In late September, one of the two Green Party MPs introduced a motion to remove tax exemptions for corporate investors, including Real Estate Investment Trusts (REITs).
For Mike Morrice, who represents Kitchener Centre, the commodification of housing has been driven largely by a rapid growth of institutional investors like REITs and their holdings. His Private Members’ Motion notes that by treating housing as an investment rather than a human right, REITs have “substantially contributed to unaffordability and has worsened the housing crisis.”
Despite REITs making up the majority of corporate landlords in Canada, the federal government exempts them from paying corporate income taxes. Instead, those possible taxpayer dollars are transferred back into the pockets of company investors.
In an interview with rabble.ca, Morrice emphasized the urgency with which the federal government needs to take action to address Canada’s housing crisis.
“We need to recognize that homes should be places for people to live, and not commodities for institutional investors to trade,” he said.
Morrice believes it’s time to remove financial incentives that have allowed for REITs to not only buy up existing multi-tenant housing stock, but also turn around and issue exorbitant rent increases that drive up the average cost of rent and make housing less affordable — a practice he calls “profiteering on the backs of low income people across the country.”
“If they want to have the largest financial return possible, I encourage them to invest in the stock market, but don’t turn housing into an investment vehicle for an institutional investor,” he said.
The motion, known as an Affordable Housing Strategy, calls on Parliament to recognize housing as a fundamental human right, while also recognizing that “homes should be first and foremost for people to live in, and not a commodity for institutional investors to trade.”
Morrice’s motion is conscious of the fact that REITs only began focusing on rentals in 1996. By 2021, they scooped up nearly 200,000 units across the country. Now, corporations make up between 20 and 30 per cent of Canada’s purpose-built rental housing stock.
The Affordable Housing Strategy doesn’t stop with just removing and recuperating tax exemptions from REITs, it would immediately subject them to the standard corporate tax rate of 38 per cent. The revenue generated from the corporate tax would be required to go toward affordable non-profit and co-operative housing.
And in an effort to prevent financial firms from monopolizing the housing stock in a single community or neighbourhood, Morrice’s legislation would invoke antitrust laws that limit their ability to do so.
REITs ‘devastating impact’ on renters, workers, and communities
The motion is informed by research in conjunction with Social Development Centre Waterloo Region (SDCWR) and a team led by University of Waterloo Professor Brian Doucet, looking at how gentrification and displacement in the Kitchener-Waterloo area has resulted in annual declines in affordable rental units.
Their findings show a “devastating impact” by investment companies through renovictions, upscaling affordable rentals, negligence resulting in crumbling infrastructure, a lack of maintenance and safety, and cutting corners on necessary repairs. It’s not just tenants who are being exploited either — REITs often fail to pay staff a decent wage, or even adequately train them for their positions.
“Practices adopted by financialized landlords to move people out are uprooting and
pushing residents out of their homes, neighbourhoods, and communities,” SDCWR Executive Director Aleksandra Petrovik said in a release last month. “The affordable buildings are being replaced with the indiscriminate construction of high-priced high-rise condominiums mostly as investments rented out, not lived in.”
In a November 2020 report, Ricardo Tranjan, a senior researcher with the Canadian Centre for Policy Alternatives Ontario office, explored just how lucrative REITs can be — even amidst a global pandemic.
What Tranjan found, as thousands of Canadians struggled to make rent payments and avoid evictions, the country’s largest landlords were celebrating with champagne.
Tranjan looked at CAPREIT, which owns 57,000 rental units in Canada — including 2,233 units acquired between February and September 2020.
CAPREIT’s third-quarter financial report from 2020 showed a 15 per cent increase in net rental revenue from September 2019 to September 2020.
During the same time period, CAPREIT’s average monthly rents on occupied units increased by three per cent — six times the rate of inflation for the period. While tenants in many provinces benefitted from temporary rent control measures, CAPREIT increased rents to turnover units by nearly nine per cent on average during the first nine months of 2020.
For Matt Clark, member of Waterloo Region Yes In My Backyard (YR YIMBY), Morrice’s motion would make a meaningful impact.
“WR YIMBY believes taxing REITs will help level the playing field for all buyers,” Clark said in a release. “Using the proceeds of this tax to invest in sustainable, non-precarious housing such as non-profits and co-operatives will ensure as many people as possible from all stages of life have a place to call home.”Morrice’s motion comes after thousands of Canadians signed a petition he sponsored to address the country’s housing crisis. Now, he hopes the Trudeau government will follow through with legislation to end tax exemptions on REITs and reinvest those tax dollars into public, affordable housing — in time for Budget 2023.
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