It’s a blame game, and investors are the unnecessary target.
The dialogue surrounding Canada’s housing market is dominated by a blame game, where everyone except Canadians themselves are held responsible for escalating housing issues. The prevalent narrative blames foreign homebuyers, money launderers, international students, and investors for the surging prices and rents. While it’s a reasonable argument that the housing market should function without heavy reliance on foreign entities, it’s critical to consider the essential role of investors in the Canadian housing sector.
Investors are pivotal in providing the capital necessary to construct new housing units and maintain existing properties for rental purposes. These investors own the majority (almost all) of rental housing in Canada, encompassing purpose-built rental buildings, condominiums, and low-rise housing. They assume all the risks associated with homeownership to offer residences to those who cannot afford to buy or prefer to rent.
If the investor-driven model is dismantled, who will step in to provide rental housing for millions of Canadians?
It’s important to note that these investors are driven by profit motives. This might sound unpalatable to some, but it’s the reality of the investment world. Profits are the primary reason investors participate in the residential rental market. If rent controls are imposed that significantly cut into these profits, there’s a high likelihood that investors might withdraw from the market.
This potential withdrawal raises a crucial question: who will provide housing for the significant portion of Canadians who rely on rental properties? Approximately 29% of the Canadian population lives in rental dwellings. This percentage escalates in urban areas. For instance, in the Montréal Census Metropolitan Area, which includes the island of Montréal and its suburbs, about 40% of residents live in rental housing. Almost all rental dwellings on the island of Montréal are owned by investors comprising institutional investors with large portfolios or smaller retail investors renting out portions of their duplexes or triplexes.
The critical role of investors in providing rental housing necessitates a shift in Canada’s public and political discourse. Populist rhetoric often vilifies investors, overlooking the adverse impact such narratives could have on renters, whose welfare is purportedly a concern for these politicians and advocates.
Therefore, it’s essential to ask: If the investor-driven model is dismantled, who will step in to provide rental housing for millions of Canadians? The answer is not straightforward and requires a balanced approach that recognizes the importance of investors in maintaining a healthy and functional rental housing market in Canada.
It’s instructive to delve into some statistics to further understand the rental market in Canada. According to the 2021 Canadian Housing Survey, the proportion of households renting rather than owning their homes varies significantly across the country. The rental market is particularly tight in cities like Toronto and Vancouver, with vacancy rates often below 2%. Additionally, Canada’s average rent for a two-bedroom apartment has been growing much faster for renters whose incomes lag behind those of owners.
Moreover, the demographic profile of renters in Canada is diverse, encompassing young professionals, students, low-income families, and seniors. This diversity underscores the need for a varied and robust rental market to meet different needs and preferences.
To help renters, politicians and housing advocates must expand their understanding of why investors and investments are critical for rental housing markets. Canadian renters will be better off if we recognize investors’ indispensable role in providing rental housing.
Renters’ rights are not to be sacrificed at the altar of profiteering. Yet, it is the responsibility of the public sector to provide shelter or gainful employment to those who struggle with housing. Why the governments feel comfortable transferring their responsibilities to landlords is not obvious.
A more balanced and informed conversation is needed, one that acknowledges the complexities of the market and seeks solutions that consider the interests of all stakeholders, including renters, homeowners, and investors.