The affordable housing crisis in Canada has been a contentious subject for decades. From policies like inclusionary zoning, to rent caps and tax incentives, bringing more affordable homes to market is a complex endeavour with no single solution. Making matters worse is the general lack of clarity surrounding the business of operating rental apartments. For many landlords, large and small, this lack of understanding has contributed to their portrayal as gauging, heartless entities making windfalls of money at the expense of tenants.
Enter some of Canada’s largest publicly traded residential REITs: Canadian Apartment Properties REIT (CAPREIT), Boardwalk REIT, Killam Apartment REIT, InterRent REIT and Minto Apartment REIT. In late 2022, the five powerhouses banded together to form ForAffordable.ca, an initiative intended to bring clarity to the business of rental housing while detailing viable ways to generate more housing supply where it’s needed.
“Canada is experiencing the worst crisis of housing affordability and supply in a generation,” said Mark Kenney, President and CEO of CAPREIT. “Put simply, there just haven’t been enough new homes built to match the country’s population growth.”
According to Kenney, this is the main reason housing has become less affordable for an increasing number of Canadians. While governments across Canada are focused on finding solutions, he believes some of the productivity has been muddied by misperceptions about how REITs and other housing providers do business.
At ForAffordable.ca, visitors can find key facts and figures pertaining to how large housing providers operate, where and how they invest in their buildings, and how they are taxed compared to other asset classes. The newly launched website also tackles some misperceptions about “renovictions” (no, these REITs don’t do them) and the percentage of affordable units that make up their rental housing portfolios. Surprisingly, half of the group’s 120,000 suites are rented at rates that meet the government’s definition of affordable (i.e., less than 30 per cent of local median renter household income). Also of note is that rents across their collective portfolios have only grown an average of 2 per cent per year over the last ten years; meanwhile they’ve all been committed to bringing more affordable housing supply to in-demand regional markets.
Essentially, the group says achieving the goal of more affordable housing relies heavily on building partnerships and working with other organizations to deliver the spectrum of housing needed. Sam Kolias, Chairman and CEO, Boardwalk REIT, put it this way: “There is an old saying: Alone we go fast, together we go far. We come together to go far in providing Canadians with more affordable housing. How? Over the last several decades, we have seen how sound public policy like no rent controls produces the most affordable housing. Alberta and Saskatchewan are the best examples where for decades rent control has been absent and are now regions where the most affordable rents are found in Canada. Education is essential for voter and policymakers to be able to make the best policy decisions.”
Expanding on that, Kolias said working with others to ensure the best data and case examples are used to create the best public policy is an integral part of the ForAffordable.ca mission. Specifically, the platform espouses that eliminating price controls, reducing capital costs with capital grants; reducing taxes with higher capital cost allowances; and making rent supports available to those who need them most will help remedy supply issues.
“Studies show how rent supports help keep everyone in housing and is much more economic and beneficial than homelessness,” he said. “Past history of lowering capital costs and taxation have also proven to produce much more quality supply of rental housing, thus lowering rental costs with more competition.”
Proposed tools & solutions
Here, from the perspective of Canada’s five largest residential REITs, are some feasible ways the government might stimulate the creation of new affordable rental housing:
1. Create supportive financing and a funding program for cooperatives and non-profits to acquire existing market-based affordable housing from REITs and others at market prices and preserve affordability through community land trusts. “We agree with the Canadian Housing and Renewal Association (CHRA) that this solution should be added to the National Housing Strategy.”
2. Expand the Canada Housing Benefit to help more families and introduce an emergency support benefit to prevent homelessness. “We are supportive of expanding the CHB to help more families make ends meet, and of developing emergency supports to help people avoid losing their homes in times of crisis.”
3. Create a national standard for land-use by aligning land use policies with national housing, infrastructure and immigration goals and investments. “Canada’s population is growing, but housing isn’t keeping up. We need to dramatically increase housing supply. The federal government should use the Health and Social transfers, infrastructure, and other funding streams to nudge provinces, territories, and municipalities to align land-use policies to create a national standard.”
4. Maintain the existing tax treatment of REITs, as per a Fall 2022 study by Ernst & Young which demonstrates how changing it could disincentivize needed investment in residential supply, put upward pressure on rents, and have a marginal—or possibly negative—impact on government revenues. “Just as putting a price on carbon reduces greenhouse gas emissions by making it much more expensive for all consumers, taxes on housing, and affordable housing in particular, discourages construction by making it too expensive for Canadian consumers to afford and builders to build. All governments must align their taxation policies to promote new construction. Historic best case examples in the 60s, 70s and 80s clearly show how lowering taxes increases the supply of affordable housing.”
Learn more about the coalition’s mission to bring more clarity and solutions to the housing crisis at ForAffordable.ca.