HUMA Committee Report

NDP Dissenting Report: HUMA Study on the Financialization of Housing

Preamble:

From coast to coast, Canadians are grappling with the impacts of the housing crisis. There has been little to no federal spending on social housing in the last three decades. The Conservative government cancelled the National Co-operative Housing program in 1992. Then in 1993, the Liberal government eliminated the National Affordable Housing Program and allowed the creation of Real Estate Investment Trusts (REITs) in 1994.[1] Thirty years of underinvestment caused the loss of over 500,000 units of social and co-op housing that would have otherwise been built. In addition, 1,030,000 rental units below $750/month were lost between 2006 and 2021.[2] As a result, Canada is operating from a deficit of more than 1.5 million affordable homes.

The dream of home ownership has evaporated, and countless people are struggling to pay rent while hundreds of thousands of Canadians per year experience homelessness. There are encampments in our communities big or small. Vacancy rates are at an all-time low and rent has skyrocketed.  In major cities like Toronto and Vancouver, rent for a one-bedroom has reached $2,620 and $2,988/month, respectively.[3] With the Federal government abdicating its responsibility for social and co-op housing, the supply of housing has been largely shaped by market forces in the interests of private landlords, large institutional investors, and developers. Instead of being treated as a basic human right, homes are now primarily treated as commodities, and investment vehicles for wealthy landlords. This is what financialization entails. Bold action is needed more than ever to address Canada’s housing crisis and the desperate housing needs of our friends and neighbours.

Introduction

Following a series of reports tabled by the Federal Housing Advocate’s office on the financialization of housing, the Standing Committee on Human Resources, Skills and Social Development and the Status of Persons with Disabilities (HUMA) studied the issue, hearing from 29 individuals and receiving 41 written briefs. The overwhelming majority indicated that financialization was hurting renters and vulnerable Canadians. A minority defended treating housing as a commodity, and they were primarily those representing financial landlords. Based on the witnesses’ presentations and briefs received, the message was clear: Canadians need the Federal government to: a) ensure housing is treated as a basic human right and not a commodity; b) stop the loss of existing affordable housing; c) invest in the development of new social housing; and d) protect renters from reno/demo-evictions and out of control rent hikes. 

Despite this, the HUMA committee has recommended little to no definitive action, choosing instead to further assess, examine and consider possible steps, while everyday people grow desperate and housing costs continue to spiral out of control. The last 30 years have demonstrated that successive Liberal and Conservatives governments’ market driven approach has failed Canadians. The NDP is submitting this dissenting report to emphasize the need for urgent action, and respect for housing as a basic human right.  As indicated by Leilani Farha, the former UN Special Rapporteur on the Right to Adequate Housing, upholding a rights-based approach to housing as laid out in the National Housing Strategy Act requires that governments: “a) secure and use all available resources to ensure adequate housing for everyone in need; b) hold private sector actors accountable to human rights standards and outcomes; and c) ensure that any public resources in the area of housing (preferential tax treatment, tax waivers) must produce human rights outcomes.”[4] [emphasis added]

Impacts of Financialization of Housing

As explained by Marie-Josée Houle, the Federal Housing Advocate (FHA) and associated experts, corporate and financial landlords aim to maximize profits by increasing rent, and cutting staff or services for tenants.[5] These landlords will often look to buy “under-performing assets” like older low-cost rental apartments, then renovate or demolish and re-build them to justify charging higher rents.[6] In the process, tenants are often displaced, either through formal eviction (reno-eviction or demo-eviction), or because they cannot afford to pay the rent increase. In most jurisdictions, displacing tenants allows the landlord to increase rent by limitless amounts – requiring new tenants to pay four or even five times the rate for the same unit.[7] Dr. Martine August outlined a pattern where REIT ownership corresponds to rent controls – with higher concentrations found in areas with weak controls, and lower concentrations in regions they were stronger.[8]

Across the country, we are seeing financialized landlords aggressively pursue rent increases and displacement as a business tactic. Nationally, the FHA estimated that 20 – 30% of purpose-built rental stock is owned by financial landlords.[9] Ms. Farha further outlines the growing power of financial landlords over key markets like Toronto and Vancouver. She estimates as of 2020 in Toronto that investors owned 1 in 5 homes, while accounting for roughly 40% of newly built home purchases and almost 100% of multi-family sales in the same year.[10] In Vancouver, she estimates investors owned 23.5% of the housing supply, and 44% of all units built after 2016.[11]  On evictions and rent increases, she describes that “Ontario saw a 232% surge in eviction applications for renovations from 2015 to 2018, with evidence suggesting higher eviction rates among financial landlords”, and that:

Data from Toronto shows that applications for AGIs [Above Guideline Rent Increases] increased by 250% between the 2012-13 and 2019-20 fiscal years, with corporate and financialized landlords responsible for 64% of all applications during this period and 84% of all units impacted. Whilst corporate landlords typically argue they need to undertake AGIs to fund necessary renovations, many landlords requesting AGIs report significant profits, raising the question of why such costs need to be borne by already struggling tenants.[12]

Financial landlord groups like the Canadian Federation of Apartment Associations suggest ‘renoviction’ numbers remain small in both relative and absolute terms, but the above indicates this is a growing problem and the impact for affected tenants no less detrimental. Left unchecked, the situation will only worsen the current housing crisis.[13]

In addition, tenant advocacy groups like ACORN and the Advocacy Centre for Tenants Ontario (ACTO) have found the profit seeking behaviour and lack of transparency associated with institutional financial landlords have negative impacts on many established, long-term tenants. In a sample survey of 606 renters, ACORN found that respondents living under financial landlords were more likely to experience a range of problems compared to those who did not, including: maintenance issues (80% versus 67%), infestations (43% versus 22%), above guideline rent increases (19% versus ~ 5% in Ontario).[14] Furthermore, over 1/3rd of respondents living under financial landlords said they felt threatened when filing a complaint.[15] Similarly, ACTO highlighted that “large financialized landlords have more financial and legal resources to pursue AGIs […] than small landlords […] The disparity in resources makes it even harder for tenants to fight back.”[16]

Disproportionate Impacts of Financialization on Vulnerable Groups

Several contributors outlined how financialization is directly and indirectly harming other vulnerable populations, by displacing tenants and compounding affordability challenges for those already facing systemic problems related to race, gender, or ability. On the displacement of Black tenants in the city of Toronto, Dr. Nemoy Lewis found that 10% of all evictions between 2018 and 2021 occurred in majority Black dissemination areas, and that financialized landlords were responsible for 73% of them.[17] The regional concentration of financialized units is also concerning in places like the Territories, where approximately 80% of all private, multi-family housing is reportedly owned by a single investor, Northview REIT – and particularly in Nunavut, where DAWN Canada estimates 37% of households are living in core housing need.[18] On the financialization of seniors housing, researcher Jackie Brown estimated that 33% of seniors housing in 2020 was owned by financialized landlords, including 42% of retirement units and 22% of long-term care beds.[19] Further, she found these homes consistently provided inferior care, even compared to other for-profit providers, with fewer care hours, less staffing, and higher mortality rates.[20]

Profit maximizing behaviour and the rapidly increasing cost of rent is also a notable challenge for disabled individuals, and survivors of domestic abuse. As noted by the Canadian Centre for Women’s Empowerment, StatsCan reported that pre-pandemic, nearly 1,000 women and children were turned away from shelters in Canada per day, primarily due to overcapacity.[21] Many of these individuals are survivors of domestic violence who cannot access market housing due to the lingering effects of economic abuse, which left them with a low credit score, highly in debt, and without a regular income.[22] Emergency housing providers in the violence against women sector, meanwhile, described a dire lack of organizational support from the current government. In their written brief, Alliance MH2 highlighted that many emergency shelter costs were not eligible under any NHS program, and called funding applications “extremely complex and cumbersome procedures, without any flexibility”.[23] Individuals living with a disability, meanwhile, may be on the hook for any additional costs needed to adapt their unit, as there are little to no requirements for landlords to implement universal design elements in their builds.[24] This can be especially prohibitive for individuals transitioning out of homelessness. DAWN Canada indicates, for example, that 46% of women who have experienced homelessness also report having a disability.^[25] To quote the Association of Municipalities Ontario (AMO), the body representing 443 Ontario municipalities: “achieving an inclusive, equitable, and affordable housing sector will only be reached through the endorsement of a progressive human rights-based approach, with specific appreciation of the unique challenges faced by Black, Indigenous, racialized, and other marginalized people in accessing affordable housing.”[26]

Actions to Curb the Financialization of Housing

If Canada is going to meaningfully address the housing crisis, it is essential that the government curb the loss of existing low-cost rental stock. Steve Pomeroy, a leading researcher, has estimated in the lead-up to the National Housing Strategy, from 2011 – 2016, that Canada lost 15 affordable units for every one created.[27] Following its introduction, from 2016 – 2021, our country has continued to lose affordable homes at more than double the rate they are being added.[28]  To address this rapid loss and the wider problem of financialization, tenant advocacy groups, alongside major non-profits like the National Pensioners Federation have called for a moratorium on the acquisition of existing low-cost units by corporate and investor landlords.[29] 

The Committee also heard from several contributors who recommended the creation of a non-profit acquisition fund, as an immediate measure to stem the loss. This call for action received widespread support from researchers, and representatives across the non-profit and private sectors. Among others, an acquisitions fund was recommended by Mr. Pomeroy, the Canadian Housing and Renewal Association, and the Canadian Rental Housing Providers for Affordable Housing (a coalition of five publicly traded REITs).[30]

With respect to other measures, it was pointed out by witnesses that REITs enjoy “preferential tax treatment” even though they are structured like other income trusts. They are not required to pay the standard corporate tax rate if they flow their profits through to shareholders. Dr. August stated:  “[T]here's no social justification for providing tax breaks to [REITs] in housing. These firms are making their money by making housing less affordable and affecting security of tenure […] It makes a lot of sense to tax them like other corporations.”[31]  The Parliamentary Budget Officer estimates that ending their preferential treatment would generate $285.8 million over 2023-27, which could be re-invested in housing supports.[32]

Vacancy control

Aside from tenants and housing advocates, in his written brief, Steve Pomeroy specifically recommends re-establishing vacancy control, noting the way realtors frequently market properties as having ‘below market rents’, ripe for greater profit extraction.[33] This was further supported by Rexdale Community Legal Clinic, and Dr. August, who supported the measure as a disincentive for financialized firms to acquire additional units in regions without rent control.[34] Unsurprisingly, the prospect of (re-)establishing rent controls was opposed by most industry representatives.

Investing in Deeply Affordable Housing

Social housing was also supported by contributors across the private and non-profit sectors, as a critical alternative to market housing. A 2023 Scotiabank report noted that Canada’s social housing stock is amongst the lowest across the OECD, at 3.5% of all housing nationwide.[35] They are calling for Canada to at least double the social housing stock of 655,000 to 1.3 million units as a “modest start” to help address the housing crisis. Major non-profit coalitions like ACHAT have argued for a bolder target – expanding social and non-profit housing stock to 20% of the overall housing market.[36]

Housing Benefit

Tim Richter, CEO of the Canadian Alliance to End Homelessness, estimates that 531,000 – 770,000 renters were evicted from their homes between 2016 and 2021.[37] This does not account for the countless families who decided to move on their own, because they could not pay the bills, nor the people who were forced out through extra-legal means. Getting new, market rate homes built in 3 to 5 years will not solve their urgent need for a home they can afford. Expanded renter benefits were championed by Mr. Richter, the Canadian Centre for Housing Rights, and REALPAC (which represents over 130 real-estate investment groups).[38]

Transparency and Access to Justice

In addition to challenges around affordability and tenure, many contributors to the HUMA study discussed the problems with transparency under financialized landlords. Among their more stunning findings, ACORN found up to 36% of respondents could not identify who their landlord was – a problem echoed by Mrs. Houle, who testified that frequent property sales and a lack of disclosure requirements allow financial landlords to obscure their ownership.[39] Renters seeking accountability from these landlords are already at a disadvantage. Basic information must be transparent and accessible to all tenants.

Recommendations:

On the evidence and testimony of experts outlined above, the New Democratic Party recommends that the Government of Canada take immediate action on the following:

Recommendation 1:Develop and invest in an acquisition fund, made available to public, co-op and non-profit housing providers to preserve and expand affordable housing stock.

Recommendation 2: Put a moratorium on the purchase of low-cost rentals by financialized landlords.

Recommendation 3: Eliminate the special tax treatment for REITs by amending the federal tax code to make their taxation consistent with other income trusts.

Recommendation 4: Tie government funding, financing and CMHC backed insurance for private landlords to specific criteria to benefit renters such as below market rent, no-displacement guarantees, and affordability levels that remain in perpetuity.

Recommendation 5: Protect renters by working with provinces and territories to establish vacancy control measures. 

Recommendation 6: Disincentivize purchasing multiple investment properties by introducing requirements for progressively larger down payments on the purchase of additional properties.

Recommendation 7:  Commit to an increase in deeply affordable housing, starting with a minimum target of 2 million social housing units, and working towards a 20% share for non-market housing. Also re-establish operating subsidies to non-profit, co-op and public housing providers to enhance affordability (as done prior to the cancellation of the Co-op Program and National Affordable Housing Program in 1992 and 1993, respectively.)

Recommendation 8: Boost the affordable, non-market housing supply by providing increased grants, and below market mortgage rates to non-profit, co-op and public housing providers.

Recommendation 9: Remove barriers to funding for non-profit, co-op and public housing providers; and, where necessary, provide additional support to help NGOs navigate complex applications.

Recommendation 10: Work with other levels of government to provide funding and infrastructure necessary to increase density and housing supply.

Recommendation 11: Expand the current suite of federal benefits supporting low-income renters to ensure that they have the income supports and rent relief they need.

Recommendation 12: Work with all orders of government to provide supportive housing and wrap around services for vulnerable populations struggling to find or maintain housing, including but not limited to people with disabilities, and survivors of domestic violence.

Recommendation 13: Provide tenant support resources to the provinces/territories, municipalities and non-profits assisting tenants faced with reno/demo-evictions, rent hikes and other issues.

Recommendation 14: Create a national rent registry, in cooperation with the provinces, territories and municipalities, in order to ensure accountability and transparency.