This story was originally posted by Jordan Flemming on August 2, 2024 Waterloo News
Canada is facing a growing housing crisis. The predicament is largely driven by skyrocketing real estate prices, limited housing supply and rising demand. Combined with financialization in the rental market and insufficient government intervention, these factors have created a perfect storm of affordability challenges for many Canadians.
Cloé St-Hilaire, a PhD candidate and Vanier scholar in the School of Planning at the University of Waterloo, sheds light on this complex issue and proposes several solutions to mitigate its impact.
“Financialization of rental housing, in a nutshell, refers to the growing influence of financial entities like real estate investment trusts (REITs), asset managers and pension funds, which acquire and manage rental properties to generate returns for investors,” St-Hilaire explains.
These entities seek to maximize profits for investors, often at the expense of tenants.
“In cities like Montreal and Toronto, financialized ownership is linked to higher housing stress for renters, who are often paying more than 30 per cent of their income on housing costs,” St-Hilaire says. “Financial landlords tend to charge higher rents and this quest for higher investor returns sometimes happens with cuts in services and amenities.”
Through her research, St-Hilaire has identified several negative impacts of financialization. Financial landlords often seek higher turnover rates to charge new tenants higher rents, leading to increased housing instability. Moreover, the concentration of ownership by a few large landlords reduces tenants' ability to contest rent increases and exacerbates housing inequality.
To address these challenges, St-Hilaire proposes a multi-faceted approach:
School of Planning PhD Candidate Cloé St-Hilaire
Creating a lease and property registry
St-Hilaire emphasizes the need for greater information transparency in the housing market. “We need a comprehensive property registry that includes information on ownership, leases and rents. This data would enable better enforcement of existing regulations and help policymakers and researchers design more effective housing policies.”
She points to initiatives like Vivre en Ville, a Quebec-based organization that has established a voluntary lease registry, as a promising step forward. By providing vital data on rental agreements, these efforts can empower tenants to challenge unfair practices, give policymakers the tools to craft more effective housing policies and enable researchers to conduct in-depth studies on housing affordability and related issues.
Expand public and non-market housing
St-Hilaire is a strong advocate for increasing the supply of public and non-market housing.
“Public housing and non-market housing, including cooperatives and transitional housing for individuals moving away from houselessness, provide the security and affordability that the private market often fails to deliver,” St-Hilaire explains. “Expanding these options can significantly improve housing outcomes for vulnerable populations by offering stable, affordable and supportive environments.”
She also suggests that the federal government take a more active role in funding and promoting public housing.
“Making housing a federal responsibility could overcome the challenges posed by municipal competition and local politics, ensuring a more consistent and equitable approach to housing provision across the country,” St-Hilaire says. “Historically, the federal government played a significant role in public housing, and returning to that level of involvement could provide the stability and resources needed to address housing affordability effectively.”
Real rent control now
Rent control can play a pivotal role in addressing housing affordability by curbing the rapid escalation of rental prices that often outpaces income growth. By setting limits on how much and how frequently landlords can increase rents, rent control helps ensure that housing remains affordable for current tenants, protecting them from sudden financial burdens and displacement.
“Stronger rent control would be a policy that would make a big difference if it's enforced,” St-Hilaire says. “The major thing that makes financial landlords want to own housing is that it's profitable. If the incentive of profit diminishes, then this asset class would not necessarily be as enticing for them. So, starting from the premise that housing is a human right and a home, having rent control would be a great place to start.”
This stability is important in high-demand markets where speculative investments and financialization can drive up costs. Furthermore, effective rent control policies can reduce the pressure on lower-income families and individuals, allowing them to allocate more of their income to other essential needs and contributing to greater overall economic stability.
Taxing real estate investment trusts (REITs)
Another solution to address the negative impacts of financialized ownership on housing affordability is to tax REITs like any other corporation. Currently, REITs benefit from preferential tax rates, which incentivizes their aggressive pursuit of profitability in the housing sector. These favourable tax treatments make financialized ownership more attractive by increasing potential returns on investments.
“Taxing REITs as regular corporations could reduce the profitability of these investments and shift the focus away from maximizing returns at the expense of tenants,” St-Hilaire suggests.
By levelling the playing field, such a policy change could decrease the financial allure of real estate investments, leading to a reduction in rent premiums and improving overall housing affordability. This approach would help to mitigate the profit-driven dynamics that currently dominate the rental market and provide a more balanced and tenant-friendly housing environment.
“As policymakers and housing advocates consider these solutions, they must prioritize the needs of tenants and view housing as a fundamental human right, not just an investment opportunity,” St-Hilaire says.
The financialization of housing presents a challenge to housing affordability and economic stability in Canada. However, through improved data transparency, targeted taxation and price controls and a renewed commitment to public housing, St-Hilaire believes that meaningful progress can be made.
