear testimony from the Federal Housing Advocate; that the committee report its findings to the House; and that, pursuant to Standing Order 109, the government table a comprehensive response thereto.^[8]

As a part of this study, the committee held four meetings between 9 May and 9 June 2023, hearing from 29 witnesses, including the Federal Housing Advocate, researchers from the reports released through the Office of the Federal Housing Advocate on the financialization of housing, advocacy groups, industry representatives and academics. It also received 41 briefs. The committee would like to thank all those who participated for their contributions to this study.

The committee heard that financialization of housing, or the treatment of housing as a financial commodity and an asset for profit,^[9] is resulting in reduced affordability of rental housing. It heard about the increase in eviction rates, and other challenges faced by renters. It also heard that financialized landlords,^[10] including real estate investment trusts (REITs),^[11] can be a part of the solution. This perspective was primarily emphasised by financialized landlords. In this report, the committee considers financialization as one component in a multi-faceted housing system. It provides an overview of the testimony it received in relation to financialization of housing and makes recommendations directed to the Government of Canada. After presenting background information on the issue of financialization of housing and its impacts, the report summarizes key testimony relating to: increasing the amount of affordable rental housing stock in Canada; considerations for changes to the tax system; other opportunities to address affordability of rental housing; and how to better support tenants. Finally, it shares some ideas on increasing the availability of data and ways to better monitor the impacts of the changing rental housing market.

Background Information

This section of the report provides background on Canada’s first federal housing advocate and her reports on the financialization of housing. It also discusses the issue of financialization of housing, and its impacts on the rental housing market in Canada.

The Federal Housing Advocate

Marie-Josée Houle is Canada’s Federal Housing Advocate, appointed in February 2022. Her role is to make recommendations to improve “laws, policies and programs so that they enable people and families in Canada to have access to adequate, affordable and safe housing that meets their needs.” To complete this work, she receives submissions on systemic housing issues, undertakes reviews, monitors the right to housing and reports annually to the Minister responsible for housing.^[12]

On 8 September 2022, the Office of the Federal Housing Advocate released a series of reports on the financialization of housing in Canada.[13] Each of these reports focused on an issue or group of people impacted by the financialization of housing, including: seniors, racialized people, those living in multi-family rental housing and tenants more broadly, as well as an examination of the international landscape. They also included a variety of recommendations for Canadian governments at all levels.

What is Financialization of Housing?

Martine August, author of one of the Office of the Federal Housing Advocate’s reports on financialization of housing and Associate Professor, University of Waterloo, described “financialization of housing” as “the growing dominance of financial actors in the housing sector, which is transforming the primary function of housing from a place to live into a financial asset and tool for investor profits.”^[14] The Federal Housing Advocate clarified that

[i]t's not new that these buildings are privately owned. What is new is that they are now increasingly owned by large institutional investors and financial firms whose focus is making maximum returns for shareholders.^[15]

In his brief, Steve Pomeroy, Professor at McMaster University and Executive Advisor at Canadian Housing Evidence Collaborative, explained that financialization occurs when financial markets, institutions and “financial elites” gain influence, and that Canada saw the first REITs formed in the 1990s as a result of changing tax policy; he cautioned, though, that the challenges relating to the loss of affordable housing, to be discussed throughout this report, are “associated with a much broader array of investors, most of whom would not be defined as ‘financialized landlords’ … [and] that eliminating REITs alone would not stall or slow the erosion of lower rent properties.”^[16]

The committee heard from the Federal Housing Advocate about her perspective on how financialization of housing has expanded and shaped the country’s housing system in the last decades. She noted that

regulatory changes enabled the creation of real estate investment trusts and allowed pension funds to invest in financial markets and instruments. These changes took place just as Canada's federal social housing program was terminated, resulting in a steep decline in the development of new non-profit, affordable co-op and social housing. As a result of these factors, low-income and vulnerable households are finding it increasingly difficult to secure affordable, accessible and adequate rental housing in Canada.^[17]

Impacts of Financialization of Housing

Houle told the committee that 20% to 30% of Canada’s purpose-built rental housing^[18] is owned by institutional investors. She discussed the harm she sees being caused by financialized housing, that it is “contributing to housing unaffordability and it’s worsening housing conditions. It is leading to evictions and displacement.”^[19] She explained that the trend toward financialization “is violating people’s right to adequate housing in Canada,” as defined under the International Covenant on Economic, Social and Cultural Rights, signed by Canada in 1976, and enshrined in the National Housing Strategy Act.^[20]

The researchers who worked on the Financialization of Housing in Canada reports described their perspective on the impacts of financialization, including its effects on the affordability of rental housing, eviction rates and tenant well being.

On affordability of rental housing, Martine August told the committee that financialized firms prioritize profits above other goals, such as affordability or tenant quality of life. In her view, they often use aggressive property management strategies, such as removing or displacing tenants, charging more for amenities, adding fees and raising rents, all of which reduce affordability.^[21]

On eviction rates, Martine August told the committee that she found that financial firms file evictions at higher rates than other types of landlords. She noted that financialized firms “find that they can raise rents more if they have vacant units. This drives them to systematically prefer to remove and displace existing tenants in order to try to get higher rent when the unit is vacant.”^[22]

Relating to tenant well being and quality of life, ACORN Canada noted in its report for the Office of the Federal Housing Advocate that of the respondents to their survey, 43% of "tenants in financialized housing reported roaches or other bugs,” far more than all other tenants (22%).^[23] Respondents to the survey with financialized landlords were also more likely to identify other problems in their units when compared to other tenants, including outdated appliances, unfinished repairs and temperature too hot in the summer or too cold in the winter.^[24]

Finally, researcher Jackie Brown indicated to the committee that in the case of long-term care homes, financialized companies divert “as much as they can into profits to pay their shareholders and investors” rather than re-investing profits into the home as is the case for municipal or non-profit providers. She indicated that financialized homes were more likely to have higher mortality rates in the first months of the COVID-19 pandemic, and that even with worse outcomes, due to large demand for care, “financialized companies are not forced to compete on quality of care.”^[25] Jackie Brown summarized that the interests of investors are “uniquely at odds with the provision of quality care and decent work.”^[26] The committee has studied the issue of long-term care, most recently in its report on Labour Shortages, Working Conditions and the Care Economy and The Impacts of COVID‑19 on the Well-Being of Seniors.

The committee also heard about the benefits that financialization can bring. Krish Vadivale, Vice-President, Skyline Apartment Real Estate Investment Trust, described REITs as a “platform from which everyday Canadian investors, not necessarily the ultrawealthy, can invest in Canadian real estate to earn a return, and in so doing help support the building of housing across Canada.”^[27] Witnesses such as Tony Irwin, President and Chief Executive Officer of the Federation of Rental-housing Providers of Ontario, and Dan Dixon, Senior Vice-President, Minto Group, argued that private investment can increase much needed housing supply.^[28]

Tim Richter, President and Chief Executive Officer, Canadian Alliance to End Homelessness, argued that the financialization of housing must be examined with a wider lens; in his view, “the issue of financialization alone isn't the problem. The bigger issue … is the erosion of affordability in the rental housing market.”^[29]

The following report examines the issue of financialization of housing as discussed by witnesses and in briefs submitted to the committee. In doing so, it considers financialization as one component in a complex and multi-faceted housing system.

Increasing Affordable Housing Supply

Throughout the study, the committee heard about the need to increase the availability of affordable rental housing. Witnesses appearing before the committee and those who submitted briefs agreed that low supply relative to demand for housing is increasing the cost of housing. Many argued that there is a link between this reduced availability of affordable housing and increased financialization of housing. In 2022, Canada Mortgage and Housing Corporation (CMHC) estimated that housing stock in Canada will increase by 2.3 million units by 2030. To restore affordability, an additional 3.5 million more units need to be created in the same time period.^[30]

In its brief, Dalhousie Legal Aid Service noted though that while there is, no doubt, a housing supply problem,

increasing the supply of rental housing in general will not address the issues caused by financialization. It is increasing the supply of deeply affordable^[31] units that requires governments’ focus.^[32]

Below, the report discusses ideas brought forward by witnesses to increase the number of affordable housing units, including through a targeted acquisitions fund; increasing funding to create more affordable housing; and a focus on key groups that face additional challenges accessing affordable housing.

An Acquisitions Fund

A significant number of witnesses and briefs discussed the need for an acquisitions fund. Dan Dixon noted that “the most affordable housing is existing housing.”^[33] The Federal Housing Advocate argued that “[o]nce affordability is lost, we can’t ever get it back,” and indicated to the committee that between 2011 and 2016, for every unit of affordable rental housing that was constructed, 15 were lost.^[34] Discussion on this topic centred around the concern that investment firms and private companies have been purchasing existing affordable housing stock and subsequently increasing rents and reducing affordability. Witnesses argued that an acquisition fund would “enable non-profit, co-op and land trust organizations to purchase at-risk rental buildings when they come on the market.”^[35] This could help minimize the potential harmful impacts of financialization.

An acquisition fund was discussed by witnesses in large part as a program that would provide funding to support provincial or local governments, community and non-profit organizations and social housing providers to acquire rental housing properties with the objective of protecting the long-term affordability of these units. There were a variety of proposals regarding the way in which such a fund should be delivered. Some briefs recommended leveraging existing National Housing Strategy (NHS) programs, such as the National Housing Co-Investment Fund or the Rapid Housing Initiative, adapting them to be more flexible and include acquisition projects. Others recommended a distinct program be developed as part of the NHS, noting that any delivery mechanism must be accompanied by guidelines that would protect the public interest; moreover, they argued that private companies should not be eligible to participate, in order to preserve the affordability of units in perpetuity.^[37] Social Innovation Canada suggested that a large fund be provided to intermediaries who would be responsible for leveraging additional private capital and distributing the funds.^[38] Finally, a joint brief submitted by the Aboriginal Housing Management Association, the Co-operative Housing Federation of BC and BC Non-Profit Housing Association, recommended that in creating an acquisition fund, the Government of Canada should also include measures that would encourage provincial and territorial governments to implement programs that extend additional support to non-profit and cooperative housing providers.^[39]

Taking this testimony into consideration, the committee recommends:

Recommendation 1

That the Government of Canada, as soon as possible and in partnership and cooperation with the provinces and territories, develop an acquisition fund to be made available to non-profit and cooperative housing organizations and governments to preserve and expand affordable housing stock.

Increasing Funding to Create More Affordable Housing

From most witnesses and in most briefs, the committee heard that more funds are required to support the construction of non-market and affordable housing, recognizing the need to create more than a million affordable houses in the next decade.^[40] The Federal Housing Advocate indicated to the committee that “[n]ew constructions, unless they come with subsidies, will not create the affordability needed.”^[41] This was supported by researcher Manual Gabarre, who described the use of housing as a financial product internationally. Based on his research, “vast social housing programs…[provide] the best indicator [for access] to housing, affordability and prosperity for all.”^[42]

There were two distinct groups of recommendations as to how more support should be delivered. The vast majority suggested that the Government of Canada provide funding to the cooperative and non-profit sector. Others suggested providing support to the private sector. The sections below describe these two groups of recommendations in more detail and examine the need for dedicated federal funding that targets specific groups of people, while recognizing the provincial and territorial jurisdiction relating to housing.

Funding for the Non-profit Sector

The 2023 Scotiabank report Canadian Housing Affordability Hurts indicated that the proportion of Canada’s housing stock that comprises subsidized rental housing or social housing—at 3.5% of the market—is among the lowest across the OECD.^[43] Several witnesses and briefs supported the report’s recommendation to double the current number of social housing units. Doing so would bring Canada to the G7 average; this increase, however, would still not address the current shortage of social housing.^[44] In its brief, Interloge recommended that non-profit, affordable housing should make up 20% of the housing market, “to ensure a definitive solution to the housing crisis.”^[45]

The committee was told that the Government of Canada should work to increase the number of affordable units in different ways, including by:

• launching the Co-operative Housing Development Program announced in Budget 2022, which would provide loans and grants to support the creation of new co-operative housing;^[46]
• repositioning funds in the NHS to better support co-operative, non-profit and social housing,^[47] and implementing an NHS action plan with a focus on the right to adequate housing;^[48]
• adjusting NHS funding so that it comes primarily in the form of grants or contributions, rather than loans, to increase the levels of affordability for units created;^[49] and
• increasing collaboration with provinces to share the costs of achieving greater affordability.^[50]

Supporting the Private Sector

Some witnesses argued for leveraging the work of private housing developers, including REITs, to increase the quantity of housing supply. Many noted that the sheer volume of housing required cannot be fulfilled by the public and non-profit sectors alone and investors of every kind, including small investors, REITs and corporations of all sizes, need to play a role.^[51] Dan Dixon provided an example to the committee of a private developer who is building affordable housing in Toronto, Ontario. He explained that by leveraging CMHC’s Rental Construction Financial Initiative (RCFI) and the City of Toronto’s Open Door Affordable Housing Program, they are constructing 100 affordable units, at 25% of local median household income, and 125 units at 30% of median household income.^[52]

Steve Pomeroy indicated that the government should encourage the private sector, and REITs in particular, to invest further in creating new rental supply.^[53] On this point, Ray Sullivan, Executive Director of the Canadian Housing and Renewal Association, reminded the committee that the RCFI of the National Housing Strategy, is one such program that provides lower-cost loans to encourage the construction of sustainable rental apartments. He recommended that programs in the NHS be strengthened to continue to support “modest levels of affordability.”^[54] Martine August also supported the possibility of federal funding flowing to the private sector to build affordable housing, with the caveat that any such housing be “affordable in perpetuity.”^[55] In her view:

[I]t's great to support the creation of new housing, if we can be sure that it's going to be affordable. It's going to be Canadian taxpayers who are putting that money in and it should be achieving the social goals that we have for housing in this country.^[56]

Regardless of who receives funding, some witnesses discussed the need for better coordination with provinces and territories, which could facilitate or accelerate the creation of affordable rental units. Steve Pomeroy told the committee that in his perspective, one of the weaknesses of the NHS has been its federal focus, that the strategy does not engage the provinces as well as it could to “lever additional provincial resources to assist in attacking this [affordable housing] problem.”^[57]

Housing as a Right

Some witnesses and briefs said explicitly that government funding to the private sector should be limited or eliminated. These arguments centred around the fact that Canada has recognized housing as a right. In particular, the committee heard from some witnesses that financialization is associated with violations of the right to housing. As noted by Jean-Claude Laporte, Community Organizer, Comité logement Rosemont,

the aim of the financialization of housing is to make investments to make money. This runs counter to the right to housing. The government has a duty to discourage such dubious practices and, above all, to put obstacles in the way of the people who engage in them.^[58]

A variety of suggestions were received, such as:

• eliminating all NHS funding to for-profit providers;^[59]
• putting “a hard limit on the number of units” a corporate landlord or REIT can purchase or own;^[60]
• limiting “CMHC preferred financing to borrowers who can guarantee affordable rents, zero displacement, and eviction prevention measures;”^[61]
• eliminating CMHC mortgage insurance to financialized investors;^[62]
• putting conditions on funding that “the Government of Canada should either retain a property interest in the real estate or organizations should be prohibited from selling it to be used for other purposes;”^[63] and
• working “with private lenders on a risk assessment framework that allows lenders to more realistically assess the stability that comes with treating housing as a human right.”^[64]

Dedicated Funding for Certain Groups

The Federal Housing Advocate shared with the committee her view that financialization is causing most harm to people in vulnerable situations, including Indigenous peoples, seniors, persons with disabilities, members of Black communities, recent immigrants and refugees and lone-parent families.^[65] The committee heard that people who are living with low income are not likely to be able to afford to live in market housing.^[66] Briefs submitted to the committee indicated additional support is needed for particular groups who face the greatest need for access to affordable housing:

• Dedicated funding for construction and maintenance of shelters serving women and their children fleeing gender-based violence. Since these kinds of shelters need to consider safety and confidentiality, the per-unit costs may be higher than other types of housing.^[67]
• Dedicated funding for buildings that meet accessibility criteria for persons with disabilities. Briefs to the committee stressed that building accessible housing is of particular importance because persons with disabilities are more likely to live in inadequate housing. In addition, persons with disabilities are more likely to need housing located near essential services, such as public transport and community organizations.^[68]
• Additional funding for the Urban, Rural and Northern Indigenous Housing Strategy. The committee is aware of the $300 million investment from Budget 2022,^[69] and the additional commitment of $4 billion from Budget 2023 to implement this strategy.^[70]
• Dedicated funding for housing industry organizations owned and led by racialized people.^[71]

With these considerations in mind, the committee recommends:

Recommendation 2

That the Canada Mortgage and Housing Corporation work with provincial and territorial partners to increase the amount of capital funding available to non-profit and public housing providers, with the goal of boosting the affordable housing supply as quickly as possible.

Recommendation 3

That the Canada Mortgage and Housing Corporation increase requirements relating to the level and duration of affordability for funding delivered through National Housing Strategy programs.

Other Solutions to Increase Affordable Housing Supply

Other options beyond increasing federal funding were suggested to support housing providers in creating more affordable housing. These are outlined in the following paragraphs.

Supports for Housing Providers

The committee heard from multiple industry representatives about some specific changes that could be implemented to support the development of new affordable rental housing. Additional supports are discussed in the section of this report entitled Tax Measures.

One recommendation was to continue to provide federal land at no cost to develop new rental units.^[72] Currently, the Federal Lands Initiative supports the transfer of surplus federal lands and buildings at a reduced or no cost to be developed or renovated for use as affordable housing.^[73] CMHC indicates that as of June 2023, it has committed $120 million to support the creation of 3,940 units through this program, of which 1,720 will be affordable.^[74]

Another recommendation was to further reduce CMHC interest rates for organizations building new housing. Krish Vadivale indicated to the committee that current interest rate increases will likely “stall the development of new housing,” because higher rates make housing projects more expensive.^[75] Michael Brooks, Chief Executive Officer of Real Property Association of Canada, told the committee that savings through lower interest rates could make more projects financially viable.^[76]

Previous incentive programs from the 1970s and 1980s were also recommended to the committee. Such programs encouraged the construction of rental housing units and “temporarily propped up the viability of rental investment.”^[77] These included the Multiple Unit Residential Buildings program, a tax measure that allowed capital cost allowance^[78] to be deducted against income, to encourage investment in rental housing; the Assisted Rental Program, a subsidy program providing grants per unit upon condition of affordability; and the Canada Rental Supply Plan, to provide interest-free mortgage loans to builders for new construction.^[79]

The committee also heard about improving builders’ access to funding through CMHC’s multi-unit mortgage loan insurance (MLI) program, which provides reduced insurance premiums and longer amortization periods for builders meeting affordability, energy efficiency or accessibility criteria.^[80] One witness criticized the rate increase that was implemented in June 2023 for multi-unit properties.^[81] Others argued that the criteria for meeting the affordability component of the program are set too high.^[82] The multi-unit MLI Select program requires a minimum of 40% of units to have rent levels at 30% of the local median renter income for 10 years for existing properties; for new construction projects, a minimum of 10% of units must have rent levels at 30% of the local median renter income for 10 years.^[83]

Finally, a recommendation was provided to the committee to create an industry advisory council, which would work with the government to provide feedback and advice on the challenges of the rental housing sector. This council could address some of the concerns relating to the impacts of REITs and other private companies on the housing system by providing a better understanding of issues through sharing reports and studies, and broaden the “government’s network and direct reach to Canadians” who could benefit the most from various initiatives.^[84]

Tax Measures

Throughout the study, witnesses shared with the committee their different perspectives on possible federal tax measures to address the problem of financialization and to increase the supply of affordable housing. Some argued that additional tax measures should be implemented to curb the financialization of housing, while others cautioned that the impacts of such measures might decrease the availability of new housing. The committee is aware that the federal government has committed to review the tax treatment of REITs,^[85] and that it committed, in Budget 2022, to conduct “a federal review of housing as an asset class, in order to better understand the role of large corporate players in the market and the impact on Canadian renters and homeowners,” including an examination of “potential changes to the tax treatment of large corporate players that invest in residential real estate.”^[86]

Measures to Disincentivize Financialization

To mitigate the impacts of financialization in the rental housing market, some witnesses recommended ending what they referred to as “preferential tax treatment” of REITs.^[87] In Canada, though REITs are structured in a similar manner to other income trusts, they are exempted from the taxation rules that apply to most income trusts.^[88] Instead, REITs are taxed like mutual funds, and are allowed to flow their income to shareholders, and pay taxes only on the undistributed portion of their income.^[89] The House of Commons Standing Committee on Finance noted in its report Taxing Income Trusts: Reconcilable or Irreconcilable Differences? that in Canada, REIT taxation was established in such a manner in order to be consistent with the taxation of REITs in other jurisdictions that are comparable to Canada.

In support of removing the distinct treatment of REITs in the tax system, Martine August stated:

I think there's no social justification for providing tax breaks to real estate investment trusts in housing. These firms are making their money by making housing less affordable and affecting security of tenure, things that are running counter to the right to adequate housing. It makes a lot of sense to tax them like other corporations.^[90]

Leilani Farha, the former UN Special Rapporteur on the Right to Adequate Housing, drew attention to the Office of the Parliamentary Budget Officer’s estimate that subjecting REITs to the standard corporate tax rate could generate an additional $285.8 million in tax revenue over four years.^[91] Martine August suggested that the money earned from ending the preferential tax treatment of REITs could be put towards housing-related goals.^[92] The non-governmental organization Social Innovation Canada noted that a REIT should only be allowed to continue receiving preferential tax treatment if at least 10% of their units are created as affordable units, or if its beneficiaries are non-profits, co-ops or land trusts.^[93]

Other tax measures suggested to the committee to disincentivize financialized housing included:

• “limiting the number of units that a corporation can own through heavy taxation for ownership of over a certain number of units”;^[94]
• making purchasing existing rental housing less economically attractive by “[taxing] the purchases of rental housing by private investors above a certain number of units to target large-scale purchases or to [tax] the profits from those purchases”;^[95]
• implementing an anti-flipping tax on residential properties;^[96] and
• implementing a gains surtax for rental owners following a quick sale (sale within two years or less).^[97]

At the same time, several witnesses spoke to the risks of taking such measures. Christian Szpilfogel, Chief Investment Officer at Aliferous, predicted a “flight of capital” if tax rules are changed in a way that is detrimental to developers.^[98] Similarly, Tony Irwin warned that tightening tax measures “would only disincentivize and drive investment to other jurisdictions or other countries.”^[99] Finally, in a jointly submitted brief, the Canadian Federation of Apartment Associations and the Federation of Rental-housing Providers of Ontario argued that

[a]dding new taxes, or changing the tax system to discourage certain investment in rental housing, risks reducing the total investment in rental housing, thereby making the rental housing supply problem worse.

That suggests that individual investors, REITs and corporations should all be encouraged to provide more rental housing, rather than facing more or higher taxes and restrictions, which tend to discourage entry into any market, and thus tend to decrease the amount of rental housing supply from what it would be with the current rules.^[100]

Measures to Incentivize Investmentin Affordable Housing

The committee also heard about tax measures that could further incentivize the creation of affordable housing. For example, in briefs submitted to the committee, both B’Nai Brith Canada and the Canadian Housing and Renewal Association recommended that the government devise “an Affordable Housing Investment Tax Credit to incentivize private sector investment in affordable housing projects, while maintaining non-profit and municipal management.”^[101]

Witnesses made recommendations pertaining to capital cost allowance. For example, Tim Richter identified an accelerated capital cost allowance as a measure that would create an economic incentive to build.^[102] In its brief, the Canadian Home Builders Association recommended the deferral of recaptured capital cost allowance, which can occur in cases where the proceeds from the sale of a depreciable rental property exceeds a certain threshold.^[103]

Witnesses also identified a low-income housing tax credit as a measure that could promote housing construction.^[104] Michael Brooks highlighted the Low-Income Housing Tax Credit program in the United States, noting that such a measure could help secure new construction of housing “through a sustainable and competitive funding model.”^[105]

A brief jointly submitted by the Aboriginal Housing Management Association, the Co-operative Housing Federation of BC and BC Non-Profit Housing Association raised challenges facing non-profit and co-operative housing providers in particular, noting provincial and municipal fees and taxes, and highlighted a potential federal role:

Given that many of these financial obligations represent a significant portion of municipalities’ revenue structure, the federal government could play a very important role in bridging the gap between both sides through tax exemptions, rebates, and grants.^[106]

The brief recommended that “that the federal government [co-develop] with the provinces and territories a refreshed approach to taxation and governmental revenue generation that prioritizes non-profit and coop housing providers,” noting that this would “not only encourage the construction of more social and affordable housing, but also discourage profit-maximizing behaviours that lead financialized landlords to put tenants at risk.”^[107]

Other recommendations for tax measures that could result in more housing supply included:

• amending the Income Tax Act to “incentivize the donation of real estate assets for affordable housing;”^[108]
• charging no capital gains tax or Good and Services Tax/Harmonized Sales Tax (GST/HST) on development costs, and potentially also operating costs, for purpose-built rental housing; or alternatively, deferring collection of capital gains tax or GST/HST until the sale of the building;^[109]
• exempting new capital investments in affordable non-profit housing from GST;^[110] and
• “[introducing] a ‘Rental Retention Vendor Tax Credit’ for private owners selling to not-for-profit groups and reinvesting in new purpose-built rental.”^[111]

The committee recognizes the varying perspectives on this issue, and taking all this testimony into account, it recommends:

Recommendation 4

That the Government of Canada examine the social and economic costs and benefits of the current tax treatment of Real Estate Investment Trusts (REITs) and assess the option of taxing REITs like other corporations, including the potential impact on the supply of affordable rental housing, as well as rental housing as a whole. That it design tax treatment options to ensure it encourages creating new affordable housing units.

Recommendation 5

That the Government of Canada implement tax measures to incentivize private sector and non-profit investment in the construction of affordable rental housing, including through tools such as, but not limited to, tax credits, tax exemptions or deferrals.

Supporting Tenants

A topic of discussion throughout the study was the need to better support renters. Many briefs submitted to the committee highlighted the treatment of tenants and, in particular, those living in housing owned by financialized landlords. Tanya Burkart, Leader, ACORN Canada stated in her testimony,

[t]enants are living with bedbugs, cockroaches, mould and more. It is nearly impossible to get issues fixed. There is a huge staff turnover. Tenants feel helpless against wealthy corporate landlords who can afford legal representatives at formal hearings. As one tenant says, “It's an unfair fight.”^[112]

This section highlights some opportunities brought forward to the committee in relation to supporting tenants; however, the committee recognizes that many of these suggestions fall outside the federal jurisdiction. A large number of briefs and much testimony argued in favour of stronger protections for tenants, given Canada’s commitment to recognizing housing as a human right, including under the NHS.^[113] Options presented to the committee to address tenant protections included preventing evictions, implementing rent control and delivering a housing benefit for renters. These issues are discussed in more detail below.

Evictions

In 2021, 7% of Canadians who responded to a Statistics Canada Canadian Housing Survey reported being evicted in the past; the top reasons reported for being evicted included: sale of the property by the landlord (37%); the landlord wanting the unit for their own use (26%); a conflict with the landlord (13%), demolition, conversion or major repairs by the landlord (10%); and being behind on rent payments (8%).^[114]

The reports from the Federal Housing Advocate argued that one of the main outcomes of increased financialization is increased eviction,^[115] and in particular “renoviction.” Renoviction is a term that is used to describe an eviction that is carried out to renovate or repair a rental unit.^[116] Leilani Farha indicated in a brief to the committee that tenants in financialized housing face insecure tenure due to frequent evictions, and that these landlords engage in renovictions.^[117] Nemoy Lewis, Assistant Professor, Toronto Metropolitan University, described to the committee his work to examine evictions in Toronto between 2018 and 2021, which found that evictions occurred more frequently in communities of predominantly low-income and Black Canadian households.^[118]

However, industry representatives told the committee that the majority of evictions take place in the secondary market,^[119] rather than in purpose-built rental buildings. John Dickie, President, Canadian Federation of Apartment Associations, indicated to the committee that from his perspective, “the vast bulk of evictions are not for major repairs.”^[120] One example of a program to prevent evictions was provided by Krish Vadivale, who told the committee about a Skyline Apartment REIT program created to provide rent relief to tenants who cannot pay their rent, describing how this program “saved over 200 tenancies” in 2022.^[121]

A number of briefs submitted to the committee suggested that federal funding through the NHS, to housing providers and governments alike, should be tied to a no-displacement guarantee.^[122] The committee also heard that the government should encourage provinces and territories to develop stronger tenant protections to prevent renovictions as part of its housing investments.^[123] As part of the NHS, the federal government has agreements with each province and territory to deliver cost-matched funds, following the multilateral Housing Partnership Framework.^[124]

As a result of this testimony, the committee makes the following recommendation:

Recommendation 6

That the Government of Canada immediately investigate providing tenant support resources to municipalities, provinces and non-profit tenant support stakeholders to address eviction and affordability matters for those residing in private market rental housing.

Rent Control

On the subject of rent control, the committee heard divided testimony. From the perspective of tenants, many briefs argued the importance of rent control to protect tenant rights and ensure housing affordability. Many contended that greater rent control would curb the financialization of housing, by minimizing or eliminating the financial incentives for landlords. Martine August told the committee that research indicated that provinces with stronger rent controls in place had proportionately lower levels of REIT ownership. She indicated to the committee that “rent control can play a role in reducing the financialization of housing or, indeed, can play a role in preventing firms from wanting to acquire properties in those jurisdictions.”^[125]

While rent control does not fall within federal jurisdiction, some had recommendations as to how the federal government could play a role. For example:

• CMHC could establish conditions on its mortgage insurance that would limit investors’ ability to impose rent increases for lower-rent properties;^[126]
• as was done in Canada in the 1970s, the provinces and territories could be asked to implement rent control and limit above-guideline rent increases for a defined period of time;^[127] and
• the federal government could work with provinces and territories to abolish vacancy decontrol (having no limit on rent increases charged to the next tenant when a tenant vacates a unit), which some argue incentivizes eviction and leads to rent increases.^[128]

However, some witnesses cautioned against implementing rent control practices. Industry representatives noted that the costs to maintain properties and make improvements, things that would preserve the quality of rental housing stock, continues to rise.^[129] Without the ability for investors to make returns on their investments, industry representatives argued, rent control would result in exacerbating the problem, that is, would limit the supply of new rental housing and, in addition, result in rental stock that decreases in quality over time.^[130] As Tony Irwin told the committee, “[p]olicies that further restrict capital investment in a sector grappling with a significant supply shortage will only make matters worse.”^[131]

Other Benefits

While the primary focus of this study was on financialization of housing, several witnesses and briefs spoke to the need to provide immediate support to renters who are being disproportionately impacted by a lack of affordable rental housing supply. As Steve Pomeroy noted, “[w]hile not all renters are lower income, most low-income households are renters.”^[132]

Many briefs argued in favour of a tenant relief program. For example, some recommended expanding the Canada Housing Benefit. The Canada Housing Benefit was launched in 2020 and provides, jointly with provinces and territories, housing allowances to households in need.^[133] In 2022, the benefit also provided a one-time payment of $500 to certain households.^[134] Briefs recommended expanding the benefit to provide better stability and temporary support for renters experiencing changes in affordability.^[135]

Additionally, the National Pensioners Federation recommended increasing federal income supports, such as Old Age Security (OAS) or Guaranteed Income Supplement (GIS), to ensure seniors have a livable income.^[136] In July 2022, OAS was permanently increased by 10% for those aged 75 and over.^[137] Older seniors who were eligible for OAS also received a one-time payment of $500 in August 2021.^[138] Finally, in April 2022, seniors who saw a reduction in their GIS or Allowance benefits since July 2021 due to the receipt of pandemic benefits in 2020 received a one-time grant, calculated based on their benefit loss or reduction.^[139]

Taking the above testimony into consideration, the committee recommends:

Recommendation 7

That the Government of Canada assess the current suite of federal benefits supporting low-income renters to ensure they have the income supports they need, including through the Canada Housing Benefit.

Data and Monitoring

Over the course of the study, the committee heard about the importance of having sufficient data to understand the extent of financialization, as well as its impacts on tenants. Witnesses highlighted a need for more data about property ownership, including beneficial ownership,^[140] as well as a range of other metrics. The section below summarizes testimony received in this regard.

Data on Property Ownership

A number of witnesses who appeared before the committee or submitted briefs pointed to a lack of transparency related to the ownership of residential properties by financialized firms and called for better mechanisms to track this information.^[141] When appearing before the committee, Martine August explained:

We don't even know the full extent [of ownership by financial firms], because it's very difficult to get the full details. A lot of the ownership is concealed by the fact that we don't have high-quality data on beneficial ownership in this country, but what we do know is that approximately 20% to 30% of multi-family rental housing, purpose built, is owned by financial firms, and that's just what we do know about. Like I said, the data is questionable.^[142]

The Federal Housing Advocate expanded on this issue, pointing to a direct impact on tenants: “When you’re a tenant in these buildings, you don’t know who your landlord is. They’re changing all the time, so there’s no one to hold to account and no one to complain about.” This in turn, she argued, impacts the quality of housing as well as evictions, as discussed in the sections above.^[143]

A solution raised by some witnesses was the creation of a dedicated registry to track property ownership.^[144] The Federal Housing Advocate supported the idea of a national rental registry that, in addition to tracking ownership, would track evictions and the habitability and accessibility of units.^[145] A research paper by ACORN Canada, released through the Advocate’s office in June 2022, supported the creation of apartment unit registries at the provincial level, but pointed to a federal role in “[mandating] or [incentivizing] disclosure of property ownership across all provinces.”^[146]

The committee is aware that in March 2023, the federal government introduced legislation to create a publicly accessible beneficial ownership registry for federally incorporated businesses, with an aim to combat money laundering and terrorist financing.^[147] In its written submission to the committee, the Appraisal Institute of Canada recommended that the federal government “work expediently with provinces and territories” to implement this registry, and that the registry and other real estate-related data (e.g., property and land title registries, accessible flood mapping information) be made available to professional appraisers and other real estate professionals.^[148]

Other Data Needs

The committee heard that, beyond data on property ownership, there is a need for more data on a range of other metrics, such as the number and quality of housing units that are accessible and affordable;^[149] as well as better data on house prices, tenure details (i.e., whether someone owns or rents their primary residence)^[150] and evictions (including the extent to which REITs file for evictions compared to smaller landlords).^[151] In its brief, the Canadian Centre for Housing Rights argued that making more data available to the public could enhance transparency and accountability, as well as respect for and protection of tenants’ human rights.^[152] Witnesses made recommendations on ways to improve the collection and availability of data, including by taking a census of empty, unrented housing stock,^[153] and gathering data on the interaction of different actors in the housing system, to determine universally beneficial ways to reduce financialization.^[154]

The committee recognizes that more data is needed to fully understand the extent and impacts of financialization in Canada, and therefore recommends:

Recommendation 8

That the Government of Canada strengthen reporting requirements for the beneficial ownership of property, including by proceeding with the implementation of a publicly available beneficial ownership registry as soon is feasible, in partnership with the provinces and territories.

Conclusion

Over the course of the study, the committee received testimony relating to the challenges faced by renters resulting from the financialization of housing, including increasing shelter costs and eviction rates. It also heard from industry representatives who cautioned the committee about trying to address these perceived problems by implementing measures that may have unintended consequences.

While the proposed solutions presented to the committee were diverse, overwhelmingly HUMA members heard about the need to increase access to affordable housing for people living in low-income. The committee sees opportunities to increase the supply of affordable housing, provide better support to people in Canada who rent their homes and improve data collection and reporting.