‘Financialisation:’ a useless distraction as the housing crisis continues

Many Canadians were justifiably proud last month when our population passed 40 million – a reflection of a growing and dynamic nation with a great future.

But despite one million new residents last year, housing starts have fallen to their lowest level in three years – meaning nearly five new people for every new home built.

Rising population and slowing construction are a devastating mix that will only exacerbate our housing crisis. It’s going to take a drastic rethink of our approach to get back on track, and that starts with stopping the dogmatic fixation on corporate investment in housing displacing capital.

The federal government’s 2022 budget commitment to review the tax treatment of real estate investment trusts (REITs) continues to threaten our ability to finance housing construction. In fact, none of us have managed to raise capital for more than a year.

During recent parliamentary committee hearings on the “financialization” of housing, many well-meaning advocates continue to argue that professional housing providers are responsible for the crisis and the damage it is causing to ordinary Canadians. But apartments are financialized by definition: investors’ capital builds them, and tenants’ rents pay them back with modest returns.

So, what if I told you there’s a group of housing providers that manages 120,000 high-rent, purpose-built rental properties, more than half of which are affordable? And that they’ve invested $40,000 per home in improvements over the last 10 years, while meeting ESG standards at the same time? Then you have a model rental, don’t you? Well, that’s us, my industry — Canada’s public apartment REITs, aka Canadian rental housing providers for affordable housing.

For too long in Canada, particularly in the Vancouver and Toronto areas, we’ve relied on the secondary market, which consists mostly of amateur individual investors – sometimes foreign – renting individual apartments for our new rental properties. Rental apartments are where the notable rent increases and rampant evictions for owner use and vacancy for sale are coming from. Without them, we would have far fewer homes today, but this kind of investment is totally inadequate to meet the needs of our fast-growing country, and leaves tenants in a permanent state of rent arrears.

Our residents have a secure and stable rent without fear of arbitrary evictions and have received an average raise of less than three percent over the past decade.

The Canadian Mortgage and Housing Corporation (CMHC) says we need 5.8 million new homes by 2030. That’s a $3 trillion proposition at the very least. We don’t achieve that with individual condo investors. We need to deploy capital to build new purpose-built rental buildings at scale. And REITs are a very effective tool for seeking and deploying capital to build new homes.

In addition, REITs enable mainstream Canadians to invest in the housing our country needs, within a regulatory framework that protects people’s savings for retirement.

That’s “financialization” for good. It is no mistake that housing is a right, a good and an investment. In Canada, more than 95 percent of all housing is provided by businesses. So let’s not let this empty label distract from the real problem: housing is expensive to build and operate, and driving capital away is the last thing we need right now.

The good news is that a consensus is being formed. “We must, of course, encourage and support private development,” said federal NDP leader Jagmeet Singh recently alongside non-market housing. Leaders of the anti-homelessness and non-profit housing associations agreed in their parliamentary testimony.

We have 10,000 new homes in our development pipeline and over 230,000 in the broader REIT sector. That is equivalent to an entire year of housing production in Canada.

So, as the government develops its plans for the Fall Economic Statement and its new infrastructure plan, we echo the prime minister’s words on this: “Let’s choose to build housing.” By creating a stable and predictable regulatory environment and encouraging investment, we will do that.

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