In recent years, the rental market in Canada has experienced rapid rent increases, with rents rising by 22% over the past two years. One of the driving forces behind this surge is the increasing influence of financialized landlords—corporate entities that view rental housing as an investment vehicle to maximize profits. These landlords, including large firms, real estate investment trusts (REITs), and private equity funds, have reshaped the rental housing landscape in Canada, often leading to higher rents and reduced affordability.
In an earlier article, Rent vs. Return: The Financialization Squeeze on Canada's Rental Market, we discussed how this trend is affecting renters across the country. Financialized landlords have turned rental properties into commodities, with shareholders' profit as the main priority, often at the expense of tenants.
The Rise of Financialized Landlords
Financialized landlords are corporate entities that manage rental properties primarily for profit. Since the 1990s, these firms have become increasingly prominent in Canada, shifting from small-scale individual landlords to large, corporate-controlled ownership models. REITs and other financial landlords now own nearly 20% of Canada’s purpose-built multi-family rental units.
One of the largest financialized landlords in Canada is Starlight Investments, which controls over 54,000 units across the country and a total of 68,000 globally. Other key players include Canadian Apartment Properties REIT (CAPREIT), which owns more than 52,000 units, and Boardwalk REIT, with over 33,000 suites under management.
How Financialized Landlords Operate
The primary goal of these financialized landlords is to maximize returns for investors. This is often achieved by increasing rents, reducing maintenance costs, and capitalizing on government loopholes such as "Above Guideline Increases" (AGIs) and "vacancy decontrol" policies.
- Above Guideline Increases (AGIs): Financialized landlords frequently use AGIs to raise rents beyond the annual cap imposed by provincial rent control laws. These increases are justified by citing the need to cover repair and maintenance costs, even though many tenants argue that the work done is superficial or unnecessary.
- Vacancy Decontrol: In provinces like Ontario, vacancy decontrol allows landlords to raise rents to market rates when a tenant vacates a unit. This encourages landlords to seek ways to remove long-term tenants, often leading to "renovictions," where tenants are evicted under the pretext of necessary renovations
By using these strategies, financialized landlords can dramatically increase their rental income, often at the expense of tenants. A striking example is Starlight Investments, which acquired properties and applied AGIs to increase rents, such as in the case of Khalil Alibi, a tenant in Toronto whose rent rose from $1,472 in 2019 to $1,761 in 2023 after Starlight’s acquisition.
The Impact on Tenants
The business practices of financialized landlords have had profound effects on renters. According to research by housing expert Steve Pomeroy, Canada lost over 550,000 affordable rental units between 2011 and 2021. This trend is largely attributed to financial firms converting affordable units into higher-end rental properties, making it difficult for low- and middle-income Canadians to find affordable housing.
A 2022 report by Martine August at the University of Waterloo shows that financial landlords are more likely to raise rents and file for evictions compared to smaller landlords. After acquiring a building, financialized landlords often file three times as many eviction applications to make room for new tenants willing to pay higher rents. This tactic further accelerates the displacement of long-term tenants, who are left with few affordable options.
As a result, rents across Canada have soared. According to Rentals.ca, rents rose by 22% over two years, and the national average asking rent reached $2,178 by December 2023. In cities like Vancouver and Toronto, where the rental market is particularly competitive, rents have risen even faster, exacerbating the housing affordability crisis.
The Profit-Driven Model
The financialization of housing treats rental properties as commodities rather than homes. Financial firms like REITs operate under a fiduciary duty to maximize shareholder returns, which often leads to aggressive management strategies. These firms aim to acquire older buildings where tenants pay below-market rents, reposition the properties through renovations, and increase rents substantially.
For instance, REITs grew from owning zero units in 1996 to controlling nearly 200,000 suites in 2021. The top 25 financial landlords now hold more than 330,000 rental units across the country. This consolidation of rental housing gives these landlords significant power to dictate rent levels and shape the housing market.
Affordable Housing Crisis
The rise of financialized landlords is a significant factor in Canada’s ongoing housing crisis. As financial landlords continue to acquire more properties, the stock of affordable rental units diminishes. This is particularly problematic in major cities like Toronto and Vancouver, where demand for housing is high, and affordable options are scarce.
Financialized landlords often target neighborhoods undergoing gentrification, where they can raise rents more quickly by catering to higher-income tenants. This has contributed to the displacement of low-income renters, many of whom are unable to keep up with the rising cost of living. In some areas, financial landlords have created monopolies over the rental market, further driving up rents.
The Need for Policy Reform
As we explored in our earlier article, Rent vs. Return: The Financialization Squeeze on Canada's Rental Market, the growing influence of financialized landlords is contributing to Canada’s broader housing affordability crisis. Experts like Martine August and Steve Pomeroy argue that stronger tenant protections and rent control policies are necessary to mitigate the negative effects of financialization.
Furthermore, there is a need for greater investment in social housing to ensure that affordable options remain available to low- and middle-income Canadians. Without intervention, the rise of financialized landlords will continue to drive rents higher, making it even more difficult for Canadians to find affordable housing.
Conclusion
The rise of financialized landlords is reshaping Canada’s rental housing market, driving up rents and reducing affordability for many tenants. By prioritizing profits over people, these landlords are contributing to the housing affordability crisis that continues to affect low- and middle-income Canadians. As rents rise and affordable housing becomes harder to find, the need for policy reforms and tenant protections becomes ever more urgent.
Sources:
- Martine August, "The Financialization of Rental Housing in Canada"
- Martine August, "The Rise of Financialized Landlords"
- CBC
The content of this article is for informational purposes only and should not be considered as financial, legal, or professional advice. Coldwell Banker Horizon Realty makes no representations as to the accuracy, completeness, or suitability of the information provided. Readers are encouraged to consult with qualified professionals regarding their specific real estate, financial, and legal circumstances. The views expressed in this article may not necessarily reflect the views of Coldwell Banker Horizon Realty or its agents. Real estate market conditions and government policies may change, and readers should verify the latest updates with appropriate professionals.
