“Financial landlords” in Toronto are the most aggressive type of landlord when it comes to raising rent prices, a new study at the University of Waterloo has found.
The term refers specifically to corporations that use rental properties as a way to generate returns for investors, such as private equity firms, real estate investment trusts and asset managers.
The study found these landlords have become the “largest acquirers” of rental properties in Toronto over the last two decades, and they’re “leading the industry in raising rents and worsening housing affordability.”
Researcher Martine August, a professor of planning in Waterloo’s faculty of environment, said financial firms acquiring a growing proportion of Toronto’s multi-family housing stock are “raising the rents in order to increase revenues for their investors and systematically making it less affordable.”
On average, asking rents among financial landlords are 44 per cent higher than the average rent paid in Toronto neighbourhoods, the study found.
August said while it’s expected that asking rents would be higher than the average rent in a neighbourhood, which includes rents paid by tenants living in rent-controlled units for several years, what stands out is that the gap is greater for financial landlords than any other landlord type.
Chain and chain-managed landlords charge 30 per cent more than average rents; landlords who only own one rental property charge 22 per cent more than average rents; landlords who own multiple rental properties charge 15 per cent more than average rents; and non-profit landlords charge about 1 per cent less than average rents, the study found.
Financial firms also raised rent prices faster than any other type of landlord, the study found, and the gap between average rents and asking rents charged by financial firms was greatest in low-income, racialized communities.
It found financial landlords raised rents 5.03 per cent per quarter. Meanwhile, chains raised rents 4.99 per cent per quarter while chain-managed buildings raised rents 3.75 per cent per quarter; landlords owning multiple properties raised rents 4.83 per cent per quarter; landlords owning only one rental raised rents 3.61 per cent per quarter; and non-profit landlords raised rents 1 per cent per quarter.
The report found more marginalized neighbourhoods — those designated “Neighbourhood Improvement Areas” by the City of Toronto — are the hardest hit as rent prices for units owned by financial landlords cost 49 per cent more than the average rent price in the neighbourhood, August said.
August said the report proves the long-standing theory of researchers and activists that financial landlords are the worst offenders for rising rents and diminishing affordability.
The “external pressure” to deliver returns to investors appears to make financial landlords more aggressive, August added, noting they themselves “boast” about charging the highest rents and raising prices to make money for shareholders.
The study is the first to examine building-level rent data and how that data changed over time, August said.
Researchers said the study supports policy recommendations to “rein in” financial firms, which includes regulating rental housing, expanding tenant protections, and replacing for-profit ownership with social housing.
August said financial landlords shouldn’t be able to access government support through Canada Mortgage and Housing Corp. (CMHC) programs and Canada’s National Housing Strategy.
“I think it’s important to ask, ‘Why we are giving a subsidy to companies whose business strategy is to make housing unaffordable?’”
She added the government should ensure that firms who receive financial support are not “violating the right to housing” by reducing security of tenure and worsening affordability.
